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 Whenever you buy insurance it's always a good idea to shop around. And when it comes to home insurance quotes there are a few simple guidelines you can follow to help compare policies. Comparison shopping can save you hundreds of dollars on your annual premiums and perhaps even thousands of dollars if you ever need to file an insurance claim.
In this article we're first going to cover some of the basic types of coverage that apply to a homeowners insurance policy. Next up we're going to explain the six dimensions you should consider when choosing or comparing policies. Finally, we're going to provide information on how to go about shopping for home insurance quotes as well as steps you can take to lower your premiums.
Basic Homeowners Insurance Policies
Home insurance can be packaged and marketed in a number of different ways. But all insurance companies offer the same basic types of coverage within their policies:
- Dwelling Insurance - this portion of the policy pays for damage to your home - the structure itself. This coverage sometimes includes "other structures" which might include a detached garage.
- Personal Property Coverage - this portion of a homeowners policy covers the personal property that is located inside the home. Personal property includes furniture, appliances and certain other items - subject to policy limits. For example, there may be limits on how much you will get paid for money / cash, jewelry, computer equipment, and artwork.
- Medical Payments - this is liability insurance within a homeowners policy that pays for the medical treatment of those persons that might be injured in your home or on your property. Medical payments covered could include doctor's fees, x-rays, hospital stays, and similar health care expenses.
- Liability Protection - personal liability insurance is used to cover you against lawsuits that might arise because something happened to someone else on the insured property. This could be either physical damage or a personal injury that might have occurred. Liability insurance usually pays for your defense in court and the amount of liability insurance coverage provided by a policy is usually stated for "each occurrence."
Items Not Typically Covered by Home Insurance
Homeowners insurance policies don't cover a lot of items besides the home itself, but specific items are worth mentioning. Homeowner's insurance does not cover pets, cars, or aircraft. Most homeowner insurance policies do not insure against neglect, war, earthquakes, or floods. And flood insurance is usually offered through special programs offered by the federal government.
Comparing Insurance Policies or Quotes
One thing to keep in mind as you're evaluating and comparing insurance policies is that you're not just picking a policy; you're also choosing a service company. If you ever need to file a claim or seek the help of your insurance company you need to make sure they're going to be there when you need them. And that's why our list of things to consider when choosing an insurance carrier goes beyond what's printed on the policy itself.
That being said, here are the six aspects of an insurance policy you should consider:
- Benefits Supplies - this is the basic benefits supplied under a homeowners insurance policy including both coverage amounts as well as deductibles.
- Service Provided - the company should be one that will quickly answer their telephones and dispatch an agent to your home in times of emergencies.
- Renewal Policy - you should be looking for a company that rewards long-term policyholders and avoid companies that cancel policies after claims are filed.
- Reliability of the Company - you need to make sure the insurance company you're selecting is financially strong. You can often get a good feel for a company's financial strength by examining its bond rating.
- Management's Philosophy - take the time to review the company's website or informational brochures. Make sure you agree with the messages the company is sending the public and / or its shareholders.
- Premiums Paid - when your satisfied that all the other variables on this list have been factored into your decision-making process then it's time to look at how much money you're paying for each policy.
What is not covered by an insurance policy is equally as important as what's covered. When evaluating home insurance quotes make sure you're comparing apples-to-apples. See if each policy covers items such as falling trees, smoke, rain, wind, hail, appliances, food spoilage, ice damage, and personal computers. In addition, make sure you read what types of "proof of loss" you will need when filing a claim.
Getting the Best Deal
Once you've narrowed down the choices a bit, you need to make sure you're getting the best deal on your home insurance premium. It might take some time but buying insurance for your home is usually a long-term commitment - so the time you take now will pay dividends for years to come.
Shopping Around
You can always ask your friends and relatives for their opinions and advice based on their experiences. If you're struggling to find some solid information on insurance companies, you might want to visit the National Association of Insurance Commissioners.
The NAIC is an organization consisting of insurance regulators from the 50 states, the District of Columbia and the five U.S. territories. They also maintain a website containing links to state insurance departments which is a valuable resource for information on insurance companies and agent licensing requirement.
Safety and Security Devices
Most insurance companies provide annual discounts on insurance premiums of around 5% for in-home safety devices such as smoke detectors, dead bolts and burglar alarm systems. In the rare event that your home has a sprinkler system installed, you might be able to reduce your premiums by as much as 20%.
Normally, insurance carriers ask policyholders to identify the devices installed in a home via annual surveys. If you've got safety devices in the home make sure your getting the discounts you deserve.
Policy Deductibles
A deductible is the amount of money you must first pay before your insurance company begins payment on a claim. Deductibles are clearly spelled out in the terms and conditions in an insurance policy. Today, most insurance companies recommend a "standard" deductible of at least $500.
Higher deductibles can save you 25% or more on your insurance premiums. Keep in mind that if your home is damaged, these higher deductibles apply. So make sure you're financially prepared to pay a higher deductible in the event your home is damaged and you need to file a claim.
Review Limits Annually
Each year your insurance carrier will offer you the opportunity to review your limits and make adjustments to total coverage and deductibles. This is the ideal time to reacquaint yourself with both the terms and conditions of your policy as well as a good time to reflect on the coverage needed.
Newly acquired high-end home entertainment equipment, custom made computers and expensive jewelry may not be adequately insured with existing policy limits. Now is the time to make sure you've got the right coverage - not too much and not too little.
Home Value versus Rebuilding Costs
One of the more expensive insurances in a homeowners policy is the dwelling insurance - the physical home. The coverage selected under dwelling insurance should be adequate to rebuild the home if completely lost. This value is not the same as the market value of the home.
For example, you might live in a township that has experienced a rapid increase in home values because of an excellent school system or proximity to high paying jobs. The market value of the home might be $1 million but it might only cost $500,000 to rebuild the home. You need to insure the home for $500,000 - not $1 million.
On the flip side if you determined the cost to rebuild your home several years ago and construction costs have increased since that time then you might find yourself in an under-insured situation. Insurance carriers have the right to prorate (in this case reduce) claims based on an under-insured situation.
If you're ever in doubt on how much it costs to rebuild your home the best approach is to contact your insurance carrier. They will either send you a form to fill out or have an inspector visit the home to assess the cost to rebuild.
Special Discounts
Certain companies will offer policyholders special discounts. For example, if you're retired and staying at home you might qualify for a discount on your premiums. Retired persons often spend more time maintaining their homes and since they spend more time at home then working individuals, the chances of their home being burglarized is also lower.
Employers may also offer their employees access to special discounts offered through group insurance programs.
Consolidating Insurance Carriers
Most home insurance companies also offer car insurance as well as liability coverage. These companies often offer discounts if policyholders purchase more than one type of insurance from them.
Oftentimes umbrella insurance policies can help policyholders consolidate and lower premiums. Umbrella insurance is designed to give added liability protection above and beyond the limits on homeowners, auto, and personal insurance policies.
Credit Ratings
More and more insurance companies are using an insurance credit rating to finalize premiums. Most states require insurance companies to disclose any adverse action they might take - such as increasing premiums - due to credit information they have on a policyholder.
There are many steps you can take to protect your credit rating, but paying bills on time, limiting your borrowing, and checking your credit report annually for errors can help steer you clear of higher home insurance premiums.
About the Author - Comparing Home Insurance Quotes
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