How Much Homeowners Insurance Do I Need?

Your home is likely one of the biggest purchases you’ll ever make. That’s why protecting it is so important. When it comes to homeowners insurance though, many new buyers might not know where to start. Between securing a realtor, finding the right house, and understanding your mortgage options, there’s a lot to process. And with insurance on top of that, homeowners must make a lot of decisions fast. That’s why we’re here to help.

So, how much homeowners insurance will you actually need? It depends. Insurance premiums differ based on where you’re located, the condition and value of the home, claim history, the amount of coverage, deductible, and more. Insurance companies develop their pricing models based on the level of risk, which is why there are many factors determining what homeowners will pay. Let us explain.

Related Article: Looking to Buy Your First Home? Here’s Where to Start

Types of homeowners insurance coverage

There are three basic types of insurance that homeowners will need to choose from, which all have varied coverage and costs.

  • Actual cash value: Coverage based on your home’s current worth, not what you paid.
  • Replacement cost: Coverage based on what the home is currently worth up to the policy’s value.
  • Guaranteed cost: Provides coverage for the home and its contents up to a particular percentage above the policy’s maximum, based on the current cost to repair or replace them.

Overall, the more coverage you buy, the less you will have to pay out of pocket if you have damages to your home or its contents. Personal liability coverage is also an important piece too, as it will protect you in the case of someone else getting hurt on your property. Your mortgage company or insurance carrier may require you to insure your house for a certain limit as well.

What affects homeowners insurance costs

What you will pay for a premium varies by state. Factors in New Jersey include:

  • Construction types – Homes made of brick for example, will have lower rates since they aren’t as vulnerable to fires.
  • Newer houses typically have lower premium rates compared to older houses.
  • The overall condition of the home – Has it been maintained? What work needs to be done?
  • The home’s proximity to a fire hydrant or local fire department may also play a role.
  • The higher the deductible, the lower the premium.
  • Some carriers offer discounts for homeowners with ample smoke detectors or security systems.

There are savvy ways homeowners can lower their premiums. As a rule of thumb, the higher the deductible – or the amount you pay out of pocket, is the easiest way to lower your premium. For example, raising your deductible from $500 to $1,000 can save you up to 25% on your premium. Making additions or repairs to your home may also lower what you pay. Upgrading plumbing, your fire-protection system, security, and the roof can also help since those repairs lower the risk to your home.

Working with an expert

At First Financial, we offer our members TruStage insurance products through Liberty Mutual Insurance so they can protect what matters most.* As a mortgage lender, we typically know what is required and can assess what additional protection you’ll need to ensure you have all your bases covered. Through the Trustage program, we are also able to offer accidental death & dismemberment insurance, auto insurance, and life insurance.

Don’t let securing the right homeowners policy get overwhelming. The team at First Financial is here to help. To discuss your options, call us at 732.312.1500, email, or stop by any of our local branches.

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*TruStage insurance products and programs are made available through TruStage Insurance Agency, LLC. Life insurance and AD&D insurance are issued by CMFG Life Insurance Company. Auto and home insurance are issued by leading insurance companies. The insurance offered is not a deposit, and is not federally insured, sold, or guaranteed by your credit union.

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