29 Insurance: Homeowners

HomeInsurance.com reports that annual premiums now average $917. If you’re like most homeowners, it’s been years since you last reviewed your policy or shopped around for better deals. As a result, you likely overpay—and nothing hurts a fringer more than that. Avoid the house of pain with these strategies.

29.1  Research the Product

Not only are these policies costly, they’re complicated. The typical contract exceeds fifty pages, so it makes sense to educate yourself. The National Association of Insurance Commissioners (NAIC) publishes a “Consumer Guide to Homeowners Insurance.” Visit NAIC.org.

29.2  Measure Your Needs

If you buy too much coverage, you overpay, so find the right fit.

   29.2.1  Compute Your Home’s Replacement Value
Buy only the coverage needed to rebuild lost structures (don’t insure the land because that survives any natural disaster). Buy more coverage if your home features gourmet kitchens or luxury bathrooms. Use these resources to calculate a value.

  • Free Calculators. Visit Building-Cost.net or search the internet for “free home insurance calculators.”
  • Low-Cost Calculators. For fancier calculators that cost about $8, visit AccuCoverage.com or HMFacts.com.
  • Local Experts. Ask a nearby broker or builder to estimate the typical cost per square foot of construction and multiply that number times the size of your home.

   29.2.2  Disfavor Extras
You need insurance, not bells and whistles. Weigh carefully whether to buy coverage for sewer backups, carpet damage, and mold remediation.

   29.2.3  Choose the Highest Deductible You Can Afford
Insure only for major catastrophes that would have a severe—and not merely inconvenient—effect upon your finances. Use some of what you save on premiums to buy inexpensive safety devices: power outage sensors, deadbolt locks, intrusion alarms, security lights, and steel-belted hoses for washing machines. These might even qualify you for further discounts (see 29.3.4).

29.3  Shop Around

Market conditions change constantly. Shop at least every other year.

   29.3.1  Seek Online Quotes
Popular comparison sites include Insure.com and Bankrate.com.

   29.3.2  Visit Insurance Company Websites
Many insurers don’t list on price comparison sites, including Geico, Progressive, USAA, Allstate, Amica, and State Farm.

   29.3.3  Call an Independent Agent
Ratchet up the competition. Locate a good deal online and then ask an agent to find you something better.

   29.3.4  Seek Discounts
Look for these deals whenever you pay a bill or shop around for new homeowners policies.

  • Bundles. If you now pay multiple insurers for home, auto, and life, consider buying from a single company. Run the numbers.
  • Group Discounts. Look for price breaks if you belong to certain groups—retirees, seniors, veterans, current military, employees of large corporations, AAA, or AARP.
  • High Credit Scores. If yours is lofty, make an inquiry.
  • Annual Premium Payments. Some insurers grant breaks if you pay premiums in advance.
  • Safety Features. Some insurers offer discounts for alarms, deadbolt locks, fire sprinklers, or other similar devices.
  • Structural Features. Houses made of brick, rather than of straw or sticks, cost less to insure. Seek discounts if you have fire resistant siding, heavy shingles, a reinforced roof, storm shutters, shatterproof windows, earthquake retrofits, or other safeguards that protect your home against natural forces and hard blowing wolves.
  • Updated Home Systems. New furnaces, air conditioners, hot water heaters, or electrical wiring might trigger discounts.
  • Location, Location, Location. Seek discounts for proximity to hydrants and fire stations, inclusion in gated communities, or governance by homeowners’ associations.
  • Zero Claims. Some insurers issue discounts to customers who never file claims. If your claims record is spotless, ask for a break on premiums.
  • Loyalty. At many companies, longtime customers pay less.
  • Credit Card Payments. Pay with plastic and pocket the rewards, but only if you pay off your cards every month (see Chapter 49).

29.4  Pick a Low-Priced Insurer

After you find the best offers, it’s time to investigate the insurers that made them.

   29.4.1  Talk With Friends
Ask if they have experience with any of your prospective insurers.

   29.4.2  Research Customer Satisfaction
Some insurance companies pay off claims quicker than others and do it without hassles. Review ratings in Consumer Reports and at JDPower.com. To view customer complaint records, click on your home state at NAIC.org/state_web_map.htm.

   29.4.3  Research Company Finances
Buy from solvent insurers only. Check with your state’s regulatory agency or private sources such as A.M. Best and Standard & Poor’s.

29.5  Follow Up

   29.5.1  Keep a File
Maintain copies of your policy, endorsements, declarations page, price comparisons, and buying guides.

   29.5.2  Maintain a High Credit Score
At many insurers, those with higher credit scores qualify for lower premiums. Maintain your score by paying bills and loan installments on time. Check with the three major reporting agencies each year to make sure that your credit history is accurate. To request a FREE copy of your report, visit AnnualCreditReport.com.

   29.5.3  List Personal Property
If you ever file a claim, you need to prove your loss. Before disaster strikes, make a video of all rooms and closets. Scan receipts of any big ticket items. For FREE software that helps you prepare an inventory, visit KnowYourStuff.org. Keep copies of the data in multiple safe places away from home.

   29.5.4  Perform Home Repairs
Homeowners policies typically exclude coverage of losses that stem from neglect or failure to repair.

   29.5.5  Avoid Small Claims
A new claim raises your premium and sometimes makes it difficult to obtain insurance in the future. Self-insure for smaller losses and file claims only for major catastrophes.

   29.5.6  Avoid High-Risk Stuff
Certain possessions make insurers cringe: pools, trampolines, and aggressive dog breeds. Most companies either charge more to insure these items or refuse to cover them at all.

   29.5.7  Avoid High-End Stuff
Most frugal fringers don’t own furs, high-end jewelry, original art, valuable antiques, and big-time coin or stamp collections. Many insurers cap their coverage for these items, so if you want insurance, prepare yourself to pay higher premiums.

29.6  Buy Insurance Friendly Houses

   29.6.1  Buy a Smaller House
The smaller the home, the lower your premiums.

   29.6.2  Buy a Newer House
Older homes cost more to insure, particularly if plumbing and electrical systems are antiquated.

   29.6.3  Avoid High Risk Areas
Homes located in areas prone to natural calamities—wildfires, mudslides, coastal storms—cost more to insure. So do homes sited in high crime areas or away from fire stations and hydrants.

   29.6.4  Avoid Flood Plains
Buy a house near a river and you’ll pay extra for flood insurance, which typical homeowners policies don’t cover.

   29.6.5  Check Insurance Costs Before You Buy
Ask the seller for a report of the house’s insurance loss history, generally contained in CLUE (Comprehensive Loss Underwriting Exchange) or A-PLUS reports. These may disclose conditions that inflate premiums or, in the worst cases, make it impossible to obtain any coverage at all. Homeowners can access CLUE reports for FREE at LexisNexis.com.

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