Cheaper Quote vs. the Right Quote: What a Lower Home Insurance Price Can Leave Out

Why two quotes for the same house can be priced differently

A price gap can come from different coverage, or from the same coverage priced differently. This page helps you tell which.

The Department of Insurance (CDI) puts it simply: "Insurance companies compete for your business on the basis of price, quality and service."

Rebuild estimates also differ by insurer. In CDI's words: "Insurance companies have formulas that they use to evaluate the replacement cost of your home. Since the formulas developed are unique for each company, different insurers may suggest or require different limits of coverage for your dwelling limit." A lower quote may simply be insuring a lower dwelling number.

Discounts vary, too. CDI notes some companies offer discounts for burglar alarms and for fire protection such as smoke detectors and sprinklers.

And deductibles matter. CDI says: "If you can afford to take a bit more of the risk, a larger deductible may significantly reduce your premium."

What a lower price can leave out: the lines to check

Start with each quote's declarations page, the summary page that lists your coverages, limits and deductibles.

Dwelling limit (Coverage A): is it based on a real rebuild estimate?

Coverage A is the dwelling limit, the most the policy pays to repair or rebuild the house itself. California requires the declarations page to say this limit "is based on an estimate of the cost to rebuild your home, including an approximate cost for labor and materials in your area, and specific information that you have provided about your home" (Ins. Code §10103).

A rebuild estimate must include at least:

• labor, materials and supplies
• overhead and profit
• demolition and debris removal
• permits and architect's plans

It can't be based on the land's value or your loan balance, and it can't deduct depreciation. You're entitled to a copy, and it must itemize those costs (10 CCR §2695.183). Insurers that provide replacement cost must give you a rebuild estimate every other year at renewal, or meet an exception (Ins. Code §10103.4).

Why it ripples, from California's required disclosure: "Coverage limits for contents, separate structures, additional living expenses, and debris removal are usually based on a percentage of the limit for the dwelling. If your dwelling limit is too low, these coverage limits may also be too low."

Mark: "I start from what it would cost to rebuild your home, not the sale price or the loan."

If you've remodeled, your rebuild cost may have changed.

What to ask: "Can I see the replacement cost estimate behind each quote?"

Loss settlement: replacement cost, extended, guaranteed, or actual cash value?

California's required disclosure says: "Actual Cash Value Coverage is the most limited level of coverage listed. Guaranteed Replacement Cost is the broadest level of coverage." (Ins. Code §10102)

• Actual cash value (ACV) pays to repair or replace, minus a deduction for depreciation, up to the limit.
• Replacement cost pays without that deduction, up to the policy limit. Many policies pay only ACV until repairs have begun or been completed.
• Extended replacement cost adds coverage above the dwelling limit, up to a stated percentage or dollar amount. Check the quote for the amount.
• Guaranteed replacement cost pays the full cost to repair or replace after a covered loss, regardless of the dwelling limit.

Construction costs can rise sharply after a widespread disaster, and the disclosure suggests considering higher limits or extended replacement cost. Personal property can be covered on either ACV or replacement cost, depending on the policy.

What to ask: "Is the dwelling, and my personal property, on replacement cost or ACV on each quote?"

Building code upgrade (ordinance or law) coverage

Ordinance or law coverage pays the extra cost of rebuilding to the building codes and zoning laws in effect at the time, costs that may otherwise be excluded.

California generally requires replacement-cost homeowners policies of this type to include at least 10% of the dwelling limit as additional code upgrade coverage, and some policies offer more. Check the declarations page for the exact amount. A policy without it must say so in capital letters on the declarations page: "THIS POLICY DOES NOT INCLUDE BUILDING CODE UPGRADE COVERAGE." (Ins. Code §10103)

CDI says that after past California wildfires, the gap between the dwelling limit and the cost of code upgrades was sometimes significant. United Policyholders says code upgrade coverage and an extended replacement cost rider "are worth paying for."

What to ask: "What's the code upgrade limit on each quote?"

Other structures, loss of use, and personal property limits

Other structures (Coverage B) is "normally" 10% of the dwelling limit (Coverage A), and loss of use (Coverage D) is "normally" 20%. You can buy more. Detached garages, sheds, fences and ADUs count as other structures.

