This article appeared in SoFi's On the Money newsletter. Not getting it? Sign up here.
Editor’s Note: This is part two of a three-part series exploring the rising cost of home insurance. Coming next week: How to avoid leaving yourself underinsured. In the past, you may not have thought much about home insurance. You chose an insurer when you bought your house, but might have gone into auto pilot after that, rubber stamping the bill each year at renewal because a small increase was normal, even baked in. If the extra cost was rolled into your monthly mortgage payment, no big deal. The bank did the math and you could handle the difference. These days, it’s a whole different ballgame. Average home insurance costs have shot up 62% since 2018 as the weather has become more extreme. Even after adjusting for the post-pandemic spike in inflation, costs rose 24% between 2020 and 2024. In some states, a typical household now pays $400 or $500 a month. So what should you do? If you have a mortgage, home insurance is required. And even if you don’t, going unprotected is risky. One option is to search for a lower rate. There are no guarantees you’ll find one, but premiums can vary widely by insurer. And comparison shopping has become more common as rates have risen. Just make sure you get apples-to-apples quotes before you switch. If saving money would leave you underinsured, it’s probably not worth it. Here’s a brief guide on how to shop around and what to weigh as you do. Much of it applies if you’re getting homeowners insurance for the first time or for a new house too. (Note: Looking for coverage because you’re being dropped by your insurer presents a unique set of challenges. The consumer advocacy group United Policyholders has some tips for navigating that.)What to Weigh
Shopping around can be time-consuming, particularly if your policy needs to cover less straightforward things like an in-law suite or certain valuables. But it can be very worthwhile. Let’s say you’re looking for $500,000 of coverage for your 15-year-old home in the Westchester neighborhood of Los Angeles. According to a premium comparison tool on the California Insurance Department’s website, annual premiums vary from just over $1,000 to well over $3,000, depending on the insurer. Many online comparison tools, including on other state insurance department websites, can give you similar information. This will help you gauge what to expect before you invest the time getting quotes. Before you switch insurers, you’ll also want to weigh:• Losing any loyalty discount you might receive from your current insurer
• Potentially losing any bundling discount you currently get for combining your home insurance with auto or other policies (if you switch only your home insurance)
• Gaining any discounts that might only be available from a new insurer
• The reputation of a new insurer (more on that below)
• The timing. You can switch insurers anytime, though some companies may charge a cancellation fee if it’s before your renewal. If you don’t have time to find a less expensive alternative before your renewal, find out if there’s a fee. If there isn’t, you can always renew at the higher rate and then take a month or to look for something better. It will require some paperwork to get a refund check later, but at least you won’t be rushed. Just make sure you don’t cancel your old policy before your new one is active.
How to Start
1. Choose a method. There are three main ways to shop around: You can call individual insurers on your own, use an independent agent or broker, or use an online platform or marketplace. (SoFi’s platform lets you compare quotes from up to 30 top insurers using Experian Insurance Services.)
If you’re calling on your own, be prepared to set aside 30-60 minutes per insurer.
And keep in mind that not all independent insurance professionals work with all insurers. Some insurance companies only sell directly or through “captive” agents.
Not sure where to start? Ask relatives or friends for recommendations.
2. Gather your information. You’ll definitely need your current policy. You’ll also want to know the square footage of your house, what it’s made of, its age, the age of your roof (if it was replaced since your house was built,) and the last time the electrical system and plumbing were updated. Reports from an appraiser or home inspector often have these kinds of details.
3. Try to get at least three quotes. The more options you pursue, the more secure you’ll feel choosing one of them.
How to Compare Apples to Apples
There are a lot of variables in an insurance policy. That’s why it’s critical to compare the same level of protection across insurers. At a basic level, home insurance reimburses you after a disaster, theft or accident. And a standard policy typically applies to repairing or rebuilding the house itself, replacing belongings, and defraying the cost to live elsewhere. It also includes liability coverage, which protects you if someone sues you over an injury or damage to property. When comparing quotes, make sure to match both the types and amounts of coverage. For each type of coverage, consider the coverage limit — the maximum you’ll get for a specific type of loss, as well as the deductible — the amount you have to pay before the insurer will. Here’s a worksheet from the National Association of Insurance Commissioners (NAIC) that can help you keep track. As you compare, you’ll want to answer these questions:• Will the policy pay claims on your home and/or belongings based on Actual Cash Value (which takes into account your home’s wear and tear) or the Replacement Cost Value (which covers replacing the items without any depreciation)? RCV gives you more protection than ACV, but the premiums will also likely be more, according to the NAIC.
• Are there exclusions for certain “perils,” like damage from wind or hail? (Flood and earthquake coverage must be purchased separately.)
• What are the deductible options and how would each of them affect your premium?
• What discounts are you eligible for? The key is to understand your policy so you’re not surprised after something has happened.
Look at More Than Price
Price might feel like the bottom line, but a cheaper policy may not be worth it if the company is hard to work with or unreliable. Online reviews and J.D. Power surveys can tell you a lot about an insurer’s reputation for customer service, and some state insurance departments track complaints. If you’re considering an insurer you’ve never heard of, it’s also a good idea to check its financial health with a rating agency like AM Best.Next week in our series: How to avoid leaving yourself underinsured.
Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
SoFi isn't recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
OTM2025042301