In our previous post we went over general information regarding home insurance like what they cover, what they exclude, types of coverage as well as levels of coverage. In this post we would like to talk about other things that you might want to have in mind when looking to purchase a policy.
We will start with how home insurances rates are determined. Basically they are set based on how likely it is for a homeowner fo file a claim, this is what is perceived as the risk to the insurer. To do this the company will take into consideration past home insurance claims by the homeowner as well as the property related claims and the owner’s credit. If your house has had multiple claims filed in the last few years, even if made by a previous owner, it might increase your insurance premium, or in certain cases might not even make you eligible. Other data taken into account is your surroundings: crime rate, neighborhood, building materials will also affect the rate. Not to mention added riders for certain specific events or for high-price possessions, as we have previously touched upon, will also factor in the annual premium.
Now, what are some cost cutting insurance tips that might help out when purchasing a home insurance? This might be a double edged sword; the trick here is not to play cheap, as it might backfire, there are however things that you can do to cut insurance costs without it coming back to bite you in the future.
A security system is always a good idea. Not only will it provide additionally security to you and your home, but if you can provide proof of monitoring from a central station or a local police station then it will help lower the annual premium around 5%. Alarms also go hand in hand with this. If your hand is a little older then it might represent even bigger savings in annual premiums. CO detectors, dead-bolt locks, sprinklers and weatherproofing can also help. Basically the better prepared your house is to deal with potential threats, the bigger you’ll save in annual premiums.
Raising your deductible is another way to help with lowering the annual premium costs, however this is a balancing act as issues that could be fixed with a few hundred dollars might have to be fully absorbed by the homeowner when having a high deductible so you might want to think it through before deciding to go with it.
One thing that we mentioned in our previous post is that sometimes you can get discounts if you already have a policy with the same insurance company as existing clients might get better deals, so make sure to ask about this. You might end up saying on two premiums or more depending on how many policies you have under the same roof. A good thing is that you can actually combine them, like home insurance with auto insurance with health insurance.
If you have renovations in mind like additions or adjacent structures then take into account the materials to be used, given that wood-framed structures are more expensive given how highly flammable they are, while cement or steel frames will cost less due to their resistance to fire and weather.
Swimming pools are something to take into account as they will drive the insurance costs up given that this can be a potential source of harm.
Paying off mortgages will have extra rewards as this will cause the premiums to drop. Why? In the eyes of the insurer a person will take better care of things if he or she owns it completely.
And finally, keep on comparing policies and coverage, maybe you’ll find an alternative option that will suit you better. Or maybe you’ve made changes through the year and if any of these changes are, for instance, things that we’ve previously discussed like installing alarms or sprinklers, let the insurer know, provide proves or receipts and it might lower your premium.
And please, do take the time to make inventory. Most homeowners are under-insured just because they don’t have an inventory of their possessions and haven’t added the total value of so they can compare it with the amounts that they are covered for by their insurances. Also cataloging your belongings will make the claim process easier by ensuring accurate evaluation of your possessions and helping you to receive a much fairer compensation in the case of a covered loss.
Now, a couple of paragraphs ago we mentioned comparing insurance companies so here is a list of tips that might help you with such an endeavor.
First and foremost, you should visit your state’s Department of Insurance website to see the ratings of each insurance company, along with whatever consumer complaints they might have. The site will also provide an average that might give you a clearer idea on where you stand regarding costs.
Along with this check their scores on top credit agencies. Sites like J.D. Power, A.M. Best, Moody's, Standard & Poor's and the National Association of Insurance Commissioners and Weiss Research will help you out with this. They keep track of feedback, complaints and rating of financial health, which is essential if determining if the company is actually able to pay out their claims.
Claim responses. How long does it take for the company to pay out a large loss? This might make a whole world of difference. If they take too long to respond then this situation might put you and your family in difficulties, so bear that in mind.
Every company will boast about how good a claims service they have, however the question that you should really be asking here is ‘What is their retention rate? How many policyholders renew each year, this will give you further insights in just how good the actual company and its service is.
Multiple quotes; again, compare. Three, or four or five companies. You’ll get a better grasp of what they offer, so this will definitely give you leverage in negotiations.
Always compare coverages and limits, so don’t look only at the annual premium.
Regarding the claims process it generally goes something like this: after the covered event takes place, contact the claims department and provide as much details of the incident as you can. They will sign an adjuster to asses the damage. The policy coverage will be reviewed, estimate the loss, discuss settlement and finally receiving payment for repairs or replacement.
At the very end the whole point of home insurances is providing financial protection against damage to your home and belongings along with liability coverage for injuries and property damage to others, so the most important thing is making sure that your specific needs are met. With both this post and the previous one we’ve made an effort to break down the most basic information that you need when faced with purchasing a homeowner’s insurance policy as well as some tips that might help you in this regard.
Remember, knowledge is power, and understanding how they work and the specific needs that you and your home have will give you leverage to find the most ideal policy for you.