Don’t Get Burned – How to Find the Best Homeowners Insurance
As a new homeowner, getting the right homeowners insurance is crucial to protecting your investment. But with so many options, deductibles, and variables – finding the optimal policy can be confusing and overwhelming.
After dealing with my own homeowners insurance headaches, I want to share tips learned the hard way to help you find cheap homeowners insurance that still adequately covers your home. This guide will walk through how to compare plans, lower premiums, and get the coverage you need. Let’s dive in!
Shop Around to Compare Homeowners Insurance Quotes
The first step is getting homeowners insurance quotes from multiple providers. Rates can vary wildly between insurers for similar coverage. Here’s how to shop around:
- Get quotes from national carriers like State Farm, Allstate, Liberty Mutual along with local providers.
- Compare quotes from independent agents who work with multiple insurers.
- Look into options from online insurance companies like Lemonade and Hippo.
- Use sites like SelectQuote and Policygenius to get customized quotes.
Be sure to get quotes for the same coverages to properly compare. Getting multiple quotes ensures you don’t overpay.
Understand Key Factors That Impact Premiums
Insurance companies set premiums based on the risk they’re taking on. Be aware of key factors that influence your rate:
- Location: Risk of natural disasters and crime rate impact premiums. Coastal areas also cost more.
- Home value: More expensive homes cost more to insure.
- Age of home: Older homes often have higher premiums.
- Construction materials: Materials like brick are less risky than wood framing.
- Claims history: Frequent claims will increase your premiums.
- Credit score: Better credit often leads to better rates.
While you can’t change some factors, being aware of risks in your area is key to finding affordable coverage.
Consider Increasing Deductibles to Lower Costs
One easy way to reduce premiums is to raise your deductible, which is what you pay out-of-pocket before insurance kicks in.
- Start with a $500 deductible, then get quotes for $1000, $2500, and $5000.
- Higher deductibles lead to much lower monthly premiums, but more upfront risk.
- Make sure you have savings to cover the higher deductibles if needed.
For cheaper insurance, consider bumping deductibles to $1000 or $2500. Just be prepared to pay more in the event of an actual claim.
Review What’s Covered Under Standard Home Insurance
There are 6 main types of coverage included under a standard homeowners policy:
- Dwelling: Covers damage to your home’s structure.
- Other structures: Detached garages, fences, gazebos.
- Personal property: Furniture, clothes, appliances inside home.
- Loss of use: Pays for living expenses if home is uninhabitable.
- Personal liability: Covers injuries for which you’re liable.
- Medical payments: Others’ medical bills from injuries on property.
Take inventory of your home’s features and possessions to ensure you have enough dwelling and property coverage.
Add Endorsements for Special Situations
Standard policies won’t cover every situation. Endorsements add extra protection:
- Flood insurance: Flooding isn’t covered under basic policies. Required if in flood zone.
- Earthquake insurance: Also not typically included. Needed in quake-prone areas.
- Jewelry endorsement: Covers expensive jewelry beyond standard limits.
- Water backup: Protects against sewer/drain backups.
- Home business insurance: Covers business equipment in home offices.
Carefully review your policy to see where gaps exist. Endorsements fill holes for specialized needs.
Claim All Possible Discounts to Save
Take advantage of any discounts you qualify for to lower premiums:
- New home: Discounts for new construction with modern features.
- Security system: Cut rates for monitored systems and cameras.
- Safety features: Savings for fire/CO detectors and fire-safe roofs.
- Bundling: Combine home and auto insurance for multi-policy cuts.
- Good credit: Having better credit often nets discounts.
- Membership affiliations: Alumni, trade groups, etc. offer reduced rates.
- No claims: File fewer claims to keep a “clean” record.
Ask your agent to review all possible ways to reduce your bill. Every little bit helps!
Compare Recommended Home Insurance Limits
Agents will recommend specific coverage limits based on your home. Here are typical guidelines on limits:
- Dwelling coverage: At least 80-100% of home reconstruction cost.
- Other structures: 10-30% of dwelling limit.
- Personal property: 50-70% of dwelling limit.
- Loss of use: Minimum 20% of dwelling limit.
- Liability: $100,000 minimum, but $300K-$500K is preferable.
- Medical payments: At least $1000 per person.
Review recommended limits and increase any severely insufficient areas. Don’t be underinsured!
Understand Differences in Replacement Cost vs. Actual Cash Value
Two key terms to know are replacement cost and actual cash value:
- Replacement cost: The cost to rebuild with materials of similar kind. Provides full reimbursement.
- Actual cash value: The depreciated value of damaged items only. Provides partial reimbursement.
Always opt for replacement cost coverage so you’re fully covered to repair damage. Avoid actual cash value policies.
Watch Out for Common Home Insurance Exclusions
While homeowners policies cover a wide range of damage, some key exclusions exist:
- Flood damage is often excluded (unless you purchase flood endorsement).
- Earthquake damage also requires separate endorsement.
- Dog bites may have limited coverage – especially for specific breeds.
- Businesses operated from home are generally excluded. Need endorsement.
- Lapses in coverage if not continuously insured.
Read the full policy exclusions closely so you know what’s not covered. Pay to add endorsements where needed.
Claim Smartly to Avoid Rate Hikes
One claim can lead to years of higher premiums. Be smart about what you claim:
- Only report claims exceeding your deductible amount.
- Pay out-of-pocket for smaller, non-critical damage.
- Do thorough research before filing a claim.
- Take measures to prevent future incidents from recurring.
- Consider filing multiple claims under one occurrence if related.
Strategic filing avoids rate hikes while still getting coverage when you truly need it.
Shop Insurance Annually to Find Savings
The final tip is to reevaluate insurance every year at renewal:
- Shop new quotes to ensure you’re still getting the best rate.
- Review your policy to confirm appropriate coverage.
- Check for new discounts you may now qualify for.
- Adjust deductibles or limits to optimize for affordability.
- Address any new risks or assets that need coverage.
Insurance should evolve as your home and life situation changes. Stay on top of it!
Finding the optimal homeowners insurance takes diligence, but pays off by securing your most valuable asset. Follow these tips to understand coverages, find discounts, establish proper limits, and strategically file claims. Shop multiple providers using online comparison tools. With the right policy for your unique situation, you’ll gain peace of mind knowing your investment is protected.
