In this ever changing market, knowing how to find the right home insurance policy is more important than ever. Each year it seems that everything goes up just a little bit. It’s the norm now for gas to be over $3/gallon, food costs are going up and generally, your dollar doesn’t stretch as far as it used to. Home insurance rates are no exclusion from this expensive trend. For the past few years, insurance premiums have been steadily rising. The Insurance Information Institute (III( keeps tabs on this type of information and has been tracking the increase. In an article published last year by USA Today, the III says that “in 2008, the average annual cost of homeowners insurance was $791…Average premiums rose slightly to $799 in 2009 and $807 in 2010.” In 2011, premiums increased anywhere from 5% to 15% depending on your state and while official data is still being compiled for 2012, it’s likely the rates rose again.

So what’s with all the additional costs? You have to understand how an insurance company determines their rates. The main responsibility of an insurer is to pay out benefits on legitimate claims and one of the ways insurance companies recoup their losses lies in the premiums they charge their customers. If there is an overall increase in claims and benefits paid out, the insurance company must raise premiums. Over the years, the number of insured loss claims has increased greatly. Last year, the Insurance Research Council (IRC) conducted a study and “found that from 1997 to 2001, the average claim payment per insured home countrywide rose 173 percent, from $229 to $626. In 2011 alone, homeowners’ insurance claim costs per insured home increased 27 percent.” The main culprit for the amount of claims and the severity of each seems to be specifically related to catastrophic events. Over the past few years, several regions of the U.S. have experienced the devastating effects of Mother Nature and luckily, they were properly insured. The insurance companies still have to find a way to make sure they can continue to provide coverage and raising rates seems to be the answer.

Just recently, Hurricane Sandy left her mark on the Northeast, an area that hadn’t experienced a hurricane of that force in close to 100 years. Some people had the right amount of insurance while others had none. When you buy a house, no matter where you live, you must know how to walk the fine line of having the right amount of coverage but getting the best price within your budget. Now more than ever, it’s important to find the right policy.

How to Find a Homeowner Policy

Determine Your Home’s Value

You may think that this is easy since you just paid for the house but the value it holds in an insurer’s eyes is different than the value your house hold’s in a realtor’s eyes. A realtor is going to take into account things like the acreage and location when pricing your home but an insurance company wants more specific, personal information. Not only will you need to determine your house’s inherent value and any other standing structures on your property but you also need to factor in the value of your personal property. After you do that, it’s very important you know how much it would cost to replace everything.

Familiarize Yourself with Your Options

As a new homeowner, you might be preoccupied with paint color rather than policy options but put that brush down! Do your research and see what kind of insurance policy is going to best suit your needs. Homeowner’s insurance is written in several different forms but the two you will want to familiarize yourself with are HO-3 and HO-5. Both will cover you under certain circumstances but you have to decide which one is best for you.

Decide on Coverage Amounts

If you know how the value of your home, this is going to be your first step to choosing the right amount of coverage. If you have an idea of what it would cost to replace everything, from your house to your spoons, comparing prices between insurers is going to be easier. Don’t leave off important coverage just to save money. If something happens to your house, it could send you into financial ruin if you don’t have the right policy. This is one situation where it’s better to be safe than sorry.

Shop Around

Luckily, although rates are increasing, the insurance market is still competitive and people want your business. Normally you can get a discount by bundling different types of insurance with one company but don’t let that be your default move. Call competitors and ask for their best prices. You will find the coverage you need.

The cost of living is increasing and with it, insurance rates rise. While it can affect a homeowner with even the cleanest record, don’t be complacent with your coverage and provider. If you notice your rates are rising for what seems like no reason, you still have the right to shop around if your insurance company doesn’t want to work with you. In today’s economy, you need to know what to look for so you don’t miss a chance to save your hard earned money.