BUYER’S ARTICLES – FOR THE SMART CONSUMER
Rates for homeowner’s insurance policies vary as much as the names of the companies that offer them. How can a first-time homebuyer know what to look for and, more importantly, save money on the policy?
Here are some tips for consumers who are shopping for homeowner’s insurance or who plan to buy a home in the near future.
Consider Multiple Insurance Companies
Just as you wouldn’t select a mortgage without first considering all of the options, you shouldn’t select an insurance company without first doing some comparative shopping for rates, discounts and other benefits.
Ask About Multiple Policy Discounts
Most consumers are fairly savvy about discount shopping, and homeowner’s insurance is one service for which you can find many small discounts. Small discounts add up, so if your current insurer offers you a 10% discount on all your premiums, consider taking advantage of the savings.
Never Work with an Unknown Company
New insurance companies appear and disappear frequently. Wise consumers know that working with the leading companies is generally the most secure way to insure a home. Many government and private organizations offer consumers information related to the insurance industry. This information can include current rates and even complaints filed against companies. Use this information to conduct your own research before selecting an insurance company.
Invest in a Good Home-Security System
While your neighborhood may seem crime–free, the possibility of theft always exists. Insurance companies know this to be true, and therefore almost always offer discounts for homeowners who opt to install and use a home-security system. Although you may decide that a high-priced automatic home monitoring system with laser triggers is not for you, even a simple alarm system will get you a discount on your premiums.
Home-security discounts are usually offered on a graduated scale. The better your security system is, the better your discount.
High Deductibles Mean Lower Premiums
This is a common truism throughout the insurance industry and it does not apply exclusively to homeowner’s insurance. You can almost always save money on an insurance policy when you select a higher deductible.
Insurers are willing to offer reduced premiums for homeowners who select higher deductibles. Why? If you have a high deductible, you will be less likely to make small claims against your insurance policy. This means that the insurer can often save significantly. Also, considering the fact that most insurance companies now begin to raise premiums as soon as you make first claim, it is a good idea to pay for the smaller items yourself without reporting them as a claim.
If you are located in an area that is prone to specific types of natural disasters, such as earthquakes, tornados, or flooding, your insurer may be willing to offer different deductible amounts for different types of claims. This is definitely something to consider when you are shopping for homeowner’s insurance.
Ask About Exclusions
When you are shopping for homeowner’s insurance, ask in advance whether there are any exclusions to the types of claims covered by the available insurance programs. Some insurers do not cover flood damage, for example, and most will not cover mine subsidence. You may need to purchase additional insurance for these types of losses, and it is always better to know about this as early as possible.
Estimate the Cost of Rebuilding Your Home
Often insurance companies base policy quotes on the amount you paid for your home. But remember, when you purchased your home, you also purchased the land on which it sits. Since in most cases, the land will survive even if the house doesn’t, is it really necessary to insure the land?
Most areas provide assessments for tax purposes, and these estimates almost always contain a land value as well as a structural value. Consider what it would cost you to rebuild your home and don’t over-insure unless that is truly your intention.
Weatherproof Your Home
When you weatherproof your home, you reduce the amount of damage that can be caused by moderate bad weather. Nothing can protect your home when it is caught in the eye of a tornado, but you can provide a certain level of protection in most other circumstances.
Depending on where your home is located, insurers may offer premium discounts to homeowners who install shutters, structural reinforcements, and/or specialized roofing materials.
Update the Home’s Major Systems
Updating your home’s electrical system may result in lower premiums, because it reduces the chance of an electrical fire within the walls of your home. Updating the heating and cooling systems may also result in lower premiums.
Investigate Every Possible Discount
Some insurance companies advertise their discounts, but often you will need to ask about the possibilities. Some insurers base premium rates on age and type of employment. Ask questions about possible discounts and other ways to reduce your costs.
Avoid Government-Sponsored Homeowner’s Insurance
This type of insurance program is most common in coastal areas or other places where natural disasters are common. Homeowners are attracted to these programs’ competitive rates. However, certain non-disaster types of coverage are often lacking so that the program can provide heightened disaster coverage. When you live in a high-risk area, you need to accept the fact that you will pay more for your homeowner’s insurance.
Some private insurance companies offer competitive rates in high-risk areas. If you are currently participating in a government-sponsored insurance program, ask for quotes from private insurance companies to get the best value for your money.
Once You Find an Insurance Company, Stick With It
Long-time policy holders enjoy discounts and services that short-term policy holders do not. Therefore, it’s a good decision to stick with a single insurer once you find the right match for your situation. As mentioned earlier, try to use one insurer for your home, life and automobile policies because of the combined discount opportunities. And stay with that company over the long term.
Don’t Be Surprised. Know the Cost of Insuring a Home Before You Buy
This is perhaps the most important advice that a consumer can get. Just as you wouldn’t purchase a new car that required extremely high insurance premiums, you shouldn’t blindly purchase a new home without knowing how much it will cost to insure it.
Hopefully this information has proven useful and insightful. Understanding the insurance industry is tricky, but not impossible with the right research. Talk to your neighbors to find out which insurance companies they have chosen to work with, and why.
Realtors have extensive experience working with buyers just like you and can provide valuable insight about homeowner’s insurance. They can help you evaluate your insurance needs and costs well before you make your first offer, especially if you are relocating to a new area.