How to estimate your home insurance cost

Understanding how to estimate your home insurance costs can help make sure you get the coverage you need without overpaying. But keep in mind: a homeowners insurance estimate can only give you a general idea of your potential premium. It’s not the most reliable way to determine how much you’ll pay for your policy.

For a clearer picture of your coverage needs and actual rate, you’ll want to get a home insurance quote, which is based on your specific property and risk factors. Homeowners quotes are fast and easy, and you can get a quote online with some companies. Here’s how to find the right policy at the best price.

Home insurance estimate vs. home insurance quote

A home insurance estimate is a rough approximation of how much your premium (the cost of your policy) could be. It’s based on information like your ZIP code and home size. While useful for early planning, it may not be very accurate.

A home insurance quote is a personalized offer based on detailed information like your home’s square footage, features, coverage needs, and claims history. It reflects what you’ll actually pay if you decide to purchase the policy and is usually valid for a set period.

While estimates help with initial comparisons, quotes are essential for making an informed and final decision.

How to estimate home insurance 

Estimating your home insurance coverage needs and premiums can help when comparing quotes from homeowners insurance companies, as premiums can vary significantly by insurer.

Here’s how to begin the estimation process.

Determine your coverage needs

A standard home insurance policy is made up of six main coverages:

• Dwelling coverage (Coverage A): Covers your home’s structure and permanently attached structures, such as an attached garage or sunroom.

• Other structures coverage (Coverage B): Covers detached structures like a fence, shed, garage, barn, or swimming pool. 

• Personal property coverage (Coverage C): Helps pay to repair or replace belongings damaged or stolen during a covered loss.

• Loss of use coverage (Coverage D): Helps with additional living expenses you incur from having to live somewhere else temporarily while your home is being repaired or rebuilt and is unlivable due to a covered loss.

• Personal liability coverage (Coverage E): Helps cover costs if you’re legally responsible for injuries or property damage to others.

• Medical payments coverage (Coverage F): Helps pay for minor injuries should a guest be injured, regardless of fault. 

With most coverage types, your policy limits are calculated as a percentage of your dwelling coverage. For example, your personal property coverage limit is usually around 50% of your dwelling coverage. So if you have $150,000 in dwelling coverage, you typically have $75,000 in personal property coverage. But if you need more than that, you can usually elect to increase the limit to match your needs.

Assess your risks 

Home insurance risks are factors that increase the likelihood or cost of a claim. Assessing your risks before getting home insurance quotes can help ensure you get the coverage you need to protect your finances and your home. 

For example, consider including water backup coverage if you have a sump pump or a finished basement. And if your area is prone to earthquakes, landslides, sinkholes, or floods, you may want to consider adding coverage since a standard home insurance policy doesn’t typically cover damage resulting from those hazards.

Homeowners with older houses and outdated electrical, plumbing, or HVAC systems may want to consider ordinance or law coverage, which helps cover additional costs to meet current building codes during repairs from a covered claim.

Further, owning a pool, trampoline, or specific dog breed could increase your liability risk. Most homeowners insurance policies come with $100,000 to $500,000 in liability coverage. If that’s not enough to cover your net worth (assets minus liabilities), buying an umbrella insurance policy may be worth it.  

Calculate your home’s replacement cost

Your home’s replacement cost is how much it would cost to rebuild if it were a total loss. You can calculate the replacement cost by multiplying the square footage of your home by local construction costs. 

For instance, if you have a 2,000-square-foot home and the average building cost in your area is $200 per square foot, your estimated replacement cost is $400,000.

Home insurance companies use proprietary tools to determine your home’s replacement cost more accurately. The calculation is based on factors such as your home’s:

• Age

• Square footage

• Building construction material

• Number and size of rooms

• Special characteristics, like arched doorways and fireplaces

• Improvements like a kitchen renovation or upgraded cabinetry 

However, replacement cost calculations aren’t perfect and can leave homeowners vulnerable in certain situations. Natural disasters with widespread damage can cause the cost of building materials to increase. Adding inflation guard protection can keep your dwelling coverage in line with rising costs, and extended or guaranteed replacement cost coverage can provide a buffer on top of your dwelling coverage limit as needed.

Contact insurers for quotes

Many insurers offer home insurance quotes online. You can usually complete the quoting process within a few minutes, especially if you’ve already estimated your coverage needs. 

It’s worth getting a homeowners insurance quote from several companies to compare coverages, premiums, and discounts. Don’t just focus on rates, but also evaluate each company’s financial strength, which is its ability to pay claims on time and in full, and customer satisfaction. Organizations like AM Best and the National Association of Insurance Commissioners can help homeowners gain insight into these areas.

The most accurate way to estimate home insurance costs

While estimating home insurance costs on your own can be a good way to get a ballpark figure for budgeting purposes, the best way to determine how much you’ll pay for a policy is to request quotes directly from insurers. Here’s how to get the most accurate quotes.

Include endorsements to customize your policy to your specific needs

Home insurance endorsements can provide additional coverage if you need it. For example, most policies include a sublimit of $1,000 to $1,500 for damaged or stolen high-value items, like fine art and jewelry. If you have items worth more, you can get a scheduled personal property endorsement covering them for their appraised value. Keep in mind that endorsements usually cost extra.

Ask about discounts 

All home insurers offer discounts, but the type, amount, and savings vary by company and state. Ask which discounts the company offers so you can apply as many as you qualify for to lower your home insurance premium. 

For example, you may be eligible for a new roof discount if you recently got a new one. And if you bundle your home and auto policies with the same company, you should qualify for a multi-policy discount.

Consider deductibles 

The deductible is the amount of damage you agree to pay for out of pocket. Then, your insurer pays for the rest, up to your policy limits. For example, if you have a $10,000 claim and a $1,000 deductible, you’re responsible for the deductible, and the insurer will pay $9,000. Choosing a higher deductible will lower your premium but increase your out-of-pocket costs if you file a claim.

Some insurers and states have separate deductibles for specific losses. Nineteen states have hurricane deductibles, which is usually a percentage of your dwelling coverage. For example, a 2% hurricane deductible on $200,000 in dwelling coverage would be $4,000.

Complete a home inventory 

A home inventory can help you determine how much personal property coverage you need. Take photos or videos as you walk around your home to record your belongings, or use an app to create a room-by-room inventory.