Whether you rent or own, you should have insurance. As a homeowner, your mortgage lender will require you to have an insurance policy to protect your property value. And as a renter, renters insurance is a wise investment in both protecting your belongings and in maintaining liability coverage in the event of unexpected property damage. As such, it’s essential to have all the facts about your homeowners or renters insurance. So what do you need to know?

Like other types of insurance, homeowners insurance protects against the things we don’t want to think about. This includes fire and water damage, accidental injury, and some intense weather such as windstorms and hail. It’s designed to replace or cover the cost of destroyed personal items, pay for medical bills in the event of injury on your property, and in the most severe cases, repair physical damage to your home.

However, it doesn’t cover all situations. If your home is damaged in a hurricane, flood, or earthquake, or from a sewer backup, you are responsible for either the cost of repair or purchasing an additional rider to address potential hazards ahead of time.

That said, between the cost of property and the value of your possessions, home insurance, plus the additional insurance rider to cover relevant natural disasters, is the most financially salient move to protect the value of your house while providing the necessary peace of mind.

With any sort of insurance, you have options. But choosing a provider can be a difficult endeavor, given the wide breadth of choices available. If you want to choose a good policy and make sure you save money in the process, here’s what you need to know about homeowners insurance.

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1. Differences Between Homeowners Insurance Companies

Getting the right policy for your house can be overwhelming. Check out our how to buy guide and tips to find what you need to know about #homeownersinsuranceThere are many companies that offer home insurance. While most places have similar policies, you should shop around to see who has good discounts and who you feel comfortable with.

Get Help From a Local Agent

When purchasing insurance, it’s a smart move to employ a local agent to help. While it’s hard to beat the ease of looking at different insurance options online, speaking directly with company agents is a more comprehensive way to understand their policies while getting a feel for their customer service.

“The challenge is for consumers to take the time to understand the differences between companies and the different policies offered,” says Brandon Tritten, an independent insurance agent in the Kansas City metro region. “That’s where I believe a relationship with an independent insurance agent is worth its weight in gold.”

“The reality is you’re buying a promise on a piece of paper,” Tritten continues.

“Most people don’t read their policy (which is a contractual document). So at the end of the day, the consumer is putting a lot of trust in their insurance agent.”

In short, building a relationship of trust with an insurance agent who understands your needs — what you want to protect, and the value of your policy — can ensure that you understand the true value of your insurance in terms of both what it covers and its dollar amount.

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The Online Option

If you end up opting for the convenience of buying insurance online, there’s a number of web-based comparative tools at your disposal. Sites like CoverHound and Policygenius compare and display quotes from around the web. Other sites like Gabi and Insurify use online advisers and artificial intelligence, respectively, to compare all your insurance options to help find the best one at the best price.

What to Watch Out For in Choosing Your Homeowners Insurance

As a note of warning: Be wary of using comparative tools provided by the insurers themselves. While they may purport to have the best price, their comparisons may be skewed to favor one company over another.

Also keep in mind when looking for insurance that not all companies operate in every state. In fact, some are highly localized. Direct your attention to the FAQ section of an insurer’s website to make sure it covers your area. This will save you time when shopping for a new policy.

As a final precaution, check how your insurance company fares with the Better Business Bureau, or what its reviews look like on Google Business. While online testimonials can be exaggerated at best (and irate at worst), these reviews can be helpful in obtaining an aggregate of perspectives on a company’s operations.

“A company’s reputation and customer feedback is always a good resource when deciding home insurance,” says Millie Ayala of HUB International Northeast, a premier personal insurance practice. “Research the company and look for customer feedback, especially in the area of claims handling.”

Verify that not only is your company ready to provide a policy that fits your needs, but that it also has a timely track record of paying out claims in the event of disaster.

In the unfortunate circumstance that your home is damaged, the last thing you’ll want is a drawn-out process to receive a crucial settlement to begin repairs or rebuilding. Doing a little research now will go a long way in the future.

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2. Finding the Perfect Homeowners Insurance Policy: What to Know

Understanding the value of your policy, in addition to what your policy covers, is a fundamental step in purchasing home insurance that works for your property. One key step to take is asking your agent whether your policy covers actual cash value or a replacement cash value. If you need to file a claim, this point will be important to the amount of assistance your policy will provide.

Actual Cash Value vs. Replacement Cash Value

Actual cash value refers to the cost of an item with depreciation. For example, if your Apple MacBook is six years old and it gets stolen from your home, you would be entitled to the cost of the computer when it was taken.

