Comparing Home Insurance Quotes for Your Budget and How to Find Cheap Homeowners Coverage

Mary Rand Home Insurance Editor

Reality Check: When was the last time you even checked to see how much you pay for home insurance? Most people just ignore it because it's part of their mortgage payment. Are you guilty? Please share your thoughts, or simply say "hello" to us on our Facebook page!

When you're looking to save on you home insurance, don't be so quick to start slashing coverage amounts in an effort to just reduce premiums. First, recognize how home insurance works, and go from there.

How much home insurance coverage is enough?
Most standard home insurance policies include coverage for (1) the structure of your home, (2) any personal possessions inside the home, (3) the cost of living expenses if you home is damaged and you are forced to find alternative living arrangements, and (4) general liability protection, in the event anybody gets hurt inside you home.

Keep in mind, the cost of replacing your home could be less than the price you paid for it, or could sell it for today.

Home insurance for the physical structure of the house
Fundamentally, you need to have enough home insurance coverage to take care of any costs of rebuilding at current construction costs. Think about the cost of labor and materials. Don't make the mistake of including the value of the land in this coverage, which is where many people go wrong during the home insurance quote comparison process. The tough love is the fact that the cost of replacing your home could be less than the price you paid for it, or could sell it for today for that matter.

Be aware that many banks and lenders want you to secure enough home insurance to cover the amount of your mortgage, nevertheless, make sure this is sufficient to cover the cost of reconstruction. Likewise, don't make the mistake of canceling your home insurance policy when you pay off you home; it's probably your biggest investment!

When getting home insurance quotes, you can probably generate a reasonable estimate on the coverage you need by multiplying you home's square footage by the local building cost per square foot in you area. Generally a local insurance agent will know this, so ask them as you compare quotes. If you want an outside opinion, seek out a builders association or even better, a local real estate agent.

As you'll notice during the quote process, the amount of home insurance coverage is also dependent upon factors such as: local construction costs, house square footage, the type of constructions (exterior walls: brick, stone, frame, etc.), the home's model (victorian, ranch, etc.), bathrooms, the age of the room and it's make, any complementing structures including patios or detached garages, fire places, pools, ornate kitchens, and value-adding home improvements.

Home insurance and personal belongings
This part of the home insurance policy is similar to a renters policy. It's the contents inside the house. Interesting, standard insurance policies sometimes attribute a generic value for you personal belongs at a value of 50% - 70% of the total amount of your home's structure. This is where you want to be diligent and perform an inventory of everything in your house, just like you would if you had to make a claim after a fire.

According to experts, you can insure you possessions for either the actual cash value or for the replacement cost. Actual cash value pays to replace your home an belongings with an adjustment for depreciation subject to the limit of your policy. Replacement cost pays for the actual cost of replacing everything without that confusing depreciation-based adjustment. No matter what, discuss this with an agent before you purchase a home insurance policy.

Imagine if you will, a fire ruins a 10 year old television. If you had a replacement cost policy, you insurance company would probably replace the set with a new one. On the other hand, if you had an actual cash value policy, the insurance company would pay a fraction of the cost, per the 10 years of depreciation on the television.

A rule of thumb during home insurance quote comparison: the cost of a replacement cost coverage policy is generally 10% more expensive than an actual cash value policy.

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Additional online information about home insurance: Home Insurance, Property Insurance