How to Choose Home Insurance: Step-by-Step Guide
Expert tips on selecting the right homeowners insurance policy, comparing quotes, and avoiding common mistakes.
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Step 1: Determine How Much Coverage You Need
Start by calculating your home's replacement cost – not its market value. Replacement cost is what it would cost to rebuild your home from scratch.
Coverage Components:
- Dwelling Coverage (Coverage A):
Should equal your home's replacement cost. Use 100-125% of this value. - Other Structures (Coverage B):
Typically 10% of dwelling coverage for garages, sheds, fences. - Personal Property (Coverage C):
Usually 50-70% of dwelling coverage for belongings. - Liability (Coverage E):
Minimum $300K recommended; $500K-$1M for higher net worth. - Medical Payments (Coverage F):
Typically $1,000-$5,000 for minor injuries on your property.
Step 2: Choose Your Policy Type
Most homeowners should select between:
- HO-3 (Special Form): Best for most homeowners – good balance of coverage and cost
- HO-5 (Comprehensive): Premium option with broadest coverage
Learn more about policy types →
Step 3: Select Your Deductible
Your deductible is what you pay out-of-pocket before insurance kicks in.
Deductible Selection Guide:
- $500: Higher premium, lower out-of-pocket risk
- $1,000: Most popular choice – balanced approach
- $2,500: Lower premium, suitable if you have emergency fund
- $5,000+: Lowest premium, best for high savings and low risk
Pro Tip: Choose a deductible you can comfortably afford to pay from savings.
Step 4: Compare Multiple Quotes
Get quotes from at least 3-5 different insurers. Prices can vary by hundreds of dollars for identical coverage.
Where to Get Quotes:
- Direct from insurers: State Farm, Allstate, USAA, Amica
- Independent agents: Can compare multiple companies
- Online comparison sites: Quick quotes from multiple insurers
- Bank/credit union programs: May offer discounts to members
Step 5: Research Company Reputation
Price isn't everything. Consider:
Financial Strength
Check A.M. Best ratings. Look for A+ or A++ ratings.
Customer Service
J.D. Power ratings and customer reviews matter.
Claims Process
Research how quickly they process and pay claims.
Complaint Ratio
Check your state insurance department's complaint index.
Step 6: Look for Discounts
Common discounts that can save 5-25%:
- Multi-policy bundle: 15-25% off when combining home and auto
- Claims-free: 10-20% for 3-5 years without claims
- Security system: 5-20% for monitored alarm systems
- New home: 10-15% for homes under 10 years old
- Loyalty: 5-10% for staying with same insurer 5+ years
- Retiree: 5-10% if you're 55+ or retired
Step 7: Review Policy Exclusions
Standard policies typically DON'T cover:
- Flood damage (need separate flood insurance)
- Earthquake damage (need earthquake endorsement)
- Sewer backup (may need endorsement)
- Valuable items over limits (need scheduled personal property)
- Home business equipment (need business policy)
Common Mistakes to Avoid
❌ Underinsuring Your Home
Don't insure for market value – use replacement cost. Being underinsured means you'll pay the difference after a loss.
❌ Choosing Based on Price Alone
The cheapest policy may have poor claims service or hidden exclusions.
❌ Not Reading the Policy
Understand what's covered and excluded before you need to file a claim.
❌ Forgetting to Update Coverage
Review annually and after major purchases or renovations.
Final Checklist Before Buying
- Replacement cost covers full rebuild
- Deductible is affordable from savings
- Liability coverage is adequate ($300K minimum)
- Company has strong financial ratings
- All available discounts applied
- Additional coverages for flood/earthquake if needed
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