December 16th, 2017 9:42 AM by Jackie A. Graves
Fire, flood, earthquakes, hurricanes, wind, falling trees and
burst water pipes are just some of the hard-to-predict events that could damage
or destroy your home and its contents. Or someone could take a spill down your
stairs and decide to sue you. And, of course, don’t forget about thieves, who
could ransack your abode and steal your valuables.
No matter where you live, having the right kind of home insurance
— and enough of it — is both costly and vital. Yet with a little effort, you
can cut your premium in half. But first …
Why You Might Want to Spend More on Homeowners
Most policies cover homes and personal property (the items inside your
home) for actual cash value (ACV), which is based on what they’d be worth
today, considering wear and tear. If the roof is 12 years old, it will be
valued at that amount — not what it will cost you get a new
To insure the full cost of replacing your home and possessions,
you need to buy a more expensive replacement cost policy. While replacement
cost policies will run you in the range of 10% to 20% more than ACV policies, experts generally recommend
them because they’re more likely to get you back to where you were before your
home and possessions were destroyed. There’s a more extensive (and expensive)
version of this coverage called guaranteed replacement cost, which will cover
the cost to rebuild your home as it was before it was damaged, even if that
costs more than the value of the property (though there are limits on this).
If you have a cash value policy and disaster strikes, the check
you get from the insurer will be for a lot less than you’ll need to rebuild.
Think about that roof. Every house in the neighborhood needs a new one. There’s
a high demand for roofers, the cost of labor and materials has gone up, and if
you’ve got a cash value policy, you’ll only get reimbursed for the value of
your 12 year old roof. However, it will probably cost you thousands more to get
a new one.
With cash value coverage, you’ll take a hit on your personal
property losses as well, since you’ll only be reimbursed for the depreciated
value of each piece of personal property.
Is It Really Guaranteed Replacement Cost?
You might think that if you spend the extra money for guaranteed
replacement cost insurance, the policy will actually pay the entire replacement
cost. Not necessarily. Some companies will pay the actual replacement cost;
others limit their payment to 125% or 150% of the face value. Be sure you know
exactly how your policy defines this coverage.
A ballpark figure on your home’s value is a useful starting place,
but that won’t tell you how much it’s going to cost to rebuild. You’d be wise
to get a professional estimate of the replacement cost of your home. Ask
insurers, get a friendly local builder to give an estimate based on current
local conditions and crunch the numbers with an online replacement cost
calculator. You can then use those figures to make sure you insure your home
for 100% of its replacement cost.
Also check if your policy has automatic inflation protection,
which increases its face value each year based upon construction costs in your
area. It’s another way to make sure your home remains sufficiently insured.
Although they’re not identical, home insurance policies are
standardized to some extent. Still, they can be complicated. Take the time to
understand what the various policies will cover and what they won’t.
What Determines Your Homeowners Insurance
Homeowners insurance premiums are determined by a variety of
things, including what it would cost to rebuild your home, where you live, what
your home is made of and your history of making insurance claims. Your credit
and even your pets can also have an effect on how much you pay.
How Can You Lower Your Homeowners Insurance
It’s well worth investing the time to lower your home insurance
costs. With a little effort, you can cut your premium by as much as 50%, not
just this year, but for years to come. Of course, homeowners insurance rates
simply costs more in certain parts of the country. If you live along a
coastline, for example, your costs are going to be high no matter what you do.
As such, it’s all the more important for you to follow these steps to help you
sure you look your best on paper. Insurers
often use credit-based insurance scores to determine how likely you are to file
a claim. (The more likely you are to file a claim, the higher your premium will
be.) So check your free annual credit reports for accuracy and get errors
fixed. (You can learn how to dispute credit report errors.) You can also keep tabs on your credit and get tips for how to
improve it by reviewing your free
credit report summary on Credit.com, which
includes two free credit scores. Improving your credit could help you save on
be clueless. Before
agreeing to give you a policy, insurance companies check to see if you have a
history of filing claims – even small ones, like for theft or fire.
