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Consumer Insight

Jan. 27, 2020

Searching for a Homeowners Insurance Policy? Tips to Get the Most Value

It’s important to review your homeowners insurance coverage every year. Upon renewal of your policy, include things like remodeling, new items you’ve purchased, new security equipment, or other changes that might affect your policy.  


The price of homeowners insurance depends on several factors:  

  • Your home. The cost to rebuild it, whether it’s made of brick or wood, how far it is to the fire department or a water source, its age and condition, and the home’s claims history.  

  • Individual factors. Coverage and deductible, length of coverage, insurance-based credit history, claims history, and whether you insure multiple properties or personal properties such as a car with the same insurer.  

  • Other factors.Smoke detectors; a swimming pool or trampoline; pets; or running a business in your home all factor in.  

Know your coverage 

Different types of homeowners policies protect your home and personal property in various ways. Insurance companies describe coverage by perils, which refer to the cause of a loss.  

All perils policies generally insure against all perils except ones the policy clearly excludes. The most basic policy insures only against the perils named in the policy, such as fire and theft.  

You can add riders to cover a risk a policy doesn’t cover to help with additional costs. Examples include damage due to sewer or drain backup, and sump pump overflow.  

 Most homeowners policies don’t cover earthquakes or floods, but you can buy separate policies to cover most of those risks. In coastal areas, windstorm damage may need to be purchased separately or may require separate percentage deductibles.  Contact your insurance agent to find out if these policies are available in your area.  

It’s a good idea to review what you’d need to know if you need to file a claim.    

  • A  deductible is the amount you must pay out-of-pocket on a claim before the policy pays the loss. For example, assume you have a $1,000 deductible and the total claim is $5,000. You’d pay $1,000 and collect $4,000 from the insurer. A deductible also may be a percentage of the home’s insured value, not a fixed dollar amount.  

  • Actual Cash Value coverage pays the repair or replacement costs – after the insurer subtracts an amount based on the home’s or personal property’s age and the wear and tear (depreciation).  

  • Replacement Cost Coverage pays the full repair or replacement cost, without subtracting for depreciation, for materials of like kind and quality.  

  • Understand the trade-offs.  Know the difference between actual cash value and replacement cost coverage. The premiums probably are lower for actual cash value coverage. But replacement cost coverage pays more if you have a claim.  


Shop around. The premiums insurance companies charge for homeowners insurance vary widely. It pays to take time to shop around to get the best value. Be sure to ask if you qualify for any discounts. Examples are discounts to protect your home (for example, add storm shutters),  get a new roof, or add home security devices (for example, a burglar alarm). Memberships in certain organizations may also provide a discount (AARP, AAA, even a fraternity or sorority).  

Bundle your insurance with one company. For example, if you buy homeowners and auto policies from the same insurer, you may get a discount.  

Choose your deductible. A higher deductible may help you save money on your homeowners insurance premium. Just be sure you can afford the deductible if you have a loss. 


  • Compare insurance companies. Shop around to find the best price and coverage for you, including discounts.  
  • Make sure you choose the coverage you need with a  deductible you can afford if you experience a loss. 
  • For more in-depth information about homeowners insurance, order a copy of the “Consumer Guide to Home Insurance” and “A Shopping Tool for Homeowners Insurance” from NAIC or visit for more information.  




About the National Association of Insurance Commissioners

As part of our state-based system of insurance regulation in the United States, the National Association of Insurance Commissioners (NAIC) provides expertise, data, and analysis for insurance commissioners to effectively regulate the industry and protect consumers. The U.S. standard-setting organization is governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer reviews, and coordinate regulatory oversight. NAIC staff supports these efforts and represents the collective views of state regulators domestically and internationally.