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How to Buy Homeowners Insurance

You can't be approved for a mortgage without homeowners insurance, which will cover you if a tree falls on your home, a guest trips on your stairs, an intruder makes off with your valuables, and much more.


  • Step 1: A standard policy covers property damage caused by certain disasters; personal belongings, up to a limit; personal liability, which protects family members from lawsuits related to injury or property damage they may cause others; and medical coverage, which pays the expenses of non-family members injured on your property.
  • Step 2: Calculate how much insurance you need to carry. Homeowners insurance reimburses you for the cost per square foot of rebuilding your home—not the market value of the house.
  • Step 3: Figure out how much it would take to replace the contents of your home, which you can record by photographing or videotaping them. Consider hiring a professional appraiser to help.
  • TIP: A standard policy has reimbursement limits. If you own something particularly valuable that exceeds the limit, buy a separate policy for it. You’ll have to prove its worth with an appraisal.
  • Step 4: Consider buying additional coverage. Damage from fire and lightning is covered in standard policies, but flooding and earthquakes are not. Hurricanes are generally covered, but any flooding they cause is not.
  • TIP: If you live in an area prone to disasters that cause rebuilding costs to skyrocket, you might want extended-replacement coverage, which gives you an additional 20 to 25 percent over your policy limit.
  • Step 5: Weigh the pros and cons of a cash-value policy, which gives you money to replace your belongings, minus depreciation, versus a replacement-cost policy, which reimburses you for the current cost of replacing your goods. The latter has higher premiums.
  • Step 6: Get at least three rate quotes, since premiums can vary wildly, and check out the financial health of various insurance companies by searching online for their financial-strength ratings.
  • TIP: If you own a car, always check homeowner rates with your car insurer. Some companies give discounts to customers with multiple policies.
  • Step 7: Ask if you qualify for a premium discount if you have a security system, an upgraded electrical system, or new plumbing. Choose the highest deductible you can safely afford. Taking a $1,000 deductible rather than a $500 one can reduce your premiums by as much as 25 percent.
  • Step 8: Review your policy, and alert your insurer any time you make substantial renovations or a pricey purchase.
  • FACT: If a ring or other piece of jewelry falls down the drain, standard homeowners insurance partially covers the replacement cost.

You Will Need

  • An estimate of the replacement cost of your home and its contents
  • A visual inventory of your valuables
  • Insurance rate quotes
  • Insurer strength ratings
  • A high deductible
  • An annual policy review
  • A professional appraiser
  • A floater policy
  • Add-ons for flood and earthquake coverage
  • Extended replacement coverage

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