covering some claims on your own – or even withdrawing a claim you’ve made – to
avoid falling into the bad risk zone. Ask your insurance agent for some
guidance on this.
around. Policies are not
identical. Costs, coverage, and conditions can vary, as can the financial
stability of the insurer. Compare coverage and prices for your home and
belongings. Start with a couple of sites that will get you multiple quotes, for
example, Insure and Insweb. But don’t stop there. Make sure you get quotes from
a range of insurers, including:
sell the policies of several different insurance companies. While they can help
you get the best deal among the insurers they handle, their commission
structure is the highest. Still, there are often benefits to working locally
with someone who you know and can contact quickly in an emergency. But even if
all you want to do is look at the pros and cons — say, of registering your
kid’s car at school or at home — a good independent agent should help you
figure out what makes sense. Your best bet is going to be to ask friends and
relatives for recommendations of local independents they’ve worked with and
work for a single insurance company such as Allstate and State Farm — companies
that have their own sales forces. Their commissions are typically lower than
those of the independent agents, so you may pay a bit less for your policy.
can give you a quote on the phone or online and generally offer the
lowest-priced policies, because they sidestep commission fees. Direct writers
tend to be the choosiest. If you have anything that hints at a real risk (a
wood stove, for example), it’s quite possible they’ll say, “No thanks.”
going for the highest deductible you can afford. Compare quotes for the replacement value
of your home and its contents with different deductibles, say, $500 and $1,000.
They’ll shave 10% to 25% off your premium annually. If you can go for a still
higher amount of $2,500 or $5,000, your annual savings will be 30% or higher.
smoke and carbon monoxide detectors on every floor, and make sure the agent knows about them. A
smoke detector may not only save a life, it can pay for itself in a year or two
with the 2% to 5% that it can save you on premiums.
fire extinguishers, deadbolt locks for all the doors, and consider other safety
devices. Ask if there are other
low-cost safety features that might save even more money on the policy. And
depending on the location and condition of your home, you may want to invest in
costlier fire and theft protection. Fire sprinklers, anyone? They can save you
money, though a home security system that’s connected to the local police and
fire departments can save you more.
the agent or company that writes your car insurance for a “multiple policy”
discount. Find out if you’re
eligible for a price reduction if you let them write both your home and car
insurance. Also ask other insurers what their multiple-policy discounts are.
loyal (if it’ll save you money). Many
insurers reward good customers to keep them. Does yours offer discounts to
long-time customers? Ask.
money off for “good behavior.” Have
you been claim-free for a few years? Some companies offer discounts for that.
you retired? Some
companies offer retirees discounts of 10% to 20%.
sure to ask about all possible other discounts. Here’s a handy checklist:
your home built with fire-resistant materials?
yours a non-smoking household?
a newish house, built with state-of-the-art construction materials? If so, it
should cost less to insure.
renovated? You might be eligible for a price break – but if you made a
significant improvement, you may need additional coverage.
you normally keep some of your gems in a safe deposit box, and if they’re worth
more than the standard policy limits, ask if you would be eligible for a
your membership in an organization – whether it’s AARP, AAA, a labor union or
an alumni group – make you eligible for a discount?
a second home? See if you can get a multiple policy discount. You might need to
accept less coverage for the contents of your second home or install an alarm
Get the Most Out of Your Coverage by Planning
You’ll have the least grief with a claim if you keep receipts,
obtain written appraisals for anything of substantial value and create a
detailed inventory of your possessions. Now. Before the storm hits.
A detailed list of your belongings can also help you figure out
how much coverage you really need. Then, down the road, if you file a
homeowners claim, you’ll have the documentation in hand.
Major categories mentioned often by insurers include jewelry, cash,
art, furniture, appliances, electrical equipment, heirlooms, rugs and clothing.
Keep an up-to-date copy of your list in a safe place, such as a safe deposit
box, at your office or with your attorney.
You want a formal, detailed inventory with careful descriptions of
your pricey belongings, brand names, receipts, dates of purchase, professional
appraisals and photo or video records. Don’t forget to update your inventory
periodically to cover new purchases.
By Christine DiGangi – To view the
original article click here