While you may have shopped long and hard before settling on insurance policies for health and car, you should compare prices just as carefully when insuring your home. New buyers often accept the insurer recommended by the builder, and current homeowners rarely consider shopping for a new carrier. But with a little research, you could save hundreds of dollars a year on home insurance. In fact, you may be able to save without even switching carriers by taking these simple steps:
- Increase your deductible. To reduce insurance costs, carry the highest deductible possible. The higher the deductible, the lower the premium the insurance company will charge you. Your savings could reach 25% by increasing the deductible from $100 to $1,000. Just make sure you have enough available cash on hand to cover the larger deductible.
- Improve home security. Most insurance companies offer discounts for homes with smoke detectors, burglar alarms, deadbolts, fire extinguishers, and to those in Neighborhood Watch areas. Alarm systems connected to a third-party monitoring system earn even higher discounts.
- Consolidate policies. You can receive “multiple coverage” discounts by using one carrier for all of your insurance needs.
- Verify distance to fire stations and windstorm areas. Your premiums will be higher if you live more than five miles from the nearest fire station and more than 1,000 feet from a fire hydrant, as public services cannot respond as quickly to emergencies. Something else to consider is whether the home is in a hurricane-prone area. If so, reduce premiums by installing approved hurricane shutters.
- Check for available records and renewal discounts. If you go without a claim for three to five years, you may be eligible for a 15% discount. And most companies that service a policy for three consecutive years offer a discount based on the longevity of service.
- Find out if additional discounts apply for mortgage-free homes. Some insurance companies offer 5% discounts to people who have paid off their mortgages.
- See if new and renovated homes qualify for additional discounts. You may qualify for discounts if your home was built or rebuilt within the past 10-15 years.
- Investigate additional incentives, including the availability of non-smoker discounts, early retirement incentives, and discounts for homeowners with live-in housekeepers.
Mortgage lenders require borrowers to carry insurance. But even those who own their homes outright should be insured. The typical homeowner policy covers loss or damage to the property as well as personal liability, which covers suits from injuries or illnesses related to the property. Losses under a homeowner’s policy will be paid on either an actual cash value basis or on a replacement cost basis. With the “actual cash value” method, the policy owner is entitled to the depreciated value of the damaged property. The older the item is, the less money you may receive for its replacement. Under the “replacement cost” coverage model, which typically costs more, the policy owner is reimbursed the amount it costs to actually replace lost or damaged items.
Another difference between policies is in whether they are considered “all risks” or “named perils.” All risk policies cover losses due to any peril not specifically excluded from the policy. The latter covers losses due to perils specifically listed in the policy, such as fire, windstorm, hail, and other weather-related loss.
The homeowner’s policy is a package that combines more than one type of insurance coverage. There are four basic types of coverage contained in a homeowner’s policy:
1) Dwelling and Personal Property — If a car plows into your picture window, your homeowner’s policy will likely cover damage to the structure.
2) Personal Liability — If someone trips on your front steps, your policy may cover the legal fees if they decide to sue.
3) Medical Payments — If your home has radon, medical treatment for visitors to your home who suffered radon poisoning may be included in your coverage.
4) Additional Living Expenses — If your home becomes uninhabitable, you may be paid expenses for time spent in a hotel.
How to Collect
All insurance companies operate under conditional contracts. This means that policy owners are responsible, in part, for loss recovery. In other words, if you have an insurance policy and suffer a loss, you must:
1) Notify the insurance carrier as soon as possible after a loss has occurred.
2) Protect the property from further damage by making repairs to prevent further damage.
3) List personal items damaged, including descriptions, actual value, and replacement cost.
4) Be prepared to show an insurance company representative the claimed damage.
5) Complete a statement for the insurance company, explaining the circumstances surrounding the loss.