Cheap Homeowners InsuranceCheap Homeowners Insurance

On average, about 5.7 percent of homes in the United States have filed a homeowners insurance claim. Most of those claims were around $13,000, according to the Insurance Information Institute. Although that percentage is relatively small, it illustrates the need for comprehensive home insurance.

That said, while you do need to protect your assets, there is no reason to spend a fortune on coverage. So, we will discuss the basics of homeowners insurance and how you can get it for cheap.

Before finding the cheapest home insurance, it helps to understand standard home insurance to compare your options.

How Much Does Homeowners Insurance Usually Cost?
The average price for standard homeowners insurance (HO3) is around $1,200 annually. However, where you live can affect your total costs significantly. For example, if you live in Delaware, you could be paying less than half of that per year. However, Oklahoma residents can pay almost twice as much.

The primary reason for the discrepancy is the number of claims in the state and the amount per claim. So, if Oklahomans pay much higher insurance premiums, it means that their average claim is much higher than those in Delaware or elsewhere in the country.

What Does Homeowners Insurance Typically Include?
Most standard HO3 home insurance plans cover the following elements:

  • Your House and Other Structures. The policy protects your dwelling and anything attached to the physical structure. Most insurance companies also cover any detached structures, such as a pool house or carport.
  • Your Belongings. While home insurance covers most of your personal property, there are limits to how much you will receive after filing a claim. Things like computers, bikes, and jewelry have sub-limits ranging from $1,500-$5,000. Expensive items require endorsements or floaters to ensure that they are sufficiently protected.
  • Your Liability. As we mentioned, if someone gets hurt on your property, you are liable for any property damages or lawsuits and lawsuit judgments. Most policies also offer payouts for medical expenses related to personal injury (for someone else, not you).
  • Your Additional Living Expenses (ALE). Should your home become uninhabitable, the insurance company pays for living expenses while the property gets repaired.
  • Perils. HO3 policies cover 16 named perils. See the list in the image below.

Cheapest Homeowners InsuranceWhat Does HO3 Home Insurance Not Cover?
There are quite a few coverage exclusions on a standard homeowners insurance policy. Typical exclusions can include:

  • Flooding. You will have to buy separate flood insurance if you want to cover floods or flooding from hurricanes.
  • Water Damage. Unless the incident is "sudden and accidental," you are on the hook for water damage repairs. If a pipe bursts because of cold weather, your policy should cover it. If the pipe breaks because it is old and rusted, you will likely have to pay.
  • Sewer. Sewer damage is also excluded in most policies, assuming that the causes are not related to excluded natural disasters (i.e., a flood).
  • Earthquakes. Even if you live in an earthquake-prone area like California, most policies do not include earthquake coverage. Instead, you must buy it separately.

The image above lists other exclusions. Although these perils are not usually part of a standard homeowners policy, you can add them (for a price). If you are not worried about these disasters happening, you can avoid paying extra for them.

How Much Coverage Do I Need?
Before shopping for cheap home insurance, you must ensure that you get the right amount of protection. Conversely, you do not want to pay for more protection than necessary, either.

As a rule, dwelling insurance claims pay the cost to rebuild your home. That figure may not reflect the actual market value of your property.

E.g., your home may sell for $350,000, but it would only cost you $300,000 to rebuild it on the same property. So, you would typically buy $300,000 worth of dwelling coverage. That becomes your dwelling and other structures policy limit.

Dwelling coverage comes with a deductible and RCV coverage. Other structures typically get covered at 10% of your dwelling coverage limit. E.g., in the example above, your other structures would have $30,000 of coverage per claim.

Personal belongings typically come with 20% to 75% of your dwelling coverage, but you can select whatever amount you want. Using the example above, you would have personal property coverage from $60,000 to $225,000, whichever you choose.

Liability coverage typically is $100,000 but also can be customized to the amount you want.

How to Get Cheap Homeowners Insurance
Even if you get a standard HO-3 policy, you do not have to pay a ton of money every year. Here are a few pro-tips to help you reduce the cost of an HO3 standard homeowners insurance policy. There are numerous strategies to get cheap home insurance premiums.

  1. Select Low Coverage Limit Amounts
  2. Downgrade from RCV/ACV to the FCV Property Valuation Method
  3. Increase Your Deductible
  4. Avoid Endorsements and Floaters
  5. Get a Bare-Bones Policy
  6. Home Insurance Discounts
  7. Shop & Compare Home Insurance Quotes
  8. Find the Best Cheap Homeowners Insurance Companies

Let us describe these below.

