Best Questions to Ask When Shopping for Home Insurance

If you are in the market for a new home, one of the most important components of buying a house is finding the right homeowners insurance policy. Homeowners insurance is not only required by your lender, it’s a safety net in the event that something happens to your home. There are a few questions you should ask when shopping for insurance coverage to make sure your home is fully protected, and you get the best deal possible. 

You should always ask the following questions when shopping for coverage:

Is the dwelling coverage enough to rebuild my house?

The dwelling coverage is the part of your homeowners insurance policy that will pay to rebuild your home if it is destroyed by a covered peril such as a fire or hurricane. If you are not carrying enough dwelling coverage, you could end up having to cover some of the rebuilding costs out of your own pocket. 

Insurers typically use a replacement cost calculator to determine the replacement value of your home. However, these calculators are not always accurate. You will almost always get a more accurate estimate if you ask your insurer to send someone to your home for a replacement evaluation.  

If your insurer is not willing to send someone out, you can also talk to a local builder who should be able to give you a fairly accurate estimate of the local rebuilding cost per square foot. Once you have established an accurate dwelling coverage limit, you may want to consider extended replacement cost coverage. This means that you insurer will pay an additional 10 to 50 percent more than your dwelling coverage limit to help you rebuild if the cost comes in higher than you expected. 

This coverage can be a financial lifesaver if the cost of lumber or labor shoots up in your area which is common after a major incident such as a forest fire or hurricane.  

Does my policy have multiple deductibles?

While the majority of homeowner policies come with a single deductible, policies in certain areas may come with more than one deductible. This additional deductible usually applies to claims for wind, hail, named storms or other disasters.

These windstorm deductibles are usually much larger than a standard deductible and are often percentage deductibles. This means the deductible is a percentage of your dwelling coverage, rather than a set amount. The percentage can vary from 1 to 5 percent in most cases this type of deductible can quickly get expensive. 

As an example, if you are carrying $300,000 in dwelling coverage and have a 3 percent windstorm deductible, you will need to fork up $9,000 if your home is damaged or destroyed by a windstorm. 

When shopping for insurance always ask about the policy deductibles and make sure you fully understand what you will have to pay in the event of a claim. 

Are there policy exclusions?

There are common exclusions on most homeowner policies that many consumers are unaware of so it is always a good idea to ask about exclusions when shopping for a new policy.

Flood damage is a good example, it is excluded on almost every standard homeowner policy. In order to be covered for flooding, you need to carry a separate flood policy. Flood insurance can be purchased in the private market or via the National Flood Insurance Program (NFIP). While it can be pricey, especially if your home is waterfront, it can be a financial lifesaver in the event of a major storm. 

Sewer lines can also be excluded from a standard policy which is why you may want to consider adding water backup coverage to your policy. This will cover damage that is done by water backing up into your home, which can be from sewer lines, sump pumps or even a septic system. 

How can I lower my premium?

One of the more important questions to ask when shopping for insurance is how can I lower my premium. There are a number of ways to bring down your rates. Here are just a few ways to drop your homeowners premium:

Shop around: This is the easiest way to lower your premium. Insurers rate risk differently so there can be dramatic differences in premium quotes. Shop at least 5 major insurers and always make sure you are comparing apples to apples when it comes to deductibles and coverage levels. 

Get multiple home insurance rates all in one place, get multiple homeowners insurance quotes and compare the best rates.

Discounts: Insurers offer dozens of discounts and your job is to make sure you are getting every discount you are qualified to receive. Ask your agent to do a discount review to make sure all available discounts are being applied to your policy. The savings can be dramatic. 

Raise your deductible: Insurers love it when you have more skin in the game so upping your deductible will absolutely lower your premium. If you can afford to double your deductible expect to shave up to 20 percent off your premium. Always choose a deductible you can easily afford in case you have to make a claim.