The average cost of homeowners insurance is $1,428 per year, or $119 per month, for $250,000 in dwelling coverage. However, your insurance rate will vary based on your personal rating factors, your home’s characteristics, where you live and more. If you’re shopping for coverage on a budget, you’re likely looking for the cheapest companies, but choosing a policy based on price alone may leave you unsatisfied with your coverage options and customer service. Bankrate’s insurance editorial team put together this guide to help you shop for cheap home insurance without sacrificing coverage quality.
How to choose the right, cheap home insurance
Budget can definitely be a driving factor when it comes to choosing a homeowners insurance policy. However, other considerations may be worth incorporating into your research as you choose the best cheap homeowners insurance provider for your dwelling. Considerations such as customer service ratings and the financial stability of a carrier may also influence your decision. While there is a wide range of carriers and policy options to choose from, there are a few simple steps you can take to narrow down the options and make sense of the process.
1. Consider details about your home
The best budget insurance for your home may depend largely on your home’s characteristics. Considering your home’s location and attributes may be a good starting point in your search for the right cheap home insurance.
- Age of home: You might pay more for insurance if you are the owner of an older home. These homes may have outdated features, like an old roof, that could be more prone to damage by a covered peril.
- Size of home: Home size may be tied to the replacement cost portion of your homeowners policy. Usually, the more square footage, the higher the replacement cost for rebuilding a structure.
- Your home’s materials: The more expensive the materials used for building a home, the higher the insurance rates may be.
- ZIP code: Whether you live near the coast, where water damage is more likely to occur, or close to a fire station in case of an emergency, location and relative common causes of loss have a significant impact on insurance rates. However, not all states allow ZIP codes to be used as a rating factor.
- Replacement cost: Your policy will help you repair your home and replace personal items following a covered loss. Replacement cost value is used if you choose to replace your damaged property at its current value, without depreciation. This is more expensive versus actual cash value, which factors in depreciation for items.
- Personal property: This covers contents within your property and includes items outside of your home, such as in a storage shed. Adding extra coverage for high-value items will likely increase your premium.
- Attractive nuisance: Items on your property that may attract an accident, such as a swimming pool or trampoline, may be considered an attractive nuisance. Being mindful of how many attractive nuisances are on your property might help control home insurance costs.
2. Consider your personal needs
In addition to your home’s features, you may want to consider your own personal needs to help you select the right amount of home insurance and ensure you don’t overspend. For example, if you have an extensive antique collection, you may need additional coverage for those high-value items. Certain carriers may offer better policy terms for other unique needs, such as your dog breed, or if you have a history of making homeowners insurance claims.
Your personal needs may include the coverage types and limits you choose. Endorsements are optional add-ons you may be able to include in your home insurance policy to tailor it to your personal needs. For example, adding sewer and water backup insurance may provide coverage if the sewer line backs up into your home’s drains or your sump pump fails, causing water to back up into your basement. Endorsements vary by provider, so if you have a specific coverage option in mind, that may limit the companies you can choose from.
Sinkholes, earthquakes and floods are also not covered under a standard policy. If you live in an area susceptible to these types of events, it may be worth speaking with your insurance company to discuss endorsement or standalone policy coverage options.
3. Compare quotes based on coverage
Once you’ve decided on the coverage types and limits you need, it may be time to start requesting quotes. Quotes may vary substantially between carriers, so this process may be the most effective for identifying which company offers the lowest rates for your circumstances and coverage selections. When comparing quotes, you’ll likely want to ensure that you’re requesting the same coverage types and limits across carriers so you can get the most accurate comparison.
4. Look for applicable discounts
Discounts are one of the easiest ways to get budget contents insurance. Most carriers offer at least a handful of discounts, and they may provide significant savings on the cost of your policy. Inquiring about discounts when you request quotes may help you see which carrier has the most relevant savings opportunities for you. Some common discounts include:
- Bundling: Purchasing your home and auto insurance from the same company may result in a discount on one or both policies.
- Security alarm: Extra security features, such as a burglar alarm or fire protection system, may earn you a discount.
- New construction: If your home was recently constructed or renovated, you may qualify for a new construction discount.
- Loyalty: If you have been with a carrier for a certain amount of time, then you may qualify for a loyalty discount.
- Claims-free: Homeowners who haven’t filed a recent claim, typically within the last three to five years, may be eligible for a claims-free discount.
5. Research trusted third-party ratings
Trusted third-party ratings may provide a snapshot of a company’s performance and customer service. For example, customer satisfaction scores from J.D. Power may show how top carriers compare to one another and meet the needs of policyholders. AM Best and Standard & Poor’s provide financial strength ratings that may indicate a carrier’s historical ability to pay out claims. Lastly, complaint index scores from the National Association of Insurance Commissioners (NAIC) show how many complaints have been filed against a company compared to the expected number based on its size.
Evaluating your communication with a home insurance carrier and how you manage your policy is also something you may want to consider. For example, if you live in a remote area, you may place emphasis on carriers who provide highly-rated digital tools so you can manage your policy fully online.
These metrics may help you get a complete picture of how satisfied you may be with a company’s service and claims process.
Frequently asked questions
If you want to find the cheapest home insurance company for your unique situation, it typically helps to compare personalized quotes from multiple home insurance providers. Obtaining quotes from a number of different insurance companies will let you compare the cost and coverage to determine which option may be the cheapest for the type and amount of coverage you need.
Unlike car insurance, home insurance is not required by federal or state laws. If you take out a loan to purchase your home, however, most mortgage lenders will require a homeowners insurance policy. The right homeowners insurance policy will provide financial protection for covered events, which prevents you from having to pay for certain types of damage out of pocket. Given the level of financial protection it provides compared to the typical cost, even homeowners who have paid off their homes may find a policy worthwhile.
Depending on the renovations and updates you’ve made to your home, these changes could now make it more expensive to rebuild your home after a covered claim. Because of this, you’ll likely want to speak to your home insurance company to see if any adjustments need to be made. But it’s not all bad news — some home insurance companies may even offer discounts or rate changes for making certain improvements to your home, like making it more energy efficient or adding a new roof.
There are several things you may be able to do to lower your cost of home insurance. In addition to the steps listed above, you may be able to further save on home insurance by evaluating your personal rating factors. In states that allow credit history as a home insurance rating factor, you may be able to save by improving your credit score. You may also be able to save by carefully evaluating damage before filing a claim. If the out-of-pocket cost to repair the damage is low, it may be worthwhile to repair the damage yourself and avoid potential rate hikes associated with filing a claim with your home insurance company.