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The price you pay for your home insurance can vary by hundreds of dollars, depending on which insurance company you buy your policy from. Here are some things to consider when shopping for homeowners insurance.
It will take some time, but it could save you a good sum of money. ask your friends, check the yellow pages, or contact your state insurance department. (phone numbers and websites are on the last page of this booklet). The National Association of Insurance Commissioners (www.naic.org) has information to help you choose an insurer in your state, including complaints. States often make available information on the typical rates charged by major insurers, and many states provide the frequency of consumer complaints by company.
Also see consumer guides, insurance agents, companies and online insurance quote services. this will give you an idea of the price ranges and tell you which companies have the lowest prices. but don’t consider price alone. The insurer you select should offer a fair price and provide the quality service you would expect if you needed help filing a claim. therefore, when evaluating service quality, use the complaint data above and talk to various insurers to get an idea of the type of service they provide. ask them what they would do to lower their costs.
verify the financial stability of the companies you are considering with rating companies such as a.m. best (www.ambest.com) and standard & poor’s (www.standardandpoors.com/ratings) and consult consumer magazines. When you’ve narrowed the field down to three insurers, get price quotes.
increase your deductible
Deductibles are the amount of money you must pay for a loss before your insurance company begins paying a claim, according to the terms of your policy. The higher your deductible, the more money you can save on your premiums. Today, most insurance companies recommend a deductible of at least $500. If you can afford to increase your deductible to $1,000, you can save up to 25 percent. Remember, if you live in a disaster-prone area, your insurance policy may have a separate deductible for certain types of damage. if you live near the coast in the east, you may have a separate windstorm deductible; If you live in a state vulnerable to hail storms, you may have a separate deductible for hail; And if you live in an earthquake-prone area, your earthquake policy has a deductible.
don’t confuse what you paid for your home with rebuilding costs
The ground below your home is not at risk from theft, windstorm, fire, and other perils covered in your homeowners policy. so don’t include its value when deciding how much homeowners insurance to buy. if you do, you’ll pay a higher premium than you should.
buy your auto and home policies from the same insurer
Some companies that sell homeowners, auto, and liability coverage take 5 to 15 percent off your premium if you buy two or more policies from them. but make sure this combined price is lower than buying the different coverages from different companies.
make your home more disaster resistant
Find out from your insurance agent or company representative what steps you can take to make your home more resistant to windstorms and other natural disasters. you may be able to save on your premiums by adding storm shutters, reinforcing your roof, or purchasing stronger roofing materials. older houses can be retrofitted to better withstand earthquakes. Also, consider upgrading your heating, plumbing, and electrical systems to reduce the risk of fire and water damage.
improve your home security
You can usually get discounts of at least 5 percent on a smoke detector, burglar alarm or deadbolt locks. Some companies offer to lower your premium by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that sounds to police, fire, or other monitoring stations. these systems are not cheap and not all systems qualify for a discount. Before you buy such a system, find out what type your insurer recommends, how much the device would cost, and how much you’d save on premiums.
look for other discounts
Companies offer various types of discounts, but not all offer the same discount or the same amount of discount in all states. for example, since retired people stay home more than working people, they are less likely to be robbed and can also detect fires earlier. retirees also have more time to maintain their homes. If you’re at least 55 and retired, you may qualify for a discount of up to 10 percent at some companies. Some employers and professional associations run group insurance programs that may offer a better deal than you can get elsewhere.
maintain a good credit history
Establishing a strong credit history can lower your insurance costs. Insurers are increasingly using credit information to price homeowners insurance policies. In most states, your insurer must tell you about any adverse action, such as a higher rate, at which point you should verify the accuracy of the information the insurer relied on. to protect your creditworthiness, pay your bills on time, not get more credit than you need, and keep your credit balances as low as possible. check your credit record regularly and correct any errors promptly so your record remains accurate.
stay with the same insurer
If you have maintained your coverage with one company for several years, you may receive a special discount for being a long-term policyholder. Some insurers will reduce your premiums by 5 percent if you stay with them for three to five years and by 10 percent if you stay with them for six years or more. but be sure to periodically compare this price with other policies.
review your policy limits and the value of your possessions at least once a year
You want your policy to cover any major purchases or additions to your home. but you don’t want to spend money on coverage you don’t need. If your five-year-old fur coat is no longer worth the $5,000 you paid for it, you’ll want to reduce or cancel your floating insurance (additional insurance for items whose full value isn’t covered by standard homeowners policies, like expensive jewelry, computers high-end and valuable works of art) and pocket the difference.
look for private insurance if you have a government plan
If you live in a high-risk area, for example, one that is especially vulnerable to coastal storms, fires, or crime, and you have been buying your homeowners insurance through a government plan, you should check with an agent or insurance company. representative or contact your state insurance department for the names of companies that may be interested in your business. you may find that there are steps you can take that would allow you to purchase insurance at a lower price on the private market.
When buying a home, consider the cost of homeowners insurance
You may pay less for insurance if you buy a home near a fire hydrant or in a community that has a professional fire department rather than a volunteer one. It may also be cheaper if your home’s electrical, heating, and plumbing systems are less than 10 years old. if you live in the east, consider a brick house because it is more resistant to wind. If you live in an earthquake-prone area, look for a wood frame house because it is more likely to withstand this type of disaster. choosing wisely could lower your premiums by 5 to 15 percent.
Check the track report (comprehensive loss underwriting exchange) for the home you’re thinking of buying. These reports contain the property’s insurance claim history and can help you judge some of the problems the home may have.
Remember that flood and earthquake damage insurance are not covered by a standard homeowners policy. If you buy a home 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 helpful flood insurance information on its website at www.fema.gov/nfip/. a separate earthquake policy is available from most insurance companies. the cost of coverage will depend on the probability of earthquakes in your area. In California, the California Earthquake Authority (www.earthquakeauthority.com) provides this coverage.
If you have questions about insurance on any of your possessions, be sure to ask your agent or company representative when shopping for a policy. For example, if you have a business out of your home, be sure to discuss coverage for that business. Most homeowners policies cover business equipment in the home, but only up to $2,500 and don’t offer commercial liability insurance. While you want to lower the cost of your homeowners insurance, you also want to make sure you have all the coverage you need.
Cooperative State Research, Education, and Extension Service, usdawww.csrees.usda.gov/