Important tips to follow while buying homeowner’s insurance

Before shopping around for a homeowners insurance quote, learn more about the policy:

Important tips to follow while buying homeowner's insurance

Homeowner’s insurance policy coverages: actual cash value vs. replacement cost. We’ll start off with actual cash value and replacement cost, because if this coverage isn’t specified in the quote, homeowners could be in for some serious trauma if there is an insurance claim. Simply put, actual cash value includes depreciating the value of items at the time of the insurance claims assessment. The depreciation calculation varies by the item insured, the insurance company and the individual claims adjuster.

Replacement cost value does not depreciate the value of items insured at the time of the insurance claims assessment. Replacement Cost is the actual cost to replace an item destroyed or damaged in the event of a covered loss. Replacement Cost increases the cost of the homeowners insurance quote. But if there is ever a need to file an insurance claim, policyholders will be glad they found home insurance with this coverage. Note: Receipts, video and itemized inventories can make the insurance claims process a lot easier and more expeditious process.

What’s included in the homeowner’s insurance quote- building. Find home insurance that includes Fire, Lightning, Wind and Vandalism coverage. A limited extension of coverage for outbuildings should also be included in the homeowners insurance quote.

What’s included in the home insurance quote and personal property insurance policy. Contents insurance or personal effects insurance covers most of the items in the home, including furniture. A limited extension of insurance coverage for personal property off-premises (i.e., personal effects in a kid’s dorm room or in the car) is included in the personal property insurance, too.

What’s excluded from the home insurance quote. PCs and phone systems are generally excluded, although special limits of coverage at an additional premium may be available for these items. Wear and tear, backed-up sewers and earthquakes are almost never covered by a home insurance quote. Clearly, anything fraudulent won’t be covered by personal property insurance, either.

Special limits in the homeowner’s insurance policy. Glass, jewelry, furs, and most valuable collectibles only receive a minimal pay-out from personal property insurance if damaged by a covered loss and reported in a homeowner’s insurance claim. But, these items can be added to a “rider” (also known as scheduled personal property insurance or a personal property insurance floater) for policyholders who need broader coverage than what’s found in a standard home insurance policy.

buying homeowner's insurance

Before finding home insurance, review information available at state property insurance associations and from the state department of insurance.

The state department of insurance provides consumer information about property insurance.
The Insurance Information Institute provides more information about homeowners insurance for consumers.

To get a better understanding of how to find home insurance, talk to an insurance agent or a licensed agent at an insurance company. They can discuss the ins and outs of the homeowner’s insurance policy, including insurance coverage, limits, and exclusions. Research how to find home insurance policy and company information at state departments of insurance and at consumer-oriented websites.

How to Save Money on a Homeowners Insurance Bill

Reviewing and updating the homeowners insurance policy should be done periodically. Recall that the money amount that should be covered is the replacement price, not what the county or municipal property tax assessment authorities estimate as a way to get into the family pocketbook. It’s also not the price that was paid for the home.

When to Update the Homeowners Insurance Policy

As stated above, this should be done periodically. Constant tweaking will ensure that all possible money saving strategies are being taken advantage of. Consider a review:

Annually. Even if no capital improvements have taken place, consider that building material costs and construction labor costs continue to rise.

After a remodeling project. Any physical renovation can add to the replacement cost of the residence. For example, if a couple remodels the kitchen and trades in that tired old Formica for a new granite or travertine countertop and backsplash, the replacement cost goes up along with home equity. Upgrading to an Energy Star refrigerator, dishwasher, water heater, and washer and dryer combo should be considered as well.

6 Ways to Save Money on Homeowners Insurance

homeowner's insurance

Increase the policy deductible. Just as with auto and medical insurance, the higher the deductible, the lower the premium tends to be. It’s all a gamble anyway; the question is, what are the stakes? The Insurance Information Institute (III) estimates that, “If you can afford to raise your deductible to $1,000, you may save as much as 25 percent. Remember, if you live in a disaster-prone area, your insurance policy may have a separate deductible for certain kinds of damage.” This refers to things like flood insurance riders.

Beef up home disaster prevention. Just installing smoke detectors will usually reap a savings of about 5%. That’s right; the insurance company will pay policy-holders to be a partner in keeping claims costs down. Going one step further, installing an automatic fire sprinkler system will net further savings with many companies.

Adding residential surveillance devices. Installing home surveillance systems such as security cameras have the potential to prevent theft and home invasions. They can also help resolve a crime after it’s been committed.

Consolidate insurance policies. The company wants business and will often be open to a “package deal”. Just adding the car policies to the same company is an incentive for them to cut a deal.

Shop for a better deal. If the current insurer isn’t in the mood to cooperate, feel free to look for a better deal elsewhere. Just because the mortgage-holder or bank requires insurance coverage, doesn’t mean they care who handles it. It’s a business, just like a store. As an analogy, if Target won’t deal, visit Costco or Walmart.

Add a metal or steel roof and storm shutters. These are more examples where the provider may be willing to risk-partner with the homeowner. A metal roof installation when re-roofing is a big plus, especially in areas where the provider gets a lot of claims for hail damage. The same is true with storm shutters in hurricane or tornado-prone locations.

Keep these budget-shaving tips in mind during these tough economic times. Some of these strategies, such as increasing the policy deductible and updating to reflect new appliances, may also be applicable to renters insurance.

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