10 tips on how to choose homeowners insurance

Buying a home is one of the largest investments you'll make in your lifetime, both financially and emotionally. That's why it's always good to be well-equipped when navigating the weltering sea of homeowners insurance companies. Here are some helpful tips to get you started on the right foot.

1. shop around for coverage

If you own a home, your mortgage lender will likely require you to get homeowners insurance.

To find a policy, consider getting quotes from a handful of home insurance companies, and assess their coverages, limits, and deductibles.

Make sure you aren't sacrificing protection for bare-minimum price either. And since you're probably going to be communicating with your insurer during stressful moments, consider picking a company that is known for quality customer service and 24/7 support.

2. find out the company rating

A.M. Best is a great source for third-party ratings for virtually any insurer in the United States.

Their rating analysis involves comparing the business to other businesses, and evaluating them against industry standards. Put simply, it's an assessment of a company's ability to meet its obligations to customers (such as paying claims), which can help provide peace of mind when picking homeowners insurance. Esurance, for instance, has an A+ rating.*

3. consider the location

If you are in the market for buying a home, bear in mind that the location of your house could impact how much you pay for home insurance. For example, if the house is in a hamlet with volunteer firefighters, or the closest fire station is more than 5 miles away, rates may start to hike up. Premiums could also be higher if the house is in a geographical location that is vulnerable to natural disasters like wildfires or tornadoes.

Other regional factors that could affect insurance rates include crime rate and general building costs in the area.

4. take advantage of discounts

Most companies offer homeowners insurance discounts for behavior that mitigates risks, so take advantage of them. From storm shutter installation and smoke detectors, to burglar alarms and water safety systems, you may be able to save some extra cash on your home insurance premium.

Some homeowners insurance companies — like Esurance — even offer discounts for simply being a new home buyer. Also, improving your credit score could increase your chances of getting a better rate. The higher your credit score, the lower your perceived risk may be.

5. go online

The most effective way to commence your research is by venturing on the interweb. Simply typing in "homeowners insurance quotes" on a given search engine is guaranteed to illuminate your screen with a bevy of pertinent information and options.

In addition, there are some insurance companies born and raised online — like Esurance — that offer a convenient and affordable way to buy and manage your policy.

6. know the costs

Remember, you're going to want your house insured for its replacement cost, not its market value. While the market value denotes the amount a buyer pays for the home, the replacement cost concerns the expenses needed to repair or rebuild the entire home.

Keep in mind the costs that may be required to transport the materials to the site, as well as other factors like inflation.

7. compare deductibles

As you start to build your policy, you can finally set your homeowners insurance deductibles. The deductible is how much you'd pay out of pocket on a claim.

For instance, choosing a higher deductible could help you lower your monthly premium — but it would mean more money coming out your wallet before your insurance company pays out.

On the flipside, a lower deductible means you'd pay less out of pocket after a claim — but your homeowners rates may be higher each month. There are certainly pros and cons for both cases, and ultimately it comes down to your financial security and personal circumstances.

8. know the home in and out

If you have recently bought a home, make sure to get a claims history report from the seller. This report details any previous damage to the home, such as fires, flooding, and other incidents. It can clue you in on any of the home's frailties that could increase homeowners insurance rates — or, worse, make it difficult to even get insurance.

The Comprehensive Loss Underwriting Exchange is the largest database used by the insurance industry, providing a history of damages to a home that resulted in a claim being filed. The disclosure outlines the date, type, and amount paid for the claim, as well as other helpful information.

Because factors like the age of the electrical system, plumbing, and other components within the home could impact premiums, try to gather as much information as you can to gauge potential issues. Bear in mind that newer homes are usually in better condition than older homes, and could, therefore, be cheaper to insure in some cases.

9. answer questions honestly

When getting your quote and selecting home insurance coverages, honesty is critical. Getting the proper information helps your insurance company provide more reliable protection.

For example, if you plan on upgrading your kitchen (check out that new backsplash!), the value of the home is likely to increase, and your coverage needs to reflect that for your protection. Likewise, if you plan on having a home office, you want to make sure you have the proper liability coverage just in case a client slips on that vinegar floor solution you forgot to towel dry.

Not only could providing incorrect information lead to an inaccurate quote, but the insurer may end up cancelling your policy.

10. know your coverage

Homeowners not understanding their coverage is a more common issue than one might think. And in a way, it's understandable. A standard homeowners insurance policy is an intricate piece of literature, outlining the nuances of what is and isn't covered — it's also not a particularly riveting read.

Nonetheless, your policy is important. So, if you're in doubt about anything, speak with your insurer and ask them to explain anything you don't understand.

If you're an Esurance policyholder, we're available 24/7 to answer any of your home insurance questions at 1-800-ESURANCE (1-800-378-7262).

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