How Home Insurance Calculators Work and Why You Need One

If you’re a homeowner, you probably know you need insurance. If you don’t have the right policies in place, that’s risky. Someone might harm themselves while visiting you. If you don’t have insurance, they might sue you and win. If so, that’s a difficult and potentially costly legal situation.

You should consider various home insurance policies and get the right one. A home insurance calculator can help you do that.

We’ll discuss this concept in detail now. Home insurance calculators assist homeowners all the time, and you can easily find these tools.

What is a Home Insurance Calculator?

As a homeowner, you need what insurance companies call homeowner’s insurance. This policy covers you against various liabilities. We mentioned a scenario where someone hurts themselves while on your property. That’s the most common situation where you need this insurance.

If someone trips while on your front steps and breaks their leg, this policy should cover their medical bills. You won’t pay those bills out of pocket, which could bankrupt you if you don’t have much money in savings, or none at all.

A home insurance calculator helps you figure out how much you’ll pay for a homeowner’s insurance policy that a company offers. Insurance companies provide these tools, and they’re fairly intuitive. Let’s discuss how you’d use one.

How Do You Use a Home Insurance Calculator?

Calculating your homeowner’s insurance usually involves a relatively simple formula. You can first figure out your home’s value. You can go on Redfin and do that, or you might look on Trulia or Zillow. They all should value your home similarly, although you might see slight price differences.

You then divide your home’s value by $1,000. You take that result and multiply it by $3.50. For instance, let’s say you own a home that Zillow values at approximately $300,000. That would mean your homeowner’s insurance policy costs about $900 per month since 300,000 divided by 1,000 times 3.50 equals 900.

You Must Ask the Policymaker for the Exact Amount

If you use a home insurance calculator and determine your approximate homeowner’s insurance policy this way, you should know how much you’ll pay per month. However, these calculators are not precise. You must ask various insurance companies how much they’ll charge you for a policy before you start budgeting.

The policymaker might feel you miscalculated the home’s total square footage, for instance. Sometimes, homeowners include the basement’s square footage. If you don’t have a finished basement, though, that might not apply. A smaller home usually means a cheaper homeowner’s insurance policy.

The insurance company might also have a different home valuation than what you find on Zillow, Trulia, or a similar website. They will do their own valuation and give you an offer based on what they find.

Shop for Different Homeowner’s Insurance Policies

If you look at different insurance companies, you’ll likely get slightly different homeowner’s insurance policy quotes. They might come out about the same, but say you have one company offering you an $850-per-month policy while another says they’ll charge you $900 per month.

If you don’t have much cash at the moment because you have stagnant wages or you’re not getting many hours at work, that difference comes into play every month. You’ll want the cheaper policy in most instances.

You must also look at what the policy gives you, though. Some cheaper policies do not offer total coverage. You want a policy that covers you fully and gives you maximum liability protection. If you’re not getting that, but you’re paying less, you might have to consider paying more for better coverage.

How Home Insurance Calculators Can Help Your House Hunting Mission

We’ve mentioned how home insurance calculators work and how a simple mathematical formula can give you the approximate amount you’ll pay each month. If you’re doing some house hunting right now, you might use one of these tools and find that it benefits you quite a bit.

Say you don’t have a house yet, but you’re looking around in certain neighborhoods. You feel like you have the money saved up for a down payment, and you can probably afford the monthly mortgage payments as well.

You must factor in additional monthly costs. You’ll examine how much you make each month at your job, how much grocery money you’ll likely need, your car payments, utility payments, and so forth. You should crunch the numbers before putting in a bid on a suitable home.

If you know the number that you’ll pay each month once you need homeowner’s insurance, you can factor that in. You can see whether you can easily afford that amount or whether you can’t handle it yet. If not, you must wait till you get a better-paying job.

Multiple Family Members Can Handle Homeowner’s Insurance Easier

Maybe you’ve crunched the numbers using the home insurance calculator and you see whether you can afford a home or not. Then, you can sit down with the other adults in your family and determine whether you can afford the house. 

Maybe you can’t handle the payments all on your own. Perhaps you have a significant other or spouse, though. Maybe you live with a parent or some other adult relative.

If so, you might all afford the house together. You can pool your money for the down payment and the monthly bills. Those include your homeowner’s insurance, so make sure you discuss it.

You should also know that you can pay the homeowner’s insurance every month, but you might also pay it all at the same time each year. Some people find that easier. You can get the whole lump sum payment out of the way at one time. You may also pay the money to the insurance company each quarter. Do whatever works best for you.

Home insurance calculators aren’t complicated, and they’re genuinely helpful. Use one when figuring out what you’ll pay for the homeowner’s insurance policy you need.

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