About 95% of American homeowners have homeowners insurance.

In the excitement shopping for and purchasing a new home, insurance may be the last thing on your mind. You are thinking about the colors you want to paint your new bedroom, or how you can throw some swanky shiplap up on the screened-in porch. A few years later, however, you will be grateful to have it if a pipe bursts.

Many mortgage companies and banks require you to provide proof of insurance at closing. It lowers their risk in the event of an emergency. Insurance also provides you with the assurance that you will not lose your shirt in the unlikely event that your home is structurally damaged.

You may be wondering how to buy homeowners insurance before the big day. Let’s take a look.

Know What You Need

There are different types of homeowner’s insurance available, and you will need to know the minimum amount necessary to protect your investment.

Basic dwelling coverage, for example, covers the standard build price of your home. Actual Cash Value (ACV) will be the least expensive option. It accounts for the market value of your home at the time it is purchased.

Replacement Cash Value (RCV) coverage involves higher premiums. Its advantage, however, is that it will reflect the actual cost of replacing your home at the time damage occurs.

Guaranteed Replacement Cost (GRC) coverage is the most expensive option. You will pay the highest premiums. Yet you will also be guaranteed reimbursement for a certain percentage above your home’s replacement costs in the event that it is damaged.

You may also want to consider getting personal liability coverage to account for valuable possessions, such as jewelry or electronics.

Many homeowners also purchase Additional Living Expenses Coverage, which will cover the cost of your housing if your home becomes uninhabitable.

Shop Around

Look online and get insurance quotes from at least three different companies. You can get a free estimate by providing basic information such as your address, square footage, and social security number.

Some resources, such as this useful article, can give you an idea of the average insurance rates in your area.

Your rates will be determined based upon factors such as the replacement cost of your home, the age of your dwelling, crime in the neighborhood, and liabilities such as a pool or trampoline.

Keep in mind that your insurance may be limited for certain perils, depending upon where you live. It may be difficult to get flood insurance, for example, if your house is on the ocean. Or you may have trouble getting wildfire insurance in California.

Additional coverage in these cases can be purchased as add-ons, or floaters, to your standard policy. You can also increase your liability using an umbrella policy. In some cases, you will still be responsible for 5-10% of your home’s value if there is an emergency.

The most important thing to look for when shopping for a home insurance company is how they handle a claim. Lower-rate companies tend to have the highest percentage of folks who disagreed with their damage estimates when a disaster occurred.

How To Buy Homeowners Insurance

Once you know the kind of coverage you need, and how to shop around for the best rate, you have a good idea of how to buy homeowners insurance.

For more information on home ownership, read our blog today.