What is an insurance quote?
Before you can get an insurance policy, you first have to complete an application with an insurance company. The insurance company takes the information on your application and runs it through an algorithm that calculates what it costs to insure you. From this, the company generates an estimate for your premium. That estimate is your insurance quote.
Your quote tells you approximately what it costs for you to get a policy with that particular insurance company. Most companies send insurance quotes that include details about the policy you hope to buy. For example, a home insurance quote may list:
You’re not bound by an insurance quote. You can choose to take your business elsewhere or continue working with the company that provided the estimate.
If you do choose to buy a policy from the company that offered the quote, then the company moves forward with processing your coverage. This includes underwriting, where individuals review the details you provided on your application to make sure nothing has changed and that the premium is appropriate for your risk. Sometimes the underwriting review reveals information that changes your quote, such as a credit problem, additional hazard, or a prior claim. This is a fairly common situation and usually the difference is minimal.
For example, let’s say you thought you had an insurance claim three years ago, so you put that information on your home insurance application. You get your insurance quote and decide to move forward with buying the coverage. However, the insurance company’s underwriter discovers that the claim actually occurred four years ago. This changes how the insurance company interprets your risk and may result in a lower final premium.
The difference between quote and policy
There’s a big difference between quote and policy in insurance. In fact, the quote comes before the policy can even exist. And while a quote may include some coverage basics, it is not the actual contract. Your policy, however, is the contract that defines your coverage. Without a policy, you don’t have insurance.
Sometimes there’s a bit of a lag between when your insurance policy’s effective date and when you have your policy in hand. To bridge that gap, insurance companies often provide you with an insurance binder. Binders are temporary but enforceable coverage that you can use as proof of insurance.
How to get an accurate insurance quote
Because an insurance quote can change before you buy the policy, you want to make sure that you get as accurate of a quote as possible. That requires giving the insurance company’s representative as much information as possible and keeping it accurate and truthful.
For example, if you say that your house is made of wood on your application, then you’ll get a quote based on that. But your premium will change if underwriting finds that your house is made of bricks. This is one reason we use technology to scour public records. Not only do we end up with the most precise information available, but we’ve also managed to make insurance applications shorter and easier to complete.
How to compare home insurance quotes
Getting just one quote from one insurance company isn’t the best way to shop for insurance. You’re usually better off requesting quotes from several companies before you decide. But when you do, make sure you’re comparing more than just the cost. Coverage details can have a major impact on the value of your policy, so you also want to look at:
- Coverage limits. Your dwelling coverage limits have a direct impact on your premium. Plus, your personal property, loss of use, and other structures limits are typically percentages of your dwelling coverage, and the available percentage can vary by insurance company.
- Valuation. We use your home’s replacement cost when we determine your insurance quote. That’s usually preferable than using its actual cash value that accounts for depreciation.
- Covered perils. Some home insurance is written on an open perils basis, which means it covers any peril except those explicitly mentioned as excluded. But insurance companies can also offer named-risk policies that only cover the events listed in the contract.
These aren’t the only features to consider. You also want to pick an insurance company that offers good discounts, great service and an easy claims process. Those are things you usually find out after you get an insurance quote and buy a policy, but looking at online reviews for the best home insurance companies can help.