How to Buy Homeowners Insurance

Here’s how to find the right home insurance for your needs.
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Written by Cassidy Horton
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Homeowners insurance offers financial protection for some of your most valuable assets, including your home and your belongings. However, shopping for home insurance is often treated as an afterthought instead of an important decision in its own right. That can leave homeowners vulnerable to financial ruin should disaster strike.

This guide will help you understand what you need to know when shopping for home insurance so you can make the best choice for your needs.

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What does homeowners insurance cover?

Standard home insurance policies typically include six types of coverage:

Dwelling coverage is the main coverage offered by home insurance. It covers the structure of your home, such as the walls, floors and roof, as well as built-in appliances and attached structures like a garage, porch or deck. If your home is damaged for a reason covered by your policy, you’ll pay your deductible and the insurer will pay the rest, up to your dwelling coverage limit.

Personal property coverage covers the contents of your home if they’re stolen, damaged or destroyed due to a covered event. This can include furniture, clothing and electronics, among other things.

Other structures coverage insures the structures on your property that aren’t attached to your house, like a fence, gazebo or detached garage. The policy limit for other structures coverage is normally 10% of your dwelling coverage limit.

Loss of use coverage pays for additional living expenses, up to your limit, if you’re unable to live in your home due to a covered event, like a fire or tornado. These expenses can include hotel bills, groceries and laundry costs.

Personal liability coverage kicks in if you’re held legally responsible for causing bodily injury or property damage to someone else. For example, if your dog bites someone while you’re out hiking, liability coverage can help pay for legal expenses, medical bills and other damages, up to your coverage limit.

Medical payments coverage covers medical expenses for guests who are injured on your property, regardless of who’s at fault. It can help pay for medical bills, ambulance fees and other related expenses.

🤓Nerdy Tip

We encourage you to shop for home insurance once a year to make sure you're getting the best coverage and price. By pulling at least three comparable quotes as part of the shopping process, you can be confident you're getting the best deal available on the coverage you need.

How to shop for homeowners insurance

1. Decide how much coverage you need

Your first step in shopping for home insurance is to figure out how much of it you need. If you don’t buy enough coverage, you run the risk of being underinsured, which means you won’t receive enough money from your insurance company to rebuild after a total loss.

At a minimum, you’ll want enough coverage to fully rebuild your home, an amount known as replacement cost coverage. The replacement cost of your home will reflect the size of your house, its features, and the cost of building in your area. Your insurance company should be able to help you determine this amount.

If you’re worried about inflation or rising building costs, you may want to consider extended replacement cost coverage. This pays an additional percentage over your dwelling coverage limit, usually 10% to 50%. Some insurers also offer what’s known as guaranteed replacement cost coverage, which will cover the full cost of rebuilding your home after a covered loss, no matter how high.

You should also consider how much personal property coverage you need. This coverage usually pays 50% to 70% of your dwelling coverage limit. Make a home inventory to get a sense for whether this amount is enough.

Note that many home insurance policies cover personal property on an “actual cash value” basis, which means you’ll receive enough money to cover the value of your lost property at the time of the loss. You typically won’t receive enough to buy brand-new replacements. To avoid this, look into upgrading to replacement cost coverage for your belongings.

Finally, make sure you have enough personal liability coverage to protect your assets should you be held responsible for others’ injuries or property damage.

2. Evaluate add-ons and endorsements

Add-ons and endorsements can provide coverage beyond what's included in a standard home insurance policy. They’re often designed to fill gaps in coverage for specific types of damage or losses.

You may want to consider these common add-ons:

  • Scheduled personal property provides extra coverage for high-value items like jewelry, art and electronics that may exceed your standard policy limits.

  • Sewer or water backup coverage is for damage caused by water backing up into your home through pipes or drains, or because of a sump pump failure.

  • Equipment breakdown coverage is for sudden and accidental breakdowns of HVAC systems and large appliances. This coverage applies when, for example, the compressor stops working in your fridge.

  • Home business endorsements provide extra coverage for home-based businesses beyond what your standard home insurance policy may include.

3. Consider insurance for flooding and earthquakes

Most home insurance policies won’t cover damage from floods or earthquakes. You'll need to purchase separate policies to handle these risks.

