Homeowners Insurance: Insurance Shopping

FT Contributor
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You buy car insurance to protect your car and life insurance to ensure your loved ones are taken care of if you were to pass away. It’s also important to invest in homeowners insurance to protect one of the biggest purchases you’ll make in your lifetime: your home. If a catastrophe happens, such as a hurricane or tornado, and you don’t have homeowners insurance coverage, your financial security is put in jeopardy as you attempt to pay for large repairs to your home on your own.

While homeowners insurance may just seem like another hidden cost in the homebuying process, it’s actually an important investment for your financial well being. If you’re in the market for homeowners insurance, learn more about what your policy may cover and how to find the best and most affordable coverage for you.

Table of Contents

What Is Home Insurance?

If you borrowed money from a lender to buy your home, your mortgage may include mortgage insurance. The Homeowners Protection Act ensures you don’t pay an exorbitant amount for this insurance. However, it’s important to recognize that this is insurance for the lender against the mortgage. It doesn’t protect your home in any way.

Therefore, you’re also required to obtain homeowners insurance to ensure your home is protected. A standard homeowners insurance policy protects against most perils or catastrophes. However, certain perils are usually excluded from coverage, including the following:

  • Nuclear accident;
  • War;
  • Earthquake;
  • Flood;
  • Mudslide;
  • Landslide;
  • Sinkhole.

If a covered peril occurs and you make a claim to your homeowners insurance company, the financial assistance you receive for repairs depends on the coverages and coverage limits you have on your policy. The most common coverages included in standard homeowners insurance policies are the following:

  • Liability coverage: Coverage that pays for other people, such as if your tree caused damage to a neighbor’s home.
  • Personal property coverage: Coverage for the items you own in your home, which are replaced if damaged or stolen during a covered loss.
  • Dwelling protection: Coverage on the structure of your home and a limit for attached structures, such as a garage or carport.
  • Loss of use coverage: If your home is being repaired for a covered loss, you have coverage to pay for the cost of living until you can move back into your residence.
  • Medical payments: Coverage for the homeowners if they’re injured away from the home in certain cases and for medical treatment for visitors who are injured on the property.

Some of these coverages aren’t standard on all homeowners insurance policies so you may need to add them if you want comprehensive coverage for your home. You can also investigate additional coverage if you’re looking for a more robust policy, such as equipment breakdown insurance or flood insurance.

Homeowners Insurance Companies

There are many homeowners insurance companies that offer coverage throughout the United States. Some companies only offer policies in select states, so you’ll need to research which companies serve your area.

Some of the most well-known homeowners insurance companies include the following:

  • Allstate: This company offers a full line of insurance products, including homeowners insurance that provides discounts for a new roof, other policies you have with the company, and certain security elements, such as a home security system. Most homeowners policies have an average cost between $930 and $1,495.
  • State Farm: You can receive a discount with State Farm if you also have your auto insurance with the company. If State Farm provides coverage in your area, you must speak with a local insurance agent to bind the policy.
  • Progressive: You may qualify for a discount when you purchase a Progressive homeowners policy if it’s your first home purchase. The company allows you to choose the coverages you want to add to your policy. The average homeowners insurance premium with Progressive in 2017 was between $604 and $2,006.
  • USAA: If you’re a veteran, active military, or related to a military member, you may qualify for USAA homeowners insurance. You can add on home sharing coverage, which protects guests if you rent out your home, or earthquake coverage. The average rates with USAA vary between $553 and $2,324.
  • Liberty Mutual: With Liberty Mutual homeowners insurance, you can add coverage for valuable items, water backup, and inflation protection. Use the company’s online homeowners insurance premium calculator to get a rough idea of how much a policy would cost with the company.

Homeowners Insurance Cost

There are many factors that determine the price of your homeowners insurance policy. In some cases, certain companies are simply more expensive than others in your area. You’ll need to shop around with different homeowners insurance companies to find the best rate for you.

Your homeowners insurance premium depends on the location of your home, your credit, and the home’s characteristics. If your home is newly built and offers many safety features or superior construction, you may be offered a lower rate. Some areas are prone to more natural disasters than others. If your home is close to the ocean or in a location that’s known for bad storms or other catastrophes, you may also pay a higher premium.

The coverage you choose also affects the price. If you choose high deductibles and low coverages, your premium is generally lower. However, if you add on coverage and request high limits and low deductibles, your premium increases.

Homeowners Insurance Shopping

When you shop for homeowners insurance, the quote shouldn’t be the only thing you consider. Research the company in question to find out more about:

  • The number of claims its customers reported and what was paid out.
  • Customer reviews and satisfaction ratings.
  • The company’s financial rating.

Ensure you’re comfortable with the coverage offered. Compare the same coverages with different companies when looking for the lowest premium. Make sure you’re taking advantage of all discounts before you decide which policy to purchase.

While your mortgage company may require you to obtain homeowners insurance before closing, it also benefits you and your financial situation. Having homeowners coverage ensures you can get your home fixed without breaking the bank if an unexpected disaster occurs.

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