Last Updated – 10 Feb 2019
As the largest asset most people will ever own, the house requires adequate insurance coverage against loss. Most lenders require a mortgagee to carry replacement-value house insurance at all times. Insufficient house insurance coverage can result in long-term financial hardship for the homeowner. The quest to find the best home insurance rates must follow a reliable process. Cheap home insurance is not the same as affordable home insurance.
What is Home Insurance?
A homeowner’s policy will mitigate the risk of loss from theft, fire or storm damage. Standard home insurance does not cover losses sustained from floods or earthquakes. Everyone in the same insurance class will pay comparable annual insurance premiums based on the perceived risk of loss. A given geographical area might present higher risks from damaging storms or wild fires, which can result in higher rates.
Thousands of homeowners pay insurance premiums that are collected by the insurance company and used to pay claims when losses are sustained. Significant losses will be offset by increased premiums in subsequent policy years. An individual policyholder cannot incur higher rates because of filing claims against the homeowner’s policy.
Types of coverage.
• Main structure – A designated amount of money in this category will pay to repair or replace the structure. Insurance companies are recommending additional coverage through riders to ensure sufficient replacement value insurance exists when labor and material costs exceed the base policy.
• Additional structures – Outbuildings, decks and other structures fall into this category. New structures must be added to the policy to be covered following a loss.
• Contents – Personal belongings inside the home will fall under this component. Standard policies do not cover expensive belongings, such as jewelry and collectibles. Homeowners are wise to list expensive belongings under insurance riders to provide coverage and reduce the premium.
• Liability – Damage sustained to someone else’s property is covered here up to the stated policy limits.
• Loss of use – A home that is damaged beyond repair will require another dwelling for the family while repairs are made. The homeowner is reimbursed from this component.
How to Find the Best Homeowners Insurance
A savvy insurance shopper will compare home insurance quotes offered from multiple insurance providers. The cheapest home insurance is rarely the best choice. Adequate coverage is important since the risk of loss can mean long-term financial hardship for the homeowner. Sources of homeowners insurance quotes include:
1. Online websites
As the most common method, the referral website connects homeowners insurance shoppers with many different insurance providers. The quotes offered will be based on the basic information provided. As the process progresses, the homeowner is asked for more detailed information that will change the final annual premium.
2. Personal referrals
Experience with a particular insurance provider is helpful when selecting a reliable insurance company that pays its claims. Neighbors and friends know which insurance companies support each customer and pay claims in a timely manner.
3. Traditional advertising
Insurance companies continue to use print and broadcast advertising to reach out to potential customers. These methods work in a traditional business industry that dates back centuries.
Compare House Insurance Policies
The home insurance comparison process requires patience and tenacity. Too many shoppers will jump to the end and compare the annual premium offered through each insurance company. This is a serious mistake since the components inside the insurance policy dictate the coverage amounts. A significant reduction in one coverage amount could drop the premium significantly. The problem will arise when a claim is denied because there is not enough coverage on the policy.
The savvy shopper will compare every amount on each policy in a spreadsheet. Each column would be assigned to an insurance company. The rows will hold the same category. Exact comparisons will reveal discrepancies that explain why the premium amounts vary. Notes next to each category will show why a particular insurance company is dropped from consideration.
How to Find Affordable Home Insurance
Standard home insurance policies will not differ in price significantly. Home insurance providers offer discounts to encourage homeowners to install security devices, fire suppression systems and remove high-risk features from the property. A savvy home insurance shopper will pursue every possible discount. The money invested in the recommended risk-reducing measures will save thousands of dollars in insurance premiums over the coming years. Staying with the same insurance company is important since loyalty is rewarded through multi-policy discounts on auto and life insurance policies.
The liability insurance limits are being raised because insurance companies know that litigation against the homeowner is possible. Umbrella liability insurance policies are being underwritten to accompany the home owners insurance policy. This approach provides additional coverage in the event of a major lawsuit. The livelihood and property are protected against loss.
Important Factors to consider while buying Home Insurance
Every home insurance quote will provide a list of coverage components that must be evaluated between every company. Different amounts will yield invalid results in the comparison process. Other considerations will affect the homeowner’s satisfaction with the policy.
1. Company reputation
A.M. Best Company offers third-party ratings for every insurance company that underwrites homeowner’s policies in the United States. High ratings are based on actual company performance in important categories, including claim handling. Low ratings indicate a significant number of customer complaints filed with the state insurance commissions.
2. Customer service model
Central customer service offers basic support for the homeowner. This model is acceptable to some policyholders. Local agents offer guidance throughout the term of the policy and make recommendations to change coverage when events cause concern.
3. Claims process
Rapid response following loss is essential for the homeowner. Experienced claims adjusters provide sufficient estimates to cover necessary repairs to the property. The claims record is in important consideration to prevent legal battles with the insurance company.
High deductibles will reduce the annual premium paid for home insurance. Anyone who cannot afford to pay thousands of dollars in a deductible amount should set the deductible at, or below, $1,000. Different deductibles will influence the annual premium significantly.
The Final Choice
Underinsured homeowners are unable to rebuild following complete losses. The savvy home insurance shopper will refuse to save a few dollars each year while risking financial ruin. Reputable insurance companies work with homeowners to underwrite comprehensive home insurance policies that will mitigate the risks of loss.
High-risk areas where severe weather and risk of wild fire exist will dictate additional coverage from other sources. The wise insurance shopper will listen to the recommendations offered and pursue sufficient insurance. Reasonable home insurance rates are available to the patient shopper who is persistent.