This tool helps you find the right coverages for your homeowner’s insurance policy, so it will be easier to make your final choice. Based on the amount of coverages you opted for and your ZIP code, it can predict an estimation of the annual insurance rate you are going to pay. The premium is adjustable for different levels of deductibles, as shown in the outcoming graph: see how much you can save by opting for different amounts of them. Read on to understand the meaning of each input.
Four basic types of coverage are included in the standard homeowners insurance policy, namely the HO-3; to follow are the main points to help you have a grasp of them and how they are calculated.
The net worth is the whole of your assets minus the money you owe to pay things as mortgages, loans on cars, education, credit cards, bills, any debts. Assets are both what you have as currency and what you own as invested, the most valuable thing being your house. Liability coverage must be at least equal to the net worth. This coverage comprehends personal liability, which pays if you are sued for claims by someone getting hurt within the space of your property, and medical payments to other people injured.
Personal property coverage: protects the belongings inside your house from damage/loss and theft. Be accurate to include every valuable item that is within your walls; here are listed big categories, so to include every possible asset. Insurers recommend that you make an inventory so that you have a clear idea of how much are you risking. This coverage will typically equal 40% of your home building’s estimated coverage: the general assumption is that on X square foots there is a certain amount of assets of a standardized value.
You can choose to be reimbursed for the actual market value of an item or you want to consider its replacement cost value, according to the specification of your policy. Jewelry and pieces of art are excluded and require separate insurance.
Home replacement cost: by inputting your ZIP, the calculator search in an updated database where the cost of materials and labor in your geographical area, as well as the average square footage, are assigned to houses in that area. The house market value at the time of purchase is no more considered. Dwelling coverage is calculated to eventually cover the cost to replace your home (insurance companies try to get close to 100%), in case it will be damaged or destroyed.
Additional living expenses (loss of use): include costs of accommodation outside the home, eating out, and further costs above your usual living expenses, to ensure you have a pleasant quality of life while waiting for home repairing. Like other coverages, this one has its limits, which can be extended by purchasing extras on your standard policy.
Deductibles: choose how much you want to risk out of your pocket every time a claim is made; there is an amount of deductible for every level of risk you can select from. This factor impacts heavily the rate of your annual insurance premium: if you are not risk-tolerant, then opt for a low level, then you will simply pay more but stay safer for the price.
The graph shows which costs you can expect from a quote for your annual insurance policy, based on the coverages you chose. Moreover, you can see how it can be adjusted for different amounts of deductibles. They apply every time you do a claim (not just one time): if you are willing to pay more in the case of an accident, you will spend less in your policy. The discrepancy between $1000 versus an $8000 deductible is based on what we commonly found on the market. Different insurers will make differing offers, while there are several factors affecting prices.
If you found yourself needing more amounts of coverage than the basic ones in this calculator, consider buying a customized policy. Besides, mind there will be extra coverage for flooding, earthquakes, high-value pieces of art and jewelry, umbrella policy for liability, and various add-ons.
These calculations are made considering a standard HO-3 policy. In the majority of cases, that is just what is needed to stay safe; if you want a wider spectrum of coverage, or have more specific needs, you may consider an HO-5 policy. For a more detailed of these and others policies, see the explanation here.
Keep in mind these are average estimations and they are subjects to variations over time, due to different factors as inflation, local taxes, etc. It will be our effort to keep them updated in order to be the most accurate as possible, so to help you at best in your choices. They are not intended to substitute quotes made by your insurance company. You are fully responsible for the final decision about your homeowner insurance.