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How To Choose Homeowners Insurance


Are you a first-time homebuyer? You've got a lot to budget for — your down payment, your closing costs, home improvements. But just to make things a little bit more complicated, you'll need to add homeowners insurance to the list. And the problem with budgeting for homeowners insurance is that it's not a one-size-fits-all situation. You have to decide what is right for your house and for your area.

Although it's a complicated process, you should start shopping for homeowners insurance early in the homebuying process. Indeed, your mortgage bank will likely require proof of insurance before closing. Many buyers go with whatever home insurance company their real estate agent recommends, but that's not always the best plan. To get the best price and coverage, try these tips:

  • Get quotes online. Remember that different policies offer different levels of coverage, so make sure you're comparing apples to apples.
  • Know what each policy covers. Homeowners insurance protects against water damage, electrical fires and roof leaks, but maintenance issues like mold and pest infestations are often not covered. Flood insurance usually has to be purchased separately, as does special coverage for fine art, a wine collection or antiques.
  • Check the insurance company's rating. A rating is an independent assessment that tells you the company's financial standing. A good rating means the firm meets its claim obligations even when disasters are widespread.
  • Choose the right deductible. If an insurance plan has a $2,500 deductible, the company will cover only claims for more than $2,500. That means that too high a deductible makes your plan basically worthless, but higher-deductible plans are also cheaper. You may save money in the long term if you choose a relatively high deductible and then set aside an emergency fund for the deductible amount.
  • Check the additional protections. Make sure you have adequate coverage for severe weather disasters likely in your area. Some insurance companies may give you a discount for procedures that make your home safer: wind mitigation, clearing brush from your property, installing impact-resistant doors and windows, and using noncombustible landscaping.
  • Find out whether freestanding garages or sheds need to be covered separately.
  • Look for discounts. You can get at least a 5% discount for security systems. Water mitigation systems like automatic water shutoff valves and leak sensors may also qualify for discounts.
  • Add liability protection. You should have at least $100,000 in personal liability coverage to cover common claims like slip-and-fall accidents on your property.
  • Look at loss-of-use coverage. Also called additional living expenses coverage, this is coverage for living expenses if you must relocate while your home is being repaired, and it's part of most standard homeowners insurance policies. Insurance experts suggest that about 20% of your dwelling coverage go toward loss-of-use coverage.

Other ways to save

Look for multiple-policy discounts. For example, if your auto insurer also offers home insurance, you may get a discount by bundling. At least once a year, compare the costs of other policies and review your existing one to note any changes that might have occurred that could lower your premiums. To smooth out payments, you can consider setting up an escrow account so your premiums are essentially bundled with your mortgage payments, spreading the cost throughout the year.

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Davis & Graves CPA, LLP
Davis & Graves CPA, LLP
700 N Main Ave
Gresham, OR 97030
Office (503) 665-0173
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