A basic guide to choosing home insurance.
Home insurance is a requirement by mortgage lenders but it is also vital to homeowners in a number of ways. 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.
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. 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.
When buying insurance, whether its home, life, auto, rental or other:
Find out whether your state insurance department offers any information concerning insurance companies and rates. This is a good way to get a feeling for the range of prices and the lowest-cost providers in your area.
Check several sources for the best deal. Try getting quotes from an insurance focused website, but be aware that many online services may provide prices for just a few companies. An independent insurance agent that works with several insurers in your local area might be able to get you a better deal.
Make sure the insurance company is licensed and covered by the state's guaranty fund. The fund pays claims in case the company defaults. Your state insurance department can provide this information.
Check the financial stability and soundness of the insurance company.
Research the complaint record of the company. Contact your state insurance department or visit the website of the National Association of Insurance Commissioners, which has a database of complaints filed with state regulators.
Find out what others think about the company's customer service.
Once you pay your first insurance premium, make sure you receive a written policy. This tells you the agent forwarded your premium to the insurance company. If you don't receive a policy within 60 days, contact your agent and the insurance company.
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. 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.
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.
Check the CLUE (Comprehensive Loss Underwriting Exchange) report of the home you are thinking of buying. These reports contain the insurance claim history of the property and can help you judge some of the problems the house may have.
Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at FloodSmart.gov. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area. In California the California Earthquake Authority (www.earthquakeauthority.com) provides this coverage.
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.
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. 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.
When buying insurance, whether its home, life, auto, rental or other:
Find out whether your state insurance department offers any information concerning insurance companies and rates. This is a good way to get a feeling for the range of prices and the lowest-cost providers in your area.
Check several sources for the best deal. Try getting quotes from an insurance focused website, but be aware that many online services may provide prices for just a few companies. An independent insurance agent that works with several insurers in your local area might be able to get you a better deal.
Make sure the insurance company is licensed and covered by the state's guaranty fund. The fund pays claims in case the company defaults. Your state insurance department can provide this information.
Check the financial stability and soundness of the insurance company.
Research the complaint record of the company. Contact your state insurance department or visit the website of the National Association of Insurance Commissioners, which has a database of complaints filed with state regulators.
Find out what others think about the company's customer service.
Once you pay your first insurance premium, make sure you receive a written policy. This tells you the agent forwarded your premium to the insurance company. If you don't receive a policy within 60 days, contact your agent and the insurance company.
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. 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.
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.
- 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.
- 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.
- 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.
- Deductible – 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.
- 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.
- 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.
- 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.
Check the CLUE (Comprehensive Loss Underwriting Exchange) report of the home you are thinking of buying. These reports contain the insurance claim history of the property and can help you judge some of the problems the house may have.
Remember that flood insurance and earthquake damage are not covered by a standard homeowners policy. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at FloodSmart.gov. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area. In California the California Earthquake Authority (www.earthquakeauthority.com) provides this coverage.
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.
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