Personal property (Coverage C) has special limits on jewelry, firearms, fine arts, silverware, money and collectibles. Valuables above those limits should be scheduled, meaning listed individually, on the policy.

What to ask: "Are B, C and D the same on both quotes? Are my valuables scheduled on both?"

Deductibles

The deductible is the part of a covered loss you pay before the policy pays. Compare the all-peril deductible and any separate deductibles on each quote.

A higher deductible is a fair trade if you chose it knowingly. It's only a gap if you didn't notice it.

What to ask: "What's the all-peril deductible on each quote, and are there any separate deductibles?"

Liability and medical payments

Personal liability (Coverage E) pays for your defense and for damages if you or someone in your household is legally responsible for injuring others. Medical payments (Coverage F) pays reasonable medical bills for guests accidentally hurt on your property.

These limits are easy to overlook because they don't change the house coverage at all.

What to ask: "Are the liability limits the same? Do I need an umbrella?"

What's excluded or limited: water, earthquake, flood

Most policies exclude flood, earthquake, earth movement, mold, wear and tear, and water damage from seepage or leaks. The insurer writing your homeowners policy must offer you earthquake coverage for an extra premium. Flood coverage comes from the National Flood Insurance Program or a private flood policy.

Mark: "If one quote includes an earthquake or flood option and the other doesn't, that alone can explain the gap. I quote both."

Many policies cover the house against all risks except listed exclusions (open perils), but cover belongings only for listed causes (named perils). Many carriers use their own versions of these forms, and comparing an open-peril policy with a named-peril policy is a real difference.

What to ask: "Which exclusions and policy form does each quote use?"

Who the insurer is: admitted, surplus lines, or FAIR Plan + DIC

Admitted insurers are licensed and regulated by CDI and are backed by the California Insurance Guarantee Association. Surplus lines insurers are specialty, non-admitted insurers and aren't backed by it. United Policyholders suggests checking a non-admitted insurer's financial strength rating before you buy.

If one "quote" is a FAIR Plan policy without a DIC policy, it's a different product. The FAIR Plan covers fire or lightning, internal explosion and smoke, and the Department of Insurance recommends pairing it with a Difference in Conditions (DIC) policy, a separate policy that fills gaps. Learn more about FAIR Plan + DIC.

Mark: "I'm a registered California FAIR Plan broker with access to multiple carriers, including admitted, surplus lines and FAIR Plan + DIC options. What's available depends on your location and carrier acceptance."

In a South County fire zone? Start here.

For landlords (1–4 units): extra lines to compare

A rental usually needs landlord insurance, a landlord (dwelling) policy, not an owner-occupied homeowners policy.

• Fair rental value or loss of rents: does each quote include it, and with what limit or time period?
• Landlord liability: check that each quote actually shows premises liability. Some landlord policies add it separately.
• Ordinance or law: compare the amount on each quote.
• Replacement cost vs. ACV, the dwelling limit and deductibles: the same as above.

Buildings with five or more units are usually written on commercial policies. I write those too, subject to carrier acceptance.

When the cheaper quote is the right one

• The coverage lines match, and one carrier simply prices your home differently.
• You qualify for a discount with one carrier and not the other.
• The difference is a higher deductible you chose and can comfortably pay.
• The rebuild estimates differ, but the lower one still reflects a proper, itemized estimate that fits your home.

Sometimes the cheaper quote is the right one, and I'll tell you if it is.

How I review two quotes

1. 1Upload both quotes or declarations pages with the quote form, or text photos to (408) 763-4533. Include your address.
2. 2I line them up on the table above: the dwelling limit and the estimate behind it, loss settlement, code upgrade coverage, Coverages B, C and D, deductibles, liability, exclusions and insurer type.
3. 3I tell you plainly what's different and what it would mean at claim time, including when the cheaper one is the better fit.
4. 4If it makes sense, I shop more carriers. Once I have what carriers need to quote, I start shopping the same week.
5. 5You decide, and I re-check at renewal.

CDI says: "The broker represents you, the customer." CDI also says it's always wise to compare policies on your own. That's why I give you the table, so you can check my work.

I quote earthquake and flood too.

Comparing quotes because you were non-renewed? Start with the 75-day plan.

Condo owners compare HO-6 quotes differently.

Frequently asked questions