Homeowner’s Insurance: How to Buy It!

Perhaps you are already knowledgeable about the various jargon that goes along with insurance and perhaps you even have a good idea of your budget and already have a specific type of homeowner’s insurance plan in mind. But how do you go about actually buying it?

Essentially, there are two markets you can shop for insurance in – the voluntary market and the shared market. Here is a guide to both of them so you can get started on insuring your home right away!

Volunteer Market

This is likely the way you will buy your homeowner’s insurance. This market is just what it sounds like – various companies, called property casualty insurance companies, will voluntarily offer you insurance policy options for your home. Fortunately, by shopping around, you can benefit from competitive rates. An independent agency system can point you in the right direction of an insurance company that will best suit your needs. But be wary of agents or agency systems that only advertise for one company – they will give you biased information!

Every state, and area within that state, will have different types of insurance coverage available. This is because every area has a different risk factor that insurance companies have to consider. So, especially if you want to obtain coverage for specific natural perils (like flood insurance), you must carefully investigate what coverage is available to you. You may have to buy flood (or earthquake) insurance separately.

Shared Market

Some people, unfortunately, cannot qualify for homeowner’s insurance in the volunteer market. After all, it is a volunteer market, and no company is legally bound to insure anyone. So if you live right on the coast, many companies won’t want to have anything to do with you, as you are at high risk for various natural disasters.

However, the shared market ensures that almost anyone can get insurance to protect his or her home. A shared market can be considered more of an “involuntary,” state-required market. But state laws vary, and in some areas, insurance is still not available.

Plans in the shared market included the Fair Access to insurance Requirements Plans (the most common), the Joint Underwriting Associations (exists in just a couple of states), and the Beach and Windstorm Plans (available in coastal states). Find out if your state offers one of these and if so, if you qualify.

Many of those who do qualify for a plan in the volunteer market still opt to use the involuntary market, as rates can be cheaper. And even those who find general insurance coverage to be available in the volunteer market often find that certain types of coverage, like earthquake insurance, are still hard to find.

Basically, the area you live in and your budget will determine what market you shop for insurance in. If you choose to take a risk and live in on a flood plane, expect to have trouble finding an insurance plan in the volunteer market. And if you are struggling financially, you may benefit from automatically looking at your options in the shared market. (Because while you won’t benefit from the competitive rates in the volunteer market, rates in general can sometimes be lower as a whole.)