Shopping around for homeowners insurance? Homeowners insurance is a must-have for property owners. It not only covers your property and possessions, but it also protects you from lawsuits and legal trouble.
With so many insurance companies out there, choosing the right policy can be a challenge. You likely want lower premiums, however, there are other factors that you should consider. In this article, we’ll give you tips on getting the best deal on your homeowners insurance.
#1 Shop around
A common mistake among first-time homeowners is going for the first insurance company they find. To save on your insurance, be sure to compare rates from at least three companies. You can contact independent insurance agents or property managers who can help you create a list of reputable insurance companies in your area.
You can also check the internet for customer reviews. Find out what real customers have to say about the insurance company. Make sure that they’re legitimate — the last thing you want is to be a victim of insurance fraud.
#2 Look for good customer service
Customer service should be a deciding factor when buying homeowners insurance. In the event that you need to file an insurance claim, you will want to be taken seriously.
In addition, your insurance company should determine your premium rates properly. Your homeowners insurance rate is affected by several factors (e.g. credit score, neighborhood, etc.) but your insurance company should never practice “unfair discrimination” to inflate your rate.
#3 Know how much coverage you need
According to CoreLogic, 64 percent of homeowners are underinsured. This means that their insurance policy is insufficient to cover their losses. When you’re underinsured, you are at risk of not being able to fully recover your property or possessions.
One of the most important things to do when buying insurance is to determine the amount of coverage that you need. For instance, if the “replacement value” of your home is $400,000, your insurance coverage shouldn’t be less than that.
Here’s how to determine the amount of coverage you need:
- Determine the right dwelling coverage. Your dwelling coverage covers the physical structure of your property. It should cover the cost to rebuild your home considering the current costs for construction and labor.
- Determine the right contents coverage. Your contents coverage repairs or replaces personal possessions such as electronics and jewelry. It is usually 50% to 70% of the dwelling coverage. For instance, if your dwelling is insured for $400,000, then your content coverage is set at $200,000 or $280,000. You can always add more coverage if needed.
- Inventory your items. Not sure how much your contents coverage should be? Create an inventory list of your items to estimate how much it would cost to replace them. Keep in mind that your insurance company may have limits for high-value items. For instance, a standard homeowners insurance policy has a limit of $1,500 for stolen jewelry.
#4 Go for “replacement cost” instead of “actual cash value”
The replacement cost is the amount it takes to replace an item. On the other hand, the actual cash value (ACV) contemplates the item’s price at the time it was purchased with depreciation. Ideally, your insurance should cover the replacement cost instead of the ACV as prices will likely rise in the upcoming years.
For instance, if your ten-year-old TV was destroyed in a fire, you would be reimbursed for its current worth. It likely won’t be enough to replace your TV. That’s why it’s better to choose replacement cost coverage.
#5 Disaster-proof your home
An effective way to lower your premiums is by disaster-proofing your home. Consider investing in security alarms, carbon monoxide detectors, smoke alarms, and security cameras. Insurance companies prefer insuring properties that are safer than others because it’s less risky on their part.
In addition, preventing break-ins from happening in the first place can save you from filing a claim. While insurance is supposed to safeguard your property, it shouldn’t be abused. Frequently filing claims can actually increase your rates.
#6 Stay on top of regular maintenance
Remember that your insurance is meant to repair or replace your property in the event of a covered peril. Your homeowners insurance policy will not protect you from damage due to negligence.
One good example is mold growth. You will only be able to file a claim if the mold was caused by factors beyond your control. If it was caused by your failure to conduct preventive maintenance, you’re on your own.
#7 Location is key
If you’re still shopping around for a house, you should consider living somewhere that’s not prone to natural disasters (e.g. tornadoes and wildfires). This is because geography can affect how much you’ll have to pay for your premiums. According to the Insurance Information Institution, homeowners from Texas and Louisiana pay the most for their insurance.
Your rate will also be affected by your neighborhood. For instance, properties that are close to a fire department will be cheaper to insure. You can hire a property management company to help you find a suitable neighborhood that’ll keep premium rates down.
#8 Increase your liability insurance
You might be thinking, “What are the chances of a guest slipping and falling on my sidewalk?” You’d be surprised to find that annually, around one million people in the U.S. end up in the emergency room because of slip-and-fall accidents.
Your standard homeowners insurance policy includes liability coverage, however, it may be insufficient. As a rule of thumb, your liability coverage should be enough to cover your net worth. Essentially, it should be enough to cover everything that can be taken from you in a lawsuit, including your home, your car, and your life savings.
More than four million homes in the U.S. are uninsured — that means that four million homes are at risk of losing everything. If you don’t want to be one of them, it’s time to buy homeowners insurance.
If you need more information on choosing an insurance company, don’t hesitate to ask the property managers at Luxury Property Care. We’ve been in the industry for years. We have the experience and expertise to guide you in making informed decisions about your home.