How To Read A Home Insurance Quote
Your home is mostly the priciest purchases you’ll make, so protecting it with the right insurance policy is crucial. Though each insurance company formats its homeowners policy documents differently, each policy document has some features in common. If you are wondering How To Read A Home Insurance Quote we’ll help you navigate your homeowners insurance policy to ensure your home and personal belongings are properly covered.
What is a home insurance quote?
A homeowners insurance quote is an estimate of the price you’ll pay for a policy. It’s based on a broad range of factors, including things like:
- The size of your house.
- The neighborhood you live in.
- Whether a fire station is nearby.
Each company uses its own formula to calculate house insurance quotes, so prices can vary widely. You boost your chances of finding the best rate when you compare homeowners insurance rates from several companies.
Since a home insurance quote is only an estimate, it may not precisely match the price you end up paying for coverage. In some cases, an inspector may come to your home and determine you need a different amount of coverage, which can change the price.
» MORE: Does Homeowners Insurance Go Up Every Year? – Things To Know
What goes into a home insurance quote?
Many factors affect your homeowners insurance quote, from the size of your house to the things in your closet. Companies weigh these factors in different ways, so one insurer might be more lenient than another about your credit history or your backyard trampoline.
Here are some of the factors that can affect your homeowners insurance quote.
1: Your House:
- Rebuilding cost. The more it would cost to rebuild your home if it were destroyed, the higher your home insurance quote is likely to be. The price to rebuild depends on local construction, material and labor costs. Size makes a difference here — a 5,000-square-foot house typically costs much more to replace than a 1,000-square-foot one.
- Age of your home. Older homes generally cost more to insure because the components may have degraded over time and may not meet current building codes.
- Type of materials. Homes built from materials like brick or stone are cheaper to insure than houses made of wood, which is flammable.
- Security features. Alarm systems, smoke detectors, deadbolt locks and other safety features can result in lower home insurance quotes because they reduce the likelihood of theft or damage.
- Home improvements. Your quote may be higher after you remodel the kitchen, add a deck or make other home improvements that increase the cost to rebuild.
2: Your Location:
- Local fire protection. If you’re near a hydrant and fire station, you’ll likely qualify for cheaper home insurance quotes than someone who lives in a more remote area.
- Natural disaster risks in your area. Home insurance quotes are typically higher in areas prone to hurricanes, earthquakes, wildfires and other natural risks.
- Neighborhood crime rates. If lots of burglaries happen in your neighborhood, your home insurance quotes may be higher.
3: You And Your Stuffs
- Your credit score. In most states, a home insurance quote can be higher for people with blemished credit. Insurers say people with poor credit are more likely to file claims. But in California, Maryland and Massachusetts, companies aren’t allowed to consider credit in setting homeowners insurance prices.
- Your pet. House insurance quotes can be high if you own a dog of a breed that’s considered aggressive. That’s because your liability insurance might have to pay out if your dog bites someone and they sue you. Some companies may not be willing to provide coverage at all.
- Your belongings. If you own a costly musical instrument, expensive jewelry or other valuables, you may need extra coverage that will increase your house insurance quote.
- Your backyard pool or trampoline. Owning these items can raise your home insurance quote because of the risk of injuries they pose. If someone is hurt using them, you could be liable whether you granted permission or not.
- Your wood-burning stove. Insurers may see your stove as a fire hazard, particularly if it wasn’t professionally installed or doesn’t meet code requirements.
- Your home-based business. If you work from home, you may need to add coverage to a standard homeowners policy or buy a business owners policy to cover business-related equipment, inventory and liability.
- Your previous claims. If you’ve filed numerous claims in the past, insurers may view you as a risk and charge you higher premiums.
Home insurance quotes online or by phone
You can get free online homeowners insurance quotes from many companies, and if you’re happy with the quote, in some cases you can complete the purchase online. Some insurers let you begin a quote online but send you to an agent to finish the quote over the phone.
When you buy homeowners insurance directly from an insurer without an agent’s help, you can easily adjust coverages and see quotes for yourself, but there are also drawbacks.
How To Read A Home Insurance Quote
Homeowners insurance is comprised of several variables but I’ll discuss some of the major components. First and foremost you want a Replacement Cost policy. Second, you need to work with your agent to determine the proper amount of Replacement Cost coverage (the cost to rebuild your home). Once this amount is determined the other coverage lines are a percentage of the dwelling coverage. Here’s an example of the major components:
Dwelling – $500,000
Other Structures – $50,000 (10%)
Personal Property – $350,000 (70%)
Next, you need to select your deductible. Deductibles typically range from $500 – % of your dwelling coverage. I recommend at least a $1,000 deductible because you do not want to file small claims on a home policy.
There are other optional coverages that are very important such as Water/Sewer Backup and Law and Ordinance coverage. Identity Theft and scheduled items can also be added. As always it’s best to discuss your options with an independent agent who can present several options specific to your needs.
SEE ALSO: Does Homeowners Insurance Go Up Every Year? – Things To Know