Have you ever been completely baffled when it comes to home insurance? Does it make your brain hurt a little? Do you kind of cringe inside when you think about it? Don’t worry. You’re not alone. It gets complicated, and that makes a lot of us want to shove it out of our minds so we don’t have to deal with it.
But we’re here to help decode the strange language that is homeowners insurance. By the end of reading this article you’ll be fluent. We’ve sectioned this guide into four basic categories to help you with getting not only the best, but also the cheapest homeowners insurance in your state.
We’ve broken this article into four sections that each tackle a home insurance mystery.
Table of Contents
- Part One: Top 5 Ways to Save on Homeowner’s Insurance
- Part Two: Case Studies
- Part Three: Beware of Missing Coverages
- Part Four: Pro Tips
Part One: Top 5 Ways to Save on Homeowner’s Insurance
When looking for home insurance, it’s important to make sure that you have enough coverage to take care of all your risks. There are a lot of factors that go into determining your home insurance premium, but there are some things you can do to help lower your premium without sacrificing the quality of your coverage. We’ve put together a list of five ways to save on your premium.
1. Fix Your Credit
This might seem like a no-brainer, but a strong credit rating (above 720) can make a difference for your monthly premium. Credit scores range from 300 to 850. Anything below 620 is considered poor, anything between 620 and 720 is good, and anything between 720 to 800 is excellent. The higher your credit score, the lower a risk you are to your insurance company (and this translates into a lower premium.) All insurance companies perform a soft check on your credit when providing a quote, so it’s important to work on improving that score. Read more about what your credit score has to do with home insurance.
2. Bundle When You Can
When you bundle your insurance, you’re essentially buying two or more insurance products from the same company. Insurance companies like it when you do this, so they might just reward you by throwing in a discount for being a loyal customer. If bundling, which is also known as multilining, works for you, then it’s a great opportunity to rake in the discounts with not only your home insurance, but your auto insurance and other policies as well.
3. Shop Around
This is where our InsuranceHub team really shines. Our agents are pros at saving people money on their rates. We’ve been in business since 1985, after all, and we’re happy to help you benefit from all those years of experience. Our agents can shop your home insurance rates with many of the top insurance carriers in the country—we’re talking companies like Nationwide, ASI, Universal, and Safeco. Shopping around provides more choices, which means more opportunities to save.
4. Home Improvements
When it comes to improving your home, there are lots of discounts that might save you money. When we say home improvements, we’re referring to things that make your home stronger in terms of structure, function and longevity. It doesn’t refer to cosmetic improvements that make your home look prettier (ie. new flooring, additions, paint, etc.) If you have a new roof, a monitored alarm, a new plumbing or AC system, an updated electrical system, or recent renovations, you may already qualify for a handful of discounts.
5. Keep Your Information Up-to-Date
Your current insurance company can’t provide additional discounts if they don’t know that you’re a candidate for them. Keep your insurance company informed about any changes to your home (like we talked about in Step Four) or any lifestyle changes. Life events are another easy way to snag a few additional home insurance discounts. For example, if you’re single and getting married, you could be eligible for a married discount. And, in the unfortunate event of the death of a spouse, a widow/widower is eligible for a discount as well.
Part Two: Case Studies
To help you understand where you might stand in the grand scheme of homeowner’s insurance, we’ve put together a few case studies of different families and how they insured their homes.
Case A: Married and Retired Couple in GA
Couple A is purchasing a second home in rural Georgia. The home is 4,700 square feet and is valued at $450,000. It has a frame construction. Couple A got quotes from two insurance carriers.
Here’s what happened:
Insurance Carrier 1: $2300 annual premium
Couple A noticed a few things about Carrier 1 when they got their quote and spoke with an agent. They were impressed that Carrier 1 provided…
- Endorsement options: An endorsement (or rider) is a written document attached to a homeowner’s policy that can change or alter the policy’s coverages or terms. Basically, it means that you’re adding extra coverages, like earthquake or sinkhole. The fact that Carrier 1 provides plenty of endorsement options means that the policy is more customizable. When considering endorsements, it’s important to take into account the replacement costs of your home and your personal belongings.