  1. Select Low Coverage Limits
    There are many options to lower your coverage amounts, which will lower your premiums.

    a.   Lower Dwelling Coverage Amount. Although you are protecting your home both inside and out, you can lower the maximum amount you can get with each claim. Since the insurance company is not on the hook for so much money, it will charge you less annually.

    Yes, it may make sense to get enough coverage to pay for the whole house, but do you need to rebuild the entire structure? Perhaps you have become an empty nester and can reconstruct a two-bedroom vs. a five-bedroom. Or maybe you can use a carport vs. a garage. Think of how you could be happy with a smaller home.

    b.   Lower Personal Belongings Coverage Amount. You might not need to replace every item in your home. How much is all your stuff worth? What is irreplaceable, and what can you live without? Do a home inventory and only cover your must-haves.

    c.   Lower Your Liability Coverage Amount. The default amount is $100,000. Check with your current home insurance agent to see what you can save if you lower this amount.

    d.   Remove Additional Living Expenses Coverage. If disaster strikes, and you cannot live in your home, how much will you need to pay for things like hotel rooms and transportation? Can you stay with a family and remove this coverage?
  2. Downgrade from RCV/ACV to the FCV Property Valuation Method
    HO3 policies come with RCV for dwellings and ACV for belongings. However, you can choose the cheapest reimbursement method, functional cost value (FCV). It pays for the least expensive replacement that provides the same functionality as the damaged item. For example, instead of replacing your hardwood floors, you might get carpet, vinyl, or faux wood flooring.
  3. Increase Your Deductible
    Your insurance deductible is the amount you pay before your insurer pays their amount due. The higher this number, the less you pay in premiums. That said, be aware that you are on the hook for larger repair bills, so consider the risk vs. reward.
  4. Avoid Endorsements and Floaters
    Endorsements are additional protections not included in your standard plan (i.e., earthquake insurance), but they cost extra. Alternatively, you could get a cheaper policy (like HO-2) and use endorsements for specific perils you need to be covered. This option can still be less expensive than getting more coverage.

    Floaters are add-ons that cover specific high-end items like jewelry. Instead, you can invest in a high-tech safe.
  5. Get a Bare-Bones Policy
    If you are hunting for the cheapest homeowners insurance, you may or may not want to buy a standard HO3 home insurance policy. We have discussed "standard" home insurance plans (HO3), but there are eight different kinds of homeowners insurance. If you wish to save money, you can choose one that does not cover as many perils.

    The different types of coverage are HO-1 through HO-8. HO-3 is the most common, but that does not mean you have to buy it. You could also get a DP1, DP2, or DP3 policy.

    Anything above HO3 is either more expensive or designed for other residences, such as apartments, condos, or mobile homes.

    When it comes to cheap homeowners insurance, you may want to choose HO-1 or HO-2. Here is a breakdown of what they offer:

    a.   HO-1 Policy
    It is hard to find this kind of dwelling coverage, but if you can, and you want minimal protection, you can potentially save a lot of money per year. Rather than a broad-spectrum plan, HO-1 policies only cover ten different perils, including:

         ●  Fire (Including Lightning Strikes)
         ●  Windstorm or Hail
         ●  Explosion
         ●  Riots or Civil Disobedience (Doesn't count if you are the one rioting)
         ●  Aircraft
         ●  Vehicles
         ●  Smoke
         ●  Theft
       ●  Falling Objects (i.e., tree branches)

    As you can see, there are significant exclusions, such as personal liability or additional living expenses, but you do pay less because of reduced coverage. Another downside of HO-1 plans is that they only replace your house and belongings at actual cash value (ACV). So, you could get less money than is necessary to repair or replace anything damaged or stolen. That includes rebuilding your home if it gets destroyed.

    b.   HO-2 Policy
    If you want better protection than HO1 for your house but want to pay less than an HO-3 plan, you can opt for HO-2. This policy covers everything named in HO-1 but instead provides replacement cost value (RCV) for your home. When it comes to belongings, however, you get ACV, so keep that in mind. Other protections include: 

         ●  Weight from Ice, Sleet, or Snow
         ●  Accidental Water Damage, Including from Natural Sources
         ●  Accidental Damage to a Built-In Appliance (i.e., central heating)
         ●  Damage Related to Freezing
         ●  Damage from Electrical Surges
         ●  Volcanoes

    c.   DP1 Policy
    A DP1 policy typically is for vacant homes. It is a bare-bones policy. It only covers named perils, only hazards, or risks explicitly listed in the policy. These normally include:
         ●  Wind, Hail
         ●  Fire, Smoke

