Tips to buy home insurance with confidence

Buy home insurance with confidence

Home ownership is an exciting milestone, but it also comes with the responsibility of protecting what is likely your most valuable asset. Purchasing home insurance is a critical step in safeguarding your home and its contents against unforeseen risks.

While shopping for home insurance can be overwhelming given the variety of policies, coverage options and pricing, there are important considerations to keep in mind to make sure you find the best coverage for your home. This guide covers the top concerns you should address when you buy home insurance, so you can make informed decisions and choose the best policy for your needs.

“Around 60% of American homes are underinsured, according to a report by CoreLogic. This means that many homeowners may not have sufficient coverage to fully rebuild their homes after a disaster, which highlights the importance of accurate home valuation and proper coverage selection.” (CoreLogic)

Understanding the basics of home insurance coverage

Before diving into the specifics of policies, it’s important to understand what home insurance typically covers. A standard home insurance policy is designed to protect against losses from risks such as fire, theft, vandalism and certain types of natural disasters. However, coverage can vary significantly, and there are different components to a standard policy:

• Dwelling Coverage: This protects the structure of your home, including walls, roof and foundation, from covered perils.
• Personal Property Coverage: This covers the personal belongings inside your home, such as furniture, electronics and clothing, if they are damaged or stolen.
• Liability Protection: If someone is injured on your property, or if you accidentally cause damage to someone else’s property, liability protection helps cover legal fees and damages.
• Additional Living Expenses (ALE): If your home becomes uninhabitable due to a covered event, ALE helps pay for temporary housing and other related expenses.

It’s important to note that standard policies often exclude certain risks, such as flooding and earthquakes, which may require additional coverage or separate policies.

“While it’s tempting to go for the minimum required coverage, underinsuring your home could leave you vulnerable in the event of a major disaster.”

Evaluating your home’s risk factors

Every home has its own unique set of risk factors that can impact insurance premiums and coverage needs. Before you buy home insurance, insurance providers assess these risks when determining your premium, so understanding them can help you choose the right policy and potentially lower costs.

• Location matters: Where your home is located plays a major role in your insurance costs. Homes in areas prone to natural disasters such as hurricanes, earthquakes or floods typically have higher premiums. You might also need to purchase additional coverage for perils not included in standard policies, like flood insurance for homes in flood zones.
• Home age and condition: Older homes may require more maintenance and could pose a higher risk for issues like electrical fires or plumbing problems, which can increase your premium. Conversely, newer homes built to modern safety standards may qualify for lower premiums.
• Proximity to emergency services: Homes closer to fire stations and hydrants may benefit from lower insurance premiums since they have quicker access to emergency services.

Determining how much coverage you need

One of the biggest questions homeowners face when shopping for home insurance is how much coverage they actually need. While it’s tempting to go for the minimum required coverage, underinsuring your home could leave you vulnerable in the event of a major disaster. There are a few key factors to consider when determining the right amount of coverage:

• Rebuilding costs vs. market value: The amount of coverage you need for your home should be based on the cost to rebuild it, not its current market value. Rebuilding costs may be higher than your home’s sale price due to factors like inflation, the cost of materials and labor expenses.
• Personal property inventory: To ensure your personal property is adequately protected, take an inventory of your belongings, including high-value items like jewelry, electronics and artwork. This can help you determine if you need additional riders or endorsements for specific items.
• Liability coverage: It’s essential to have enough liability coverage to protect your financial assets in the event of a lawsuit. A general rule of thumb is to carry liability coverage equal to the value of your assets, such as savings and investments.

Comparing policies and premiums

Once you have an idea how much coverage you need, it’s time to shop around and compare policies from different insurance providers. Insurance premiums can vary widely depending on factors like the provider’s underwriting process, your home’s risk factors and the type of coverage you choose. Here are a few tips to help you compare policies effectively:

• Look beyond price: While it’s tempting to choose the lowest premium, it’s important to evaluate what’s included in the coverage. A cheaper policy may have higher deductibles or exclude certain perils that could leave you underinsured. And don’t forget about personal service. Having an agent you trust is definitely a value for most people.
• Check deductibles: A deductible is the amount you must pay out of pocket before your insurance kicks in. Higher deductibles often result in lower premiums, but be sure you can afford the deductible if you need to file a claim.
• Discount opportunities: Many insurance companies offer discounts for factors like installing a home security system, bundling home and auto insurance, or maintaining a good credit score. Be sure to ask about any potential discounts to help reduce your premium.
• Customer service and claims handling: A good policy isn’t just about coverage—it’s also about how the insurer handles claims. Check reviews and ask for recommendations to ensure you’re choosing a company known for responsive customer service and hassle-free claims processes.

“Many homeowners choose to bundle their home and auto insurance policies, with 77% of Americans reporting that they receive a bundling discount. Bundling can reduce overall premiums.” (J.D. Power)

Special considerations when buying home insurance: floods, earthquakes and other exclusions

Most standard home insurance policies typically exclude certain types of disasters, such as floods and earthquakes. Depending on where you live, you may need to purchase additional coverage for these events. Here’s a closer look at some of the most common exclusions:

• Flood insurance: If you live in a flood-prone area, it’s essential to purchase separate flood insurance through the National Flood Insurance Program (NFIP) or a private insurer. Standard home insurance policies do not cover flood damage.
• Earthquake insurance: Similar to flood insurance, earthquake damage is not covered by standard home insurance. If you live in an area at risk for earthquakes, consider adding an earthquake endorsement or purchasing a separate policy.
• Sewer backup: Water damage from a sewer or sump pump backup is often excluded from standard policies but can be added through an endorsement. This coverage can be valuable for homes with basements or in areas with heavy rainfall.

According to FEMA, only 15% of U.S. homeowners have flood insurance, despite the fact that floods are one of the most common and costly natural disasters. (FEMA)

Review your policy regularly

Once you’ve purchased home insurance, it’s important to revisit your policy regularly to ensure it still meets your needs. Over time, your coverage requirements may change due to factors such as home improvements, increases in property value or changes in your financial situation. Regularly reviewing your policy can help ensure you’re adequately protected and that you’re not paying for coverage you no longer need.

• Home renovations: If you’ve recently remodeled your kitchen, added a room or upgraded your home’s systems, you may need to increase your dwelling coverage to account for the higher rebuilding costs.
• Personal property changes: As you acquire new belongings, be sure to update your personal property coverage, especially for high-value items like jewelry, collectibles or electronics.
• New risks: If you move to a new area or your neighborhood’s risk factors change (such as new flood zones or increased crime rates), consider adjusting your coverage accordingly.

Buying home insurance is an essential step in protecting your home and your financial future. By understanding the basic components of home insurance, evaluating your home’s risks, determining how much coverage you need and comparing policies, you can make a well-informed decision that provides peace of mind. Remember to review your policy regularly and update it as your circumstances change to ensure you’re always adequately protected.

Armed Forces Insurance: Your trusted advisor for homeowner insurance

At AFI, our commitment goes beyond just providing insurance. We’re dedicated to serving those who serve our country, offering personalized service and ensuring that our members feel supported and secure in their homes.

Armed Forces Insurance has been a trusted advisor to American Armed Forces service members and veterans for more than 135 years. We’re not a giant corporate skyscraper full of slick insurance executives. We’re a small company headquartered just down the road from Fort Leavenworth in Kansas. We know each other, and our customers know us. If you’re looking for someone you can trust to shoot you straight and help you protect your home and property, check out our homeowner insurance page.

Learn more:

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Homeowners Insurance Basics (Insurance Information Institute)