Home insurance policies are not all created equal. In fact, there are a number of things that you can do to get good coverage and pay less for it. Here are nine tips that may save you hundreds of dollars a year on home insurance.
Start shopping for a homeowner policy as soon as your offer to purchase your house has been accepted. Resist the temptation to wait and force your title or escrow company to call insurance companies on your behalf right before closing. Shop around. Ask friends. Contact your state insurance authority. Check with the National Association of Insurance Commissioners.
Know Your House
When you call an insurance agent, he or she will ask you for a lot of information – the age of the roof, the condition of the plumbing and electrical wiring, the square footage, the location of the nearest fire hydrant and fire station, the year the house was built, its exact location. Without this information, the agent won't be able to give you the most accurate rate.
Get At Least Three Quotes
This will help you determine which company has the best price and which company will offer you what you need if and when you file a claim. You also can check the financial stability of the companies you are considering with rating companies such as A.M. Best or Standard & Poor's.
Figure Out How Much Insurance You Need
The first thing you need to know is that insurance agents don't insure dirt. If your property is assessed at, say, $300,000, and $100,000 of that is the land you own, you know you need to insure a $200,000 building.
However, you also need to know the difference between an assessed value and a replacement cost. The assessed value of a home is how much the home is currently worth. The replacement cost is how much it would cost to replace the same house if it were destroyed. Very often, the assessed value of a house and the replacement cost of a house are two very different numbers. What you need to know is that insurance estimators recommend buying home insurance that covers the replacement cost of your home. If your house burns down to the foundation, a policy based on the replacement cost will allow you to rebuild a house that is the same as the one that burned down.
Insurance companies offer replacement cost coverage, which is designed to protect the homeowner who has suffered a total loss and has to pay a lot more because of inflation or because the cost of materials have increased. If the company offers 125 percent replacement cost coverage and the house is insured for $200,000, the homeowner would receive $250,000 to rebuild his house. Some agents will recommend 200 percent replacement cost coverage, which would provide $400,000 to someone with a $200,000 house, giving them the ability to build a larger, more luxurious house.
Decide On A Deductible
A deductible is the amount of money you're willing to pay out of pocket before the insurance company begins paying toward your claim. Figure out how much you're willing to pay for your deductible. The larger your deductible, the lower the insurance premium you'll have to pay. Insurance companies typically start giving premium discounts at a $500 deductible, and deductibles usually can be as high as $10,000.
Hurricane deductibles are a different animal. Insurers offer hurricane deductibles of as much as 10 percent. If a homeowner – and this also applies to commercial buildings – insures his house for $250,000 and chooses a 5-percent hurricane deductible, the homeowner must pay $12,500 out of pocket before the insurance kicks in. Someone with a $500,000 house and a 10-percent hurricane deductible would pay $50,000 out of pocket before he could tap his insurance.
Prepare To Pay For Insurance That You May Not Want
If you live in a high risk flood zone, you must have flood insurance. If you live along a coastline, you must have wind insurance. Also keep in mind that this coverage may not always help you when you need it. For example, in the Outer Banks of North Carolina, a homeowner with flood insurance may not have his ground-floor living space covered if the house is not raised high enough off the ground.
Choose The Right Policy Options
A lot of homeowners decide against liability policies, which protects you if someone hurts themselves at your house and decides to sue you. People who elect to have liability insurance often receive $300,000 in coverage, but it only costs about $25 more to have $500,000 in coverage. Most liability policies top out at $1 million, but homeowners can buy excess liability policies, also known as umbrella policies, which give you an additional $1 million in coverage. Umbrella policies may seem excessive, but they make a lot of sense for people with pools, where there is a threat of drowning.
Take Advantage Of All Applicable Discounts
You may be eligible for a discount of about 10 percent if you are 50 or over, or if you have an alarm system that reports to a central station. Those who live in a flood zone can get a discount on flood insurance if they have vents in the foundations of their houses that allow flood waters to escape from under their houses. The multi-policy discount is the most common one. An insurance company will give you a discount if you also have an auto insurance policy with it.
Update Your Policy Every Few Years
Call your agent every few years and ask him to review your homeowner policy because things change. Your house may have increased – or decreased – in value which might change how much coverage you need. You never know when you'll need your insurance, so you want it to be updated so you'll have enough coverage when you need it.
Keep these tips in mind the next time you are on the market for home insurance. They might end up saving you some serious money.