Best Homeowners Insurance Buying Guide

Options, add-ons, and separate coverages will increase the cost of a standard policy. But they could save you a lot of money in the long run.

Keep in mind as you price shop that some carriers may include these extras in their basic coverage while others may will charge you an added premium. The National Association of Insurance Commissioners offers a homeowners insurance shopping worksheet as part of its free shopping guide to help you approximate apples-to-apples comparisons. 

Here are add-ons to consider:

• Sewer backup. This coverage would protect you if, say, a municipal line failure caused sewage to back up into your home, says Loretta Worters, a spokeswoman for the Insurance Information Institute. (Sewage backup could also be caused by tree roots growing into the sewer line.) The cost is $40 to $100 per year.

• Earthquake, hail, and windstorm. In our 2018 homeowners insurance survey, 6,940 CR members said they’d filed a claim in the previous three years. According to those claimants, hail was the leading cause of damage. Depending on your state, you may have to pay a separate deductible for hail damage or buy stand-alone coverage. The same is true for earthquakes and high-speed windstorms.

• Extended replacement cost. This will pay 10 to 50 percent above the limit of coverage if building costs soar after a major disaster. Guaranteed replacement cost coverage is a pricier option, but one that may pay to replace your home regardless of the cost. Benefits can vary depending on the state and insurance carrier, so be sure to check the details before purchasing.

• Contents replacement cost. A standard policy may reimburse only the depreciated, or “actual cash value,” of stolen or damaged home contents. To avoid having to pay the difference when replacing possessions, opt for replacement cost coverage. Document the contents of your home by making a video inventory of your possessions, and store it somewhere safe, such as in the cloud or on a thumb drive kept in a safe deposit box.

• Additional valuables. Homeowners policies typically put dollar limits on what an insurer will pay to replace valuables such as furs, firearms, jewelry, and home-based business property. For instance, you’d get at most $2,500 to replace stolen jewelry. (These lower limits often apply only to theft.) So buy a “floater” to supplement coverage on costly items. Raising the limit on jewelry coverage to $5,000 from $2,500, for instance, costs about $17 annually with State Farm.

• Ordinance, or law and endorsement. These can provide the extra coverage required to pay for the cost of rebuilding in compliance with updated local building codes, as can be the case when repairing or replacing an older home.

• Inflation protection. Make sure your policy includes an “inflation guard” feature or rider that automatically raises your coverage to reflect annual increases in homebuilding costs.

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