The price you pay for homeowner’s insurance can vary by hundreds of dollars, depending on the insurance company you buy your policy from. One tip is to ask your insurance agent or company representative about discounts available to you, but there are many others, some of which are listed below.
Insure For 100 percent of Rebuilding Costs
The amount of insurance you buy should be based on the cost of rebuilding, and not on the price of your home. The cost of rebuilding your house may be higher (or lower) than the price you paid for it or the price you could sell it for today.
Do You Have a Replacement Cost Policy?
Most policies cover replacement cost for structural damage but check with your insurance agent to make sure your policy does this. A replacement cost policy will pay for the repair or replacement of damaged property with materials of similar kind and quality. The insurance company won’t deduct for depreciation (the decrease in value due to age, wear and tear, and other factors).
Find Out About Flood Insurance
If your home is in an area prone to flooding, contact your insurance agent or the Federal Insurance Administration at (800) 638-6620 and ask about the National Flood Insurance Program.
Check Your Policy and Keep Your Agent Informed
Make sure your agent knows about any improvements or additions to your house that have been made since you last discussed your insurance policy.
Look at your policy to see what the maximum amount is that your insurance company would pay if your house was damaged and had to be rebuilt. The limits of the policy usually appear on the Declarations Page under Section 1, Coverage, Dwelling. Your insurance company will pay up to this amount to rebuild your home.
Contents Insurance: Make a List of All Your Personal Possessions
This includes everything you and your household own in your home and in other buildings on the property, except your car and certain boats, which must be insured separately. Among the things you should include are indoor and outdoor furniture; appliances, stereos, computers and other electronic equipment; hobby materials and recreational equipment; china, linens, silverware, and kitchen equipment; and jewelry, clothing and other personal belongings.
Check Your Policy for Special Limits
Check the limits on certain kinds of personal possessions, such as jewelry, artwork, silverware, and furs.
This information is in Section 1, Personal Property, Special Limits of Liability. Some insurance companies also place a limit on what they’ll pay for computers and other home office equipment.
If the limits are too low, consider buying a special personal property “endorsement” or “floater.”
First, do some preliminary research. Start by making a list of insurers to call. Ask your friends about their insurers, search online, check the Yellow Pages, or call your state insurance department. Also, check consumer guides. You can also check with an independent agent.
When talking to insurers, ask them what they could do to lower your costs. Once you’ve narrowed your search to three companies, get price quotes.
Tip: Don’t consider price alone. The insurer you select should offer both a fair price and excellent service. Quality service may cost a bit more, but it provides added conveniences. Talking to insurers will give you a feel for the type of service they offer.
Deductibles on homeowners’ policies typically start at $250. Increasing your deductible saves you money.
Some companies that sell homeowner’s, auto, and liability coverage will take 5 to 15 percent off your premium if you buy two or more policies from them.
A new home’s electrical system and plumbing, as well as its structure, are usually in better shape than those of an older house, so insurers may offer you a discount of 8 to 15 percent for a new home. Check the home’s construction. Brick houses may result in less costly premiums in the East; frame houses are less costly in the West. Choosing wisely could cut your premium by 5 to 15 percent. Avoiding areas that are prone to floods can save you money as well.
Does your town have full-time or volunteer fire service? Is the home close to a hydrant or fire station? The closer it is to either of these, the lower your premium will be.
Insuring the value of the land under your house is not necessary because land isn’t at risk from theft, windstorm, fire or other disasters.
You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm, or dead-bolt locks. Some companies offer to cut your premium by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police station or another monitoring facility. These systems are not inexpensive, and you should also be aware that not every system qualifies for the discount.
Tip: Before you buy an alarm system, find out what kind your insurer recommends and how much you’d save on premiums.
Some insurers offer to reduce premiums if all the residents in a house don’t smoke. Ask your insurer if this discount is available.
Compare the limits in your policy with the value of your possessions at least once a year, to make sure your policy covers major purchases or additions to your home.
Tip: On the other hand, you don’t want to spend money for coverage you don’t need. If your five-year-old fur coat is no longer worth the $20,000 you paid for it, reduce your floater and pocket the difference
If you live in a high-risk area, one vulnerable to coastal storms, fires, or crime, for instance, and have been buying your homeowner’s insurance through a government plan, you may find that there are steps you can take to allow you to buy insurance at a lower price in the private market. Check with your insurance agent.
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