“Covering the actual cash value of homeowners’ belongings instead of the replacement cost is a common mistake,” says Daniela Andreevska of real estate data analytics firm Mashvisor. “Due to inflation, your personal belongings will cost much more in a few years than they cost now, so you should insure your belongings for the replacement cost in the future.”

Therefore, if you purchase a policy that provides replacement cash value, you would be able to submit for the cost to replace the computer when you buy a new one. That could mean a difference of $500 for the laptop alone, not to mention the cost of other electronics lost in a disaster.

The Effects of Location on Homeowners Insurance

Plus, it’s important to understand the location of your home and the risks inherent to its geographic location. Are you close to a body of water? Is your house in sunny Los Angeles and precariously above the San Andreas fault line? If so, seek out an insurance company best suited to address your particular coverage needs.

“If you’re in an area that is prone to natural disasters, you may need to get additional coverage for your home,” advises insurance expert Katie Tu of comparative insurance website QuoteWizard. “Things like earthquakes and floods aren’t covered with a normal homeowners policy, and you may have to get a separate policy elsewhere. Make sure you keep this in mind as well when you’re selecting your policy.”

It’s a good idea to find an agent with an in-depth knowledge of your region. This will help you figure out the location-specific facts you need to know when choosing a homeowners insurance policy.

“Some are specialists at coastal risk, some concentrate on rural homes and farms, others focus on high value homes,” says Stacey Giulianti, co-founder and chief legal officer of Florida Peninsula Insurance Company. “Find a knowledgeable agent that knows the local market and can help you find the carrier that matches your specific needs.”

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Size and Value

Finally, the size and value of your home should be an important consideration when choosing insurance. In the same way that some companies tailor their policies to fit specific regional considerations, many also look at the type of home.

“When it comes to home insurance, some companies prefer to insurance high-end homes, and others prefer hobby farms,” Tritten says. “A lot of the insurance companies that advertise on TV or internet banner ads do have a program for just about anyone. But even within that broad program, those companies will still have guidelines and nuances.”

Even if the company you’re looking at seems to provide a “one size fits all” strategy to homeowners insurance, as a business, it will inevitably focus on the bottom line: profit. As such, it has likely designed policies to maximize its earning potential, which may not match the necessary coverage for your property. Speak with your agent and read the fine print of your policy to make sure you get the most bang for your buck.

3. Bargaining for Discounts

Once you choose an insurer, there are many things you can do to reduce your monthly premiums. For example, if you have both auto and home insurance, you tend to get a discount when you bundle your policies with the same company.

Additionally, tell your insurance company if you have a home security system, working smoke detectors, deadbolts on your exterior doors, or a fire extinguisher on-hand. Not only will these additions reduce the likelihood of property damage or theft, but they’ll likely provide you with a discount — sometimes multiple, depending on the number of amenities present in your home. Ask your agent what other discounts you may be eligible for, and shop around for a security system that works for your budget.

Discounts for Improvements

“Some of the main discounts you can find available include multipolicy (bundling automobile and home insurance together), installation of a security system, the age of your roof, your electrical system, and heating and cooling,” Tritten says. “Longevity is a factor, too. Some insurance companies may give you credit if you have been with your prior insurance company for a long time.”

Tritten’s suggestion raises another salient point in lowering your home insurance premium: Structural changes and improvements to your property can be important in obtaining a lower premium on insurance.

Tu echoes that sentiment. “Updating aspects of your home, such as your roof, can really help with insurance rates,” she says. “Older roofs are likely to leak and are a greater risk. By documenting your roofing update, the insurer knows that it’s in good shape.”

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Double the Benefits

Asking what discounts are available can provide a path to lowering the cost of your homeowners insurance while at the same time improving your property value. As you shop around for insurance, ask your agent or double-check on the company’s website to figure out the different cost-saving measures available before settling on a policy. They could save you thousands of dollars over time.

What to Know About Homeowner’s Insurance: A Few Final Facts

It can be difficult to find a home insurance policy that works for you and your money. However, it’s a necessary step in ensuring your property is protected.

While saving money is important, remember at the end of the day, if you buy a cheap policy that is ultimately worthless, you’ll end up wasting your money. Ensure that you have an insurance agent you can trust and that you’ve addressed any coverage issues specific to your location first and foremost. Afterward, look for ways to shave a few bucks off your policy through home improvement measures.

Doing all this will guarantee your home is protected against any possible threat and that you’ll be financially secure for years to come. In the unlucky circumstance that your property is damaged, you’ll be well prepared to file a claim and move on with your life.

Additional reporting by Connor Beckett McInerney.