Buying Your First Homeowner’s Insurance Policy? Here’s What to Look For

Anyone who is buying a house needs to have a homeowners insurance policy. Lenders require this, and even cash buyers will want coverage so they don’t have to pay for repairs or replacement of their home out of their bank account if disaster strikes.

It can be confusing to buy homeowners insurance, though, as there are many different companies out there offering policies. For those getting coverage in place for the first time, here’s what to look for to ensure the right protections are put in place.

What types of incidents does the policy cover?

The first thing you’ll want to find out is what kinds of incidents would be covered. Policies are typically divided into two types:

• Named peril policies: These cover only incidents named in the policy, such as fires, explosions, vandalism, or falling objects.
• Open peril policies: These cover everything that is not specifically excluded. Common exclusions include flood damage and routine wear and tear.

In general, most policies — regardless of whether they are named peril policies or open peril policies — provide coverage for:

• Lightning
• Windstorms
• Fire
• Smoke damage
• Falling objects
• Explosions
• Damage from aircrafts
• Burst pipes
• Vandalism
• Theft

And most policies exclude coverage for flood damage, as well as for other specific risks that are especially likely to occur in certain areas such as mudslides, earthquakes, or wildfires.

Homeowners can read their policies to find out exactly what is covered. When certain risks are excluded, such as floods or earthquakes, buying a separate policy to cover these potential sources of loss is usually a good idea.

What types of losses are covered?

It’s also important to understand the kinds of losses that are covered. Typically, homeowners will want to make sure they have the following kinds of coverage:

• Liability coverage to pay for damages caused to others, if someone is injured at the home
• Dwelling coverage to pay to repair or replace the house
• Personal property coverage to pay for repairing or replacing personal property

Other add-ons, such as loss of use coverage, can be a good idea, too. This would pay for additional living expenses if a covered loss occurs and the property owners can’t live in the home while repairs are being made.

Homeowners should review their policies and make sure they have chosen comprehensive coverage. If there are any losses they couldn’t afford to pay for out of pocket if something went wrong at home, they should insure against them.

How much are the monthly premiums?

The average monthly cost of homeowners insurance is $2,305. But insurance premiums vary based on location and the house’s condition and value. To find the most affordable premiums, homeowners should get quotes from several home insurers.

Many insurers make it easy to get quotes online. Independent insurance agents also work with multiple companies and can help homeowners find the cheapest policies.

What is the insurer’s reputation?

Finally, homeowners want to make sure the insurer will actually be fair and pay them promptly if a covered disaster happens. To find out if an insurer has a good reputation, homeowners can review the J.D. Power Home Insurance Study to see how customers rate different insurers. The National Association of Insurance Commissioners also maintains a complaint database homeowners can review.

By considering these factors when buying coverage, homeowners can make sure they have the right insurance to protect their finances.

Our picks for best homeowners insurance companies

There are many homeowners insurance companies to choose from. We’ve researched dozens of options and short-listed our favorites here. Looking for a green build discount or easy bundle policies? Want an easy-to-use interface? Read our free expert review and get a quote today.