- A strong company reputation
- Higher coverage options
Insurance Carrier 2: $1600 annual premium
Couple A wasn’t so impressed with what they found at Carrier 2. Even though they were initially excited about the lower premium, Couple A asked some questions and found out that Carrier 2 had:
- Fewer coverage options.
- Limited endorsement options: This means that the company doesn’t offer as many additional coverages.
- Nonstandard company status: A nonstandard company may have a lower insurance rating and may not provide as good a claims experience. However, they are more liberal as far as the risk they will insure than a standard insurance company.
Couple A decides to purchase their insurance from Company A because of the quality of coverage they offer, plus the option to add additional coverages to their home. Even though it’s more expensive, they’re able to enjoy peace of mind knowing that they’re protected from a variety of disasters.
Case B: Single Individual in NC
Customer B wants to buy a home in North Carolina. They like a 1600 square foot home that has a frame structure. It’s valued at $180,000. The coverage is pretty straightforward, but they still get quotes from multiple carriers because they know that shopping around is a good way to make sure that they get quality coverage at a fair rate.
In the end, they make their decision and their annual premium is $1100.
Case C: Married Couple (Middle Aged) with Two Children in TN
Family C is looking to move to a large city in Tennessee. They decided to purchase home insurance, auto insurance, and umbrella insurance. Their home is valued at $150,000 and is made of brick. In addition to their home, they have an older model SUV that they want to insure.
Here’s what they ended up paying:
- An annual premium on their home of $800.
- A semi-annual premium of $600 for their car, which includes full coverage and higher limits of liability. The semi-annual premium means that the $600 would be paid twice a year. Full coverage means that they have coverage for others (liability), for themselves, and for their vehicle as opposed to just having liability coverage, which takes care of other people who might be involved in an accident.
- $170 annually for umbrella insurance of $1M.
With this coverage, Family C feels good knowing that they’re extra protected from any disasters that could arise. Adding the umbrella insurance and the higher limits of liability on their car, though an additional expense, provides extra protection for their kids. And that’s the most important thing.
The moral of these case studies is that not having enough coverage could be extremely harmful if a disaster befalls your home. That’s why it’s important to make sure that you understand exactly what your risks are and what you can do to protect yourself from them, even if this means buying extra insurance and paying more. Quality is more important than getting the lowest price. Though it might be tempting to spend less on your home insurance, you never know what’s going to happen, and you’ll be thankful that you spent a little extra to get additional coverages.
There are certain risks that a typical homeowner’s policy doesn’t protect you from, and these are the ones that you might need to purchase extra insurance for. In the next section of our guide, we’re going to outline some of the coverages that are often missing from homeowner’s policies. The first step towards ensuring that you have enough coverage is knowing what you’re covered for and what you’re not.
Part Three: Beware of Missing Coverages
You definitely don’t want to find yourself in a situation where you don’t have the right coverage when something bad happens. You’d be out of luck. So that’s why we’ve titled this section beware of missing coverages.
Think of insurance like a baseball game. You want all those bases to be covered, right? Inevitably, the one that’s not will be the one to get hit by lightning. (Well, your home is protected from lightning damage. But you get the point.)
Many people are unpleasantly surprised to find that their homeowner’s insurance doesn’t cover certain disasters, natural or otherwise. You don’t want to be underinsuring your home, so we’ve put together some of the areas that a typical homeowner’s policy doesn’t cover to help you be prepared.
Your typical homeowner’s policy won’t protect you against…
Flood/surface water/rain-damage: Unfortunately, most home policies don’t cover flood damage. You would have to get a separate flood insurance policy. But the good news is that you’re eligible for it if your community is a part of the National Flood Insurance Program. Still, it’s a good idea to be proactive and protect your home from water damage.
Mold damage: Most insurance companies won’t cover mold damage that results from a maintenance problem (humidity, condensation, leaks, etc.) Mold damage caused by landscaping or drainage is most likely not covered.
Water that backs up through sewers or drains: To make sure that you’re protected from this most unpleasant occurrence, you would need to add sewage and backup to your policy.
Earth movement: Earthquakes and landslides are typically not covered in a homeowner’s policy. You can, however, find separate coverage if you live in an area with high risk for these natural disasters. Earthquake policies cover your house and the belongings in your home. It’s best to buy enough insurance to cover the cost of rebuilding your house and replacing your possessions.