Flood insurance covers damage caused by flooding. This includes scenarios such as a river or lake that overflows its banks, a storm surge from a hurricane, a heavy downpour that accumulates faster than it can drain or flooding caused by snowmelt.

Flood insurance is available through the National Flood Insurance Program (NFIP) and private insurers.

Earthquake insurance is for damage caused by earthquakes and other earth movement. In California, home insurance companies are required to sell earthquake insurance. In many states, you have the option to buy a standalone earthquake insurance policy or add extra coverage as an endorsement. If you have difficulty finding earthquake insurance in your state, you may need to contact an independent insurance agent.

4. Get quotes from at least three companies

By this point in the process, you should know how much home insurance coverage you need and which endorsements you want. Now it’s time to gather quotes from multiple companies.

You can get quotes online, by calling companies directly or by working with an independent insurance agent who shops around on your behalf. You’ll typically need to have this information on hand to get a quote:

  • Your insurance history, including past claims, the name of your most recent insurer and your last date of coverage.

  • Personal information for anyone living in your house.

  • Type of residency (primary home, secondary, etc.).

  • Whether you conduct any business on your property.

  • The square footage of your home.

  • The year your home was built.

  • The type of construction (wood, brick, etc.).

  • Any recent home renovations.

  • The number of stories, bedrooms, bathrooms and detached structures.

  • Any security features, such as a burglar alarm, smoke detectors or deadbolts.

When you get quotes, you’ll typically have the option to choose your home insurance deductible, which is the amount of a claim you’re responsible for paying before your insurance kicks in. Raising your deductible from $1,000 to $2,500 could save you an average of 11% on your home insurance premium, according to NerdWallet’s rate analysis. However, before you choose a higher deductible, make sure that you can cover that amount should you have to file a claim.

Did you know...

Your home insurance policy may have special deductibles for damage from hurricanes, windstorms or other events. These deductibles are often a percentage of your dwelling coverage and may be significantly higher than your main deductible. Read your policy carefully to ensure you understand when these deductibles may apply.

When you get quotes, make sure you're comparing similar coverage limits and deductibles. You might not get the same coverage limits or deductible options with every company, but try to match them as closely as you can to ensure you’re not sacrificing coverage for a lower premium.

Note that quotes are estimates, and they may not exactly match the price you end up paying for coverage.

For a more detailed look at what’s involved with this process, read our guide to home insurance quotes.

5. Buy your home insurance policy and read it closely

Once you’ve compared quotes and picked a policy, it's time to finalize the details. Sign the paperwork to lock in your policy, and make your first payment. If you’re in the process of buying a house, your first payment may be rolled into your closing costs.

After you sign the contract, you’ll receive a home insurance declarations page from your insurer. This one- to two-page document lays out the most important information about your policy, such as how much it costs, what it covers and the start and end dates of the policy.

🤓Nerdy Tip

Be as accurate as possible when giving your information to insurance companies. If you misrepresent your home or your belongings to get a lower premium, you may be denied coverage or even charged with fraud.

We also recommend reading your home insurance policy in its entirety, as it will lay out the details of what your policy does and does not cover. Understanding the limits of your coverage will help you avoid unwanted surprises later. Keep a copy of your policy in a safe place so you can refer to it if you need to file a claim.


NerdWallet averaged rates for 40-year-old homeowners from various insurance companies in every ZIP code across the U.S. All rates are rounded to the nearest $5.

Sample homeowners were nonsmokers with good credit living in a single-family, two-story home built in 1984. They had a $1,000 deductible and the following coverage limits:

  • $300,000 in dwelling coverage.

  • $30,000 in other structures coverage.

  • $150,000 in personal property coverage.

  • $60,000 in loss of use coverage.

  • $300,000 in liability coverage.

  • $1,000 in medical payments coverage.

We made minor changes to the sample policy in cases where rates for the above coverage limits or deductibles weren’t available.

We used the same assumptions for all other homeowner profiles, with the following exceptions:

  • For homeowners with a claims history, we added a single wind damage claim.

  • To see the effect of changing your deductible, we raised the deductible from $1,000 to $2,500.

  • We changed the credit tier from “good” to “poor,” as reported to the insurer, to see rates for homeowners with poor credit. In states where credit isn’t taken into account, we only used rates for “good” credit.

These are sample rates generated through Quadrant Information Services. Your own rates will be different.

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