         ●  Lightning
         ●  Aircraft, Vehicles hitting the house
         ●  Explosion
         ●  Vandalism, Riot
         ●  Volcanoes

    DP-1 does not cover:

         ●  Falling objects, falling trees
         ●  Water damage
         ●  Weight of ice, sleet, or snow
         ●  Theft
         ●  Appliance-related damage
         ●  Freezing pipes
         ●  Power surge
         ●  Liability is optional

    d.   DP2 Policy
    DP2 policies cover everything a DP1 does, but with RCV, plus:

         ●  Electricity Damage (only for sudden and accidental events)
         ●  Water or Stream (only for sudden and accidental events)
         ●  Falling Objects
         ●  Cracking, Bulging (only for sudden and accidental events)
         ●  Glass Breakage
         ●  Vehicles
         ●  Burglary Damage
         ●  Freezing Pipes
         ●  Weight of Snow
         ●  Collapse

    Cheapest Homeowners Insurance
  6. Home Insurance Discounts
    Many insurance companies offer discounts for various items. They give you credits or points for each thing on their list. The accumulation of those credits converts to a final discount off your monthly premium. Talk with your agent to see which options are available for your policy. Here a few ideas:

    a.   Bundle Home and Auto Insurance. Many insurers offer multiple policies, and if you purchase them all through the same company, you can save accordingly.

    b.   Home Alarm & Security Systems. You can get up to 35% off your premiums for using things like high-tech smoke detectors, local alarms, automated sprinkler systems, and fire extinguishers.

    c.   Green Insurance Discounts. Having eco-friendly building materials, solar panels, and other energy-saving and recyclable products qualify you for green insurance discounts.

    You can find many more in our articles: 30 Ways To Save Money On Homeowners Insurance, Top 10 Secret Home Insurance Discounts, Impact-Resistant Roofs & Home Insurance Discounts, Texas Homeowners - Know Your Hail Resistant Roofing Credits, and The 5 Best Smart Devices for Home Insurance Discounts.
  7. Shop & Compare Home Insurance Quotes
    Another way you can save money on coverage is to compare companies and home insurance rates. Since there are so many home insurance options out there, it can be challenging to know which companies are the best. Using price and coverage comparison sites like ours is the fastest and easiest way to compare home insurance quotes.

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    Here are some important factors to examine when shopping around for the cheapest home insurers:

    a.   Financial Stability. Insurance companies get ranked by their credit score and asset-to-debt ratio. Pay attention to ratings from Moody's, A.M. Best, and Standard and Poor. Look for insurers with an A rating or higher.

    b.   Customer Satisfaction. The Better Business Bureau (BBB) reports on home insurance companies. It is an excellent resource when determining if an insurer takes care of its customers. If the company has a low rating on BBB, the chances are that it is hard to cancel your policy or file a claim. Read negative reviews and pay attention to the date and whether the company responded or not. Insurers with excellent customer service should have tons of positive reviews online.

    c.   Free Quotes. It is not hard to get home insurance quotes from reputable companies. Many of them will provide an estimate based on limited information, such as your home's address. If a company gives you the runaround, chances are it's not legit.

    When you analyze the carriers, follow the advice in these articles: How to compare home insurance coverage side by side, Home Insurance Quotes - Compare Like An Expert, and How to Compare Home Insurance.
  8. Find the Best Cheap Homeowners Insurance Companies
    Here are some of the top home insurance companies with cheaper premiums and high homeowners insurance ratings to help make your search easier. Be sure to compare quotes and policy options before making a final decision. Also, check out our article, Top 40 Home Insurance Companies of 2021, for an excellent list of carriers you should consider.

    a.   Travelers. Travelers' offers some of the cheapest plans. However, be aware that you will have limited coverage, and policies are not available everywhere. Learn more about Travelers home insurance in our Travelers Insurance review article.

    b.   Progressive. Since Progressive is such a big company, it can offer lower rates than smaller brands. The best option is to bundle home and auto insurance if possible. Learn more about Progressive home insurance in our Progressive Insurance review article.  Learn more about Progressive home insurance in our Progressive Insurance review article.

    c.   Allstate. This company makes it easy to customize your coverage and lower your rates accordingly. Learn more about Allstate in our Allstate Insurance review article.

Get a Cheap Home Insurance Quote
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Hope that helps!

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At your service,
Young Alfred