Sinkholes: Coverage for sinkholes is usually specific to the state where you live. Not all states are at risk for sinkholes, so it may not be necessary for you to have it.
Power outages: If the power goes out and the food in your freezer spoils, your policy won’t cover it. But you can get special coverage for electrical blackouts if you’re worried.
Sound-system theft from cars: Your homeowner’s policy will most likely not cover sound systems that were stolen from your vehicle. This includes iPods. Again, you can most likely get specific insurance on these things if you have an expensive sound system in your car.
Aircrafts, cars, RVs, boats: Your homeowner’s policy doesn’t cover these kinds of powerful vehicles. You need to purchase separate coverage.
Purposeful bodily injury or physical damage: Insurance is for accidents and unforeseen events.
Vacant properties: If you’re moving or having construction work done and have to leave the house unattended, you may have to purchase additional coverage to be sure that your property is protected.
Jewelry, artworks, etc.: Valuables such as jewelry require an additional “floater” coverage plan. You can either insure these items for their replacement value or their actual cash value. It’s recommended that you cover them for their replacement value, as the cash value may have deteriorated since you bought the item.
Having a thorough review of your policy once a year is the best way to ensure that you have the right coverage for your home. This is your chance to evaluate what you’re covered for and what you’re not. Think of it as your risk assessment. Remember, you don’t have to do this alone! We can help you figure out what risks you have and see exactly what you’re covered for in your homeowner’s policy.
Part Four: Pro Tips for Home Insurance
So far we’ve covered how to save on your insurance and we’ve looked at a few different case studies to see what kind of home insurance was purchased in various scenarios. Then, we talked about some of the most common disasters that aren’t covered in your typical policy. You’re on your way to becoming an expert.
But there’s one more thing that you need: how about some pro tips for buying home insurance?
Pro tip #1: Check that you have enough coverage for your home.
Ideally you want to have enough coverage to make sure that you can rebuild your home if it were destroyed by an event like a fire, replace everything in the house, and protect yourself if someone were to get hurt on your property.
Pro tip #2: Conduct an annual policy review.
This goes along with Pro tip #1. When you’re reviewing your policy, you want to think about things like remodeling, additions to your home, and purchases of expensive items. You also want to take into account any significant lifestyle changes that may have occurred over the past year.
Pro tip #3: Know exactly what your policy covers.
Going back to Part Four of this guide, you don’t want to be caught without coverage if a disaster happens. Know what your homeowner’s policy protects you from and get additional coverage if you have risks that it doesn’t insure.
Pro tip #4: Insure home improvements.
Any home improvements could impact the value of your home, so your agent needs to know about them.
Pro tip #5: Be prepared for the extra cost of rebuilding your home.
Starting from scratch costs less than rebuilding a home that’s been destroyed because there are expenses associated with demolition and cleanup. Construction costs are going up, too, so you want to make sure that you’ve accounted for this in your coverage.
Pro tip #6: Do a home inventory.
It’s really hard for your insurance company to know what to replace if you don’t have a detailed record of it in a home inventory. Take stock of everything in your home so you know what you need to claim.
Super pro tip: Include photos or videos in your inventory. This adds credibility to your claim.
Pro tip #7: Try not to file minor claims.
Handle what you can on your own. Bring in your insurance company when the damage or loss is too much for you to take care of by yourself.
Pro tip #8: Insure personal property for the replacement value, not actual cash value.
Actual cash value will only reimburse you for the current cost of a belonging that was destroyed. Since value tends to depreciate over time, chances are the actual cash value will be less than it cost you to buy the item in the first place or less than it would cost to replace it. If you choose to insure your valuables for their replacement value, you’ll get more of your money back. You’ll still be out your deductible, but being reimbursed for the replacement cost helps.
So there you have it—our ultimate guide to homeowner’s insurance. Knowledge is power! With this information about home insurance, you know what to look for when it comes to protecting your home.
If you have any questions about home insurance, contact us today. We’d be happy to help you figure out what kind of coverage you need, and we can help you find the best possible rate by getting you a free quote. You’re not in this alone!