Home insurance or homeowner's insurance is not a luxury; rather, it is a mandatory requirement. It is important because it guards the home and all the possessions inside your home against theft or damage. Every mortgage company has made it necessary for the borrower to get insurance cover for either full or the fair value of the home.
Now, you don't need to own a house to get insurance. Some landlords make it mandatory for the tenants to have a renter's insurance cover. Of course, this is not a mandatory requirement, but it is certainly good to be protected. Now, let's understand a few important details associated with homeowner's insurance.
Some tips for cost-cutting on a homeowner's insurance
Of course, it doesn't work to be cheap when it comes to insurance, but you should certainly try to reduce the cost of the premium. Here are some steps that you can follow for the same.
- Have a security alarm at home
If you wish to lower the insurance premium's cost on your homeowner's insurance policy, you should get a security alarm installed in your home. It is best if the alarm is monitored directly by the local police or the central station. In many cases, having this additional layer of security is known to bring down the insurance cost by at least 5%, and sometimes even more. However, to avail of a discount, you'll have to furnish proof of the monitoring by the local police or the central station either as a contract or the bill to the company. Having smoke alarms, too, will lower down the premium amount. Though a smoke alarm is a regular in modern homes, the installation of these alarms in older houses could help you save approximately 10% on the amount of premium. Other things, such as deadlock, CO2 detectors, or sprinkler systems, could also help. - Increase the deductible
Like other types of insurance, in homeowner’s insurance, raising the deductible would mean a decreased yearly premium. Now, there's one problem that you might face with a deductible, and that is the issues, which usually cost you around $100 for fixing, such as a faucet that's been leaking, or a broken window, will have to be absorbed directly by the owner. On adding up, these costs tend to be high. - Check for the different policy discounts
A lot of insurance companies offer discounts to the customers who avail of all of their insurances (health, auto, pet, etc.) from a single company. This discount could often be anywhere between 10-15%. So, it is good to get a combined quotation of all of the different plans, and then you'll certainly fetch good savings. - Plan your renovation
Homeowners who are planning to construct an adjacent or an additional structure for their homes must take into account the raw materials that will go into it. Please know that if you opt for the wooden structures, it will comparatively be costlier as these structures are flammable. On the other hand, if you opt for steel or cement-framed structures, the cost of insurance will be lesser because they are less susceptible to extreme weather conditions and fire. Furthermore, the homeowners should also take into account the impact of structures like swimming pools on the insurance premium. In a fair situation, this can exceed the premium cost by up to 10%, and sometimes even a lot more than that. - Pay the mortgage
Yes, it is not easy for many homeowners to repay the loans immediately, but it helps to do as early as possible. It is important to know that homeowners who have full ownership of the houses will have to pay lesser premiums than those who have taken a mortgage loan against the home. This is so because insurance companies believe that if the place belongs to you 100%, you certainly put in more care into it. - Make regular comparisons and review the policy
Irrespective of the initial price you received by the homeowner's insurance company, it is important to shop around and make some comparisons. There are three levels for coverage: replacement cost, cash value coverage, and the extended replacement value coverage. You need to see what is included in your plan. You can also consider checking the options of group coverage via trade unions or credit unions, association members, or employers. Moreover, even once the insurance policy is taken, you should conduct market research every once a year. Take some time and compare the prices charged by different companies. Further, do a regular review of the existing policy to ensure that there's no increment in the rate. If you made any changes in your home that should have declined your premium cost, immediately intimate the insurance company. For instance, when you pay off your loan, shut down the swimming pool, install a theft alarm, or assemble a trampoline, inform the homeowner's insurance company about these changes. This would reduce your premium costs. Additionally, you need to continually assess your most expensive purchases to ensure that you have the requisite coverage. You should also note the changes that might have recently been done in your neighborhood. There will be a couple of changes that will have an impact on the premium amount that you pay. For instance, if your neighborhood just installed one fire hydrant, it could lower your premium rate. - Stay loyal to your insurance company
It always pays back to be loyal. If you stick to your homeowner's insurance company for many years, they'll certainly reward you by charging you lower premium rates. If they do not lower the rates themselves, you can ask for loyalty discounts.
