Buying Home Insurance – a Primer

How do you know you’re getting apples-to-apples quotes when you are shopping for homeowner’s insurance? 

Too often, we see situations where people opt for what seems to be comprehensive coverage for a really great price, then find out (usually the hard way) the coverage doesn’t actually cover what they expected.

That is never a good day.

To help you make sure this never happens to you, here’s a quick primer of what you need to know and what to ask for when you are getting a home insurance quote.

#1 – What You Need

There are three basic elements to your home insurance policy that you want to carefully consider when you are comparing policy costs:

1. How much would it cost to replace your home? That’s right. In the event of a total loss, like a natural disaster or a fire, what would it cost to rebuild from the ground up? Generally speaking, it is recommended that you are insured for that amount. You also want to re-evaluate that number every year. If building materials costs rise, you could end up under-insured if your insurance policy is not updated to reflect this increase in replacement costs.  
2. What is the value of your personal belongings? Generally speaking, it is recommended that you have enough personal property coverage for all of your personal belongings, like furniture, electronics, and appliances. Keep in mind that special belongings, like original art, special collectibles, or expensive jewelry, might require separate coverage. Talk to your agent if you have expensive belongings that would not be found in every home.
3. How much are you worth? Many people consider an umbrella policy to provide additional coverage for injuries, property damage, and certain lawsuits for personal liability circumstances. Learn more about umbrella policies and how they help here.

IMPORTANT! Be sure that any policies you are evaluating are quoted based on the same values, including any desired additional coverages. 

#2 – Learn the Language

To help ensure that you are getting quotes that cover everything you need, you want to be sure you’re asking the right questions. Knowing the language will help you navigate. Your agent may refer to these items* (or you might need to be your own advocate, if the agent isn’t asking YOU the right questions):

1. Dwelling – that’s typically the house and anything directly attached to it, like a porch and garage. Generally speaking, the “dwelling” does not include detached buildings that might be on your property. Those would likely be considered…
2. Other structures – typically a building or other construction that isn’t attached to your dwelling. This could include a detached garage, a tool or garden shed, a pool house, or the fencing around your property.
3. Personal property – typically the stuff you own that could be damaged or stolen, such as electronics, furniture, clothing, jewelry, tools, yard care equipment, etc.
4. Additional Living Expenses (ALE) - If you can’t live in your home temporarily due to a covered loss, your insurance policy may provide coverage to help with the cost of temporary housing and relocation expenses while repair or rebuilding is going on. 
5. Personal liability – in certain situations, personal liability coverage may help protect you and your assets against liability for someone else’s injury or property damage. You may also want to separately consider an umbrella policy. As mentioned above, you can learn more about umbrella policies and how they help here.
6. Medical payments – in certain situations, this coverage may help cover the medical expenses of a guest to your home that injures themselves on your property.
7. Actual Cash Value (ACV) – typically, this type of coverage will reimburse you for the value of your personal property minus the cost of depreciation. In certain circumstances, this may mean cheaper premiums but you may pay more out of pocket if you have a loss. For example, a couch might cost $1500 to replace, but you’d likely only be reimbursed for a fraction of that amount if your couch is 10 years old (depreciated).
8. Replacement Cost Value – typically, this coverage would reimburse you for the value of the covered property at today’s prices, with no depreciation. It’s likely a higher premium, but for many, well worth it.

You also want to know about things that would require additional coverage and whether or not your insurance company can include that. For example, flood insurance in the State of Minnesota is covered by a specialized carrier and is not included in a standard homeowners’ policy. But if you have a trampoline, that typically requires special coverage that many companies can include for an additional charge. Similarly, a basement drain backup or a sump pump failure will also typically require a separate addition to your policy.

#3 – Your Home Details

Gather this information yourself so you are absolutely certain that each quote you receive is based on the same information. 

1. Your home’s square footage, number of rooms, and how many bedrooms and bathrooms
2. What kind of roof covering do you have (asphalt shingles, steel or wood)?
3. How is your home heated (gas, electric, boiler, wood)? 
4. What is the renovation history of your home?
5. Do you have pets? A trampoline? A pool? Is your property fenced in?
6. Do you ever rent your home or a portion of your home?
7. How far are you from the nearest fire hydrant?
8. How long would it take the fire department to get to you in the event of a fire?
9. Do you have working smoke alarms? Carbon monoxide detectors? Burglar alarm? Video surveillance installed?

Now You’re Ready

Armed with all of this information, you are ready to shop for homeowner’s insurance. You’ll be providing each agent with the information they need so you can compare quotes effectively.

Once you have your quotes in hand, take your top choices and do you research to evaluate each insurer.  Consider looking at their AM Best^® rating or other third party rating site.  

A Couple of Other Suggestions

When you are considering a new insurance company, we recommend you look at two more specific things.

1. What is their experience in your area? Are you better off with a company that only works in one specific area of the country, so they have deep expertise with the issues that arise in that area? Or are you better off with a company who covers everyone everywhere and maybe doesn’t understand the specific needs in your geography? 
2. How often will your agent reach out to you, proactively, to do an insurance checkup, so that you can know you have what you need even though things have changed since you initially purchased the policy? 

If we can be of assistance to you as you evaluate homeowner’s insurance policies, please reach out. We will be glad to help.

* These terminology discussions are for illustration purposes only.  Nothing in this section shall supersede the definitions, terms, exclusions or conditions set forth in an applicable policy.

Start a Quote Online or Contact Us. We look forward to hearing from you.

This article is for general information only and should not be considered an offer of insurance or legal or other expert advice.  The recommendations herein may help reduce, but are not guaranteed to eliminate, any or all risk of loss.  Claims illustrations herein are hypothetical and for discussion purposes only.  Coverage will be determined based on the facts of the claim and the terms of your policy, if approved for issue.  Policy limits, deductibles, conditions, and exclusions may apply.  Your eligibility and premium will depend on the application of Federated’s underwriting guidelines to your unique circumstances including, but not limited to, your personal information, loss history, location, and coverage.  The information herein is current as of September 2022 and is subject to change.  Coverage not available in all states.  Qualified counsel should be sought with questions specific to your circumstances.   Policies are underwritten by Federated Mutual Insurance which is licensed in Minnesota.