Home Insurance Cost Too High?

In this quick guide to buying homeowners insurance, we'll review the steps involved in the process and show you how to snag some savings on your policy.

Step 1: Decide how much coverage you need

Not all home insurance policies are created equal, and the cost of your homeowners insurance will depend on the amount of financial protection you're looking to secure.

Your homeowners insurance policy will generally consist of the following components:

• Dwelling coverage, which covers property damage. To figure out how much coverage you need here, you'll need to determine how much it would cost to fully rebuild your home. This is also known as replacement cost value.
• Loss of use, which covers you when your home is not inhabitable following damage. Loss of use coverage usually hinges on dwelling protection -- namely, it's generally about 20% of your dwelling coverage.
• Personal property coverage, which pays for damage to the items in your home, like furniture. To see how much coverage you need, take inventory and figure out what it might cost to replace your bigger-ticket belongings if they were destroyed.
• Liability coverage, which covers injuries on your property. It's difficult to calculate how much liability coverage you might need, since it's almost impossible to predict whether someone will get hurt on your property and what the extent of that person's injuries will be. Most homeowners insurance policies offer at least $100,000 in liability coverage, but it never hurts to get more if you can afford it. This especially holds true if you have a swimming pool or other potential hazard on your property.

Step 2: Figure out whether you need additional coverage

Homeowners insurance will generally pay to repair damage caused by wind or fire -- but if your home is damaged by flooding, that's a different story. The same holds true if your home sustains damage following an earthquake -- that's usually not covered by a standard homeowners policy. As such, you'll need to decide if you should buy additional coverage for these specific events (hint: If you live in a flood zone or earthquake-prone area, you should).

Additionally, if you have expensive items like artwork or jewelry sitting in your home, you may need what's known as a rider on your homeowners insurance. Most homeowners policies limit the amount they'll reimburse for stolen or destroyed jewelry, so by adding a rider, you get extra coverage for those items that may be worth a lot of money. The same holds true for art and antiques.

Finally, if you're planning to rent out a portion of your home but live in it yourself, you may need a special rental rider that covers you in case a tenant gets injured on your property. And if you're buying a home that you plan to rent out full time, you'll need landlord insurance, or rental dwelling insurance. Landlord insurance generally costs about 25% more than regular homeowners insurance, but usually, in addition to the covered items above, it offers coverage for loss of rent following property damage.

Making your home a safer place could help you snag the most competitive homeowners insurance rates out there. As such, it could pay to invest in features that are apt to result in lower premiums. These include:

• An alarm or security system.
• Storm shutters or other window guards.
• A fence around your property, or, at the very least, around a pool.
• Leak-detection sensors in and around water fixtures.

Updating certain features of your home can also lower your insurance costs. For example, replacing an outdated roof with a newer one could result in more affordable premiums -- but the amount you invest in a major project like that could take years to recoup in terms of insurance discounts.

You don't have to use an insurance broker to purchase a homeowners policy; you can simply search for different insurance providers online, reach out yourself, and obtain quotes. But if you want to outsource that process, it could pay to hire a broker -- a licensed one, of course. A broker can obtain quotes on your behalf and help you narrow down your options. And since brokers aren't associated with specific insurers, they can generally give you a wide range of choices.

On the other hand, brokers work on commission, and when you hire one, you run the risk that he or she will try to sell you a policy that's more expensive than necessary in order to snag more money. Also, a broker may be more apt to push additional coverage that you don't need. Ultimately, you can minimize these ris

ks by hiring a reputable broker -- someone who comes with endorsements from friends, family members, colleagues, or neighbors.

It's always a good idea to get more than one quote when shopping for homeowners insurance, just as it's wise to shop around when you're applying for a mortgage. Once you have all of that information, you'll need to land on the right policy for you. But don't just assume that the policy with the lowest annual premium is the best choice. As is the case with most things in life, when it comes to homeowners insurance, you get what you pay for, so a cheaper policy could offer less coverage when you need it.

One specific thing you'll want to look out for is your policy's deductible, which is the amount you'll need to pay out of pocket each time you file a claim with your insurer. It could be the case that a policy with a lower premium charges a higher deductible, which means you'll save money the years you don't need to file a claim, but you'll spend more when the need to file one does arise.

Step 6: Prepare for a home inspection

Though this doesn't always happen, many homeowners insurance companies will come out to inspect your home before finalizing your insurance. That way, they can make sure the information you've provided about your home is accurate. If an insurance company representative finds that certain aspects of your home are more outdated or hazardous than you've let on, you may see your rates go up. On the other hand, if your inspector notices certain safety modifications, like a fence around your home's pool, then you could see your rates go down.

The process of buying homeowners insurance can be a little complicated. Now that you know what to expect, you can tackle it with ease.