Whenever buying insurance, it's always a good idea to shop around. When it comes to home insurance quotes, there are a few simple guidelines that can help families to compare policies. Comparison-shopping can save hundreds of dollars on annual premiums, and perhaps even thousands of dollars when filing an insurance claim.
In this article, we're first going to review some of the basic types of coverage that apply to a homeowners insurance policy. Next up, we're going to explain the six dimensions buyers should consider when choosing or comparing policies. Finally, we're going to provide information on how to go about shopping for home insurance quotes, as well as steps everyone can take to lower their premiums.
Basic Homeowners Insurance Policies
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Home insurance can be packaged, and marketed, in a number of different ways. However, all insurance companies offer the same basic types of coverage within their policies:
Dwelling Insurance: this portion of the policy pays for damage to the home; this is the physical structure itself. This coverage sometimes includes "other structures," which might include a detached garage.
Personal Property Coverage: this portion of a homeowners policy covers the personal property that is located inside the home. Personal property includes furniture, appliances and certain other items; subject to policy thresholds. For example, there may be limits on how much will be paid for money / cash, jewelry, computer equipment, and artwork in the home.
Medical Payments: this is liability insurance that pays for the medical treatment of those persons that might be injured in the home, or on the property. Medical payment coverage could include doctor's fees, x-rays, hospital stays, and similar health care expenses.
Liability Protection: personal liability insurance is used to protect the policyholder against lawsuits that might arise because something happened to someone else on the insured property. This could be either physical damage or a personal injury. Liability insurance usually pays for the policyholder's defense in court, and the amount of coverage provided is usually stated for "each occurrence."
Items Not Typically Covered
Homeowners insurance policies don't cover many items besides the home itself; but specific items are worth mentioning. Homeowners insurance does not cover pets, cars, or aircraft. Most policies do not insure against neglect, war, earthquakes, or floods. In fact, flood insurance is usually offered through special programs run by the federal government.
Comparing Insurance Policies or Quotes
One thing to keep in mind when evaluating and comparing insurance policies is the choice involves more than just a policy; the insured is also choosing a service company. When filing a claim, or seeking the help of the insurance company, it's important they provide good service when needed. That's why our list of factors to consider when choosing an insurance carrier goes beyond what's printed on the policy itself.
When comparing quotes, here are the six aspects of an insurance policy everyone should consider:
Benefits Supplied: this is the basic benefits supplied under a homeowners insurance policy, including both coverage amounts as well as deductibles.
Service Provided: the company should be one that will quickly answer their telephones, and dispatch an agent to the home in times of emergencies.
Renewal Policy: look for a company that rewards long-term policyholders, and avoid companies that cancel policies after claims are filed.
Reliability of the Company: make sure the insurance company being selected is financially strong. It's often possible to get a good feel for a company's financial strength by examining its bond rating.
Management's Philosophy: take the time to review the company's website or informational brochures. Make sure the messages the company is sending the public and / or its shareholders seem reasonable.
Premiums Paid: when all the other variables on this list have been factored into the decision-making process, it's time to look at how much the premiums cost.
What is not covered by an insurance policy is equally as important as what's covered. When evaluating home insurance quotes, it's important to compare apples-to-apples. Make sure each policy covers items such as falling trees, smoke, rain, wind, hail, appliances, food spoilage, ice damage, and personal computers. In addition, carefully examine the section of the policy explaining what types of "proof of loss" are needed when filing a claim.
Lowering Insurance Premiums
Once the choices are narrowed down, it's time to make sure the deal is the best one possible. It might take some time, but buying insurance for a home is usually a long-term commitment; so taking this time now will pay dividends for years to come.
Shopping Around
Ask friends and relatives for their opinions, and advice, based on their experiences. Individuals that are struggling to find some solid information on insurance companies can visit the National Association of Insurance Commissioners. The NAIC is an organization consisting of insurance regulators from the 50 states, the District of Columbia, and the five U.S. territories. They also maintain a website containing links to state insurance departments, which is a valuable resource for information on insurance companies and agent licensing requirements.
Safety and Security Devices
Most insurance companies provide annual discounts on premiums of around 5% for in-home safety devices such as smoke detectors, dead bolts, and burglar alarm systems. In the rare event that a home has a sprinkler system installed, the owner might be able to reduce their premiums by as much as 20%.
Normally, insurance carriers ask policyholders to identify the devices installed in a home via annual surveys. If there are safety devices in the home, make sure to get these discounts.
Policy Deductibles
A deductible is the amount of money the policyholder must first pay before the insurance company begins payment on a claim. Deductibles are clearly spelled out in the terms and conditions in an insurance policy. Today, most companies recommend a "standard" deductible of at least $500.
Higher deductibles can save 25% or more on insurance premiums. Keep in mind that if the home is damaged, these higher deductibles will apply. It's important to be financially prepared to pay a higher deductible in the event the home is damaged and a claim is filed.
Review Limits Annually
Each year, the insurance carrier will offer the opportunity to review limits and make adjustments to total coverage and deductibles. This is the ideal time for policyholder to reacquaint themselves with both the terms and conditions of their policy, as well as a good time to reflect on the coverage needed.
Newly acquired high-end home entertainment equipment, custom made computers, and expensive jewelry may not be adequately insured with existing policy limits. Now is the time to make sure the policy's coverage is correct, not too much and not too little.
Home Value versus Rebuilding Costs
Perhaps the most expensive coverage in a homeowners policy is the dwelling insurance, which applies to the physical home. The selected payout level under dwelling insurance should be adequate to rebuild the home if completely lost. This coverage is not the same as the market value of the home.
For example, Ann might live in a township that has experienced a rapid increase in home values because of an excellent school system, or the proximity to high paying jobs. The market value of the home might be $1 million, but it might only cost $500,000 to rebuild the home. In this example, Ann needs to insure the home for $500,000, not $1 million.
On the other hand, if Ann determined the cost to rebuild her home several years ago, and construction costs have increased since that time, then she might find herself in an under-insured situation. Insurance carriers have the right to prorate (in this case reduce) claims based on an under-insured situation.
Whenever in doubt as to how much it costs to rebuild a home, the best approach is to contact the insurance carrier. They will either send a form to fill out, or have an inspector visit the home to assess the cost to rebuild.
Special Discounts
Certain companies will offer policyholders special discounts. For example, if the policyholder is retired and staying at home, they might qualify for a discount on their premiums. Retired persons often spend more time maintaining their homes, and since they spend more time at home than working individuals, the chances of their home being burglarized is also lower.
Employers may also offer their employees access to special discounts available through group insurance programs.
Consolidating Insurance Carriers
Most home insurance companies also offer car insurance as well as liability coverage. These companies often offer discounts to customers that purchase more than one type of policy.
Oftentimes, umbrella insurance coverage can help policyholders lower their premiums. Umbrella insurance is designed to give added liability protection beyond the limits on homeowners, automobile, and personal insurance policies.
Credit Ratings
Insurance companies are now frequently using an insurance credit rating to finalize premiums. Most states require insurance companies to disclose any adverse action they might take, such as increasing premiums, due to credit information they have on a policyholder.
There are many steps individuals can take to protect their credit rating. Paying bills on time, limiting borrowing, and checking credit reports annually for errors, can help to avoid higher home insurance premiums too.
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