Homeowners insurance estimates used to be a cornerstone of the industry. Back in the day, the only way to get homeowners insurance was to fill out a long paper form and wait several weeks while the insurance company processed the application.
Nowadays, homeowners can get an insurance quote instantly. But if you want an idea of what your premium might look like before you apply, follow the steps below.
Estimating homeowners insurance cost in 3 easy steps
Premiums can vary quite a bit between home insurance companies, so it makes sense to have an estimate in mind when you’re shopping for coverage. Here’s how you can get a ballpark figure for your premium to make it easier to compare your options.
Find the average cost for country and state
Start by looking for the average cost of home insurance in your state. Homes in different states face different risks based on local weather patterns, construction standards, and other factors. Knowing the average cost of coverage in your state can help you understand what you might pay.
Determining your basic coverage needs
There are six different types of coverage included in a standard home insurance policy. These are:
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Coverage A (Dwelling coverage, or hazard coverage).
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Coverage B (Other structures).
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Coverage C (Personal property).
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Coverage D (Loss of use).
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Coverage E (Personal liability).
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Coverage F (Medical expenses).
Most people want to get enough insurance that they can rebuild their home even after a total loss, so start with the replacement cost for the structure of your home. From there, insurers usually suggest you set coverage amounts on your other structures, loss of use, and personal property coverages that are a percentage of your dwelling limit. However, those are just guidelines, so you might also want to think about where you might need more or less coverage. For example, conducting a home inventory of your personal belongings may show you that you need high limits for Coverage C.
Please note that your mortgage lender may also have specific requirements for the types and amounts of coverage you need to carry.
Assessing your risk
Do you live near a flood zone? Are you in an area prone to earthquakes or sinkholes? That may mean you need additional coverage because these perils are often excluded. Some special types of coverage that protect against specific perils include:
Evaluating your risk also means thinking about any special circumstance or unique concerns you might have. For instance, if you’re worried about water backing up into your basement, you may need a water backup and sump overflow endorsement. Just remember that additional coverage means higher premiums.
Why it’s better to get a quote instead of a home insurance estimate
An estimate gives you a ballpark idea of what you might pay for coverage, and it’s a good tool to have when you start shopping for a policy. However, quotes are quick and usually more accurate than an estimate.
The biggest difference is that a quote is a price that an insurance company can stand behind. The only time a quote changes is if your insurer finds something during the discovery period that changes your risk. Usually, the impact is minimal, and most insurers give you an opportunity to make repairs, but your price may go up or down as a result.