Tips for comparing different companies offering home insurance
When you are seeking a company that gives you homeowner's insurance, it is important to be watchful. Here are some tips that might help.
- Compare insurers and the state-wide cost
As far as homeowner’s insurance or even any other insurance for that matter is concerned, always pick a company that is creditworthy and legitimate. So, for this, you should check out the website of the insurance department of your state. On this website, you can find the ratings for the different homeowner's insurance providers who have a valid license to operate in the state of your residence. Moreover, you can also find out if there are any complaints from consumers lodged against them. Also, check the average cost for the homeowner's insurance prevalent in your state or city so that you do not get duped. - Perform a health check for the company
To ascertain whether or not a particular company is healthy, you need to check their credit scores. It can be analyzed on some top-rated credit agencies, like Moody's, A.M. Best, etc. Other websites that you can use to check the company's health include Weiss Research or the NPOs like NAIC. We recommend these websites because they keep a tab on all the consumer complaints, which have been registered against these companies. Furthermore, you can also find general feedback about them on the websites. Information on their speed with regards to paying off the claim and other relevant company information can also be availed from this website. This knowledge will help you ascertain whether or not the company can pay your claims on time. - Check who will be handling your claims response
After you undergo a massive loss, there's a significant burden on you both emotionally, mentally, and financially. In this time, paying for the home repairs out of your pocket and the endless wait of reimbursement from the homeowner's insurance company might put your family and you in a spot. Now, what's to know here is that a couple of insurance companies outsource their core functions, including claim handling. So, when you purchase a homeowner's insurance, you should be upfront and ask the company managers who will handle your claim calls if need be. In some companies, the job is outsourced to a call center, while other companies have their responsive licensed adjusters for this. Nonetheless, your provider should give you honest feedback on the carrier's market reputation and experience with them. Always go with a company that has a record of timely and fair settlements. You should also question the insurer about their holdback provisions. It is a provision as part of which, at times, a homeowner's insurance company will hold back a particular sum of money till the time the homeowner gives proof that the repair work has already started. - Find out about the retention rate
When you question a homeowner's insurance company, it will always be said that they have an excellent claim reimbursement service. But do not trust them yet. You need to probe further and find out about the satisfaction rate amongst the policyholders. Their retention rate can prove this. So, a retention rate is the percentage of the insurers who renew their policies year after year. Only opt for companies that have a retention rate somewhere between 80 percent and 90 percent. Further, details relating to policyholder's satisfaction can be found in online reviews, annual reports, and the company's testimonials. - Get a couple of quotations
It is particularly important in the case of homeowners because the coverage needs are variable. When you compare different companies, it would be easier to determine which one offers maximum value at the least cost. Now, the big question is, how many quotations should one get before finalizing the things? See, let's be prudent about this, and get at least five different quotations. When you have five quotations with you, it is easier for you to judge what different companies are offering. It would give you a chance to make a more-informed negotiation. However, before you approach different homeowner's insurance companies, you should reach out to the insurance agent who you have already been associated with in the past. It is quite likely that the insurance agent from whom you have already taken a few insurances in the past will offer you a comparatively better deal. There will be insurance companies that'll get you an exclusive discount if you are working from your home or senior citizen. It is so because both these categories of people happen to be more in their homes. So, the chances of burglary are fewer in their houses. - Check for things beyond the price
Usually, it is the insurance premium, which determines the cost that you'll have to bear towards it. However, when you shop for homeowner's insurance, you need to look beyond just the price. Of course, the two insurers adopt similar forms or endorsements. But, the wordings of their policy contracts might be different. Thus, you should consider a bunch of different things, such as the limits and the coverage of the policy. - Communicate with a real agent
One of the most efficient ways to get insurance is to get a quotation directly from the homeowner's insurance company or interact with an agent who is associated with a couple of insurance companies. It works better than going with an agent who works with only one company. However, please know that if you take a deal from a broker, he'll also add his commission or fees. This might cost you a few additional dollars.
Lastly, ask the insurance company as many questions as possible to get a thorough clarity on the available options.
