When you buy a home, one of the things you're also going to have to buy is homeowners insurance. You won't be able to get a mortgage without it, for one thing, and you'll also want to have it to protect yourself as well.
Homeowners insurance does more than simply cover the structure itself against damage or destruction in the event of a fire, windstorm or other natural disaster. It also covers your possessions in the home, including against theft, provides you with liability protection if someone is injured on your property, and will usually even cover the cost of temporary lodging while your home is being repaired or rebuilt.
Homeowners insurance premiums are typically billed right along with your monthly mortgage payment and the cost can vary widely. While you don't want to be skimp on insurance and be underinsured, you don't want to spend more than you have to either. Here are some of the best ways to make sure you're getting the insurance coverage you need at the lowest price available.
1 - Start with an independent agent
An independent insurance agent represents more than one insurance company and can compare their various offerings to help you get the best deal for your needs. Usually, the best offer they can find you will likely be fairly competitive in terms of price and coverage.
However, you don't want to stop there. Certain companies, particularly larger insurers, don't market their products through independent agents. For those, you'll need to contact them directly. It's a good idea to check with 3-5 providers to get a good sense of the market and what prices are.
2 - Look into discounts
You can often get a reduced rate if you get two or more types of insurance from the same company - such as bundling your auto and home. You'll still be billed for them separately, though.
Various organizations also offer group discounts on homeowners insurance for their members. These include many credit unions, the AARP, various civic groups and the like. You may also be able to get a group discount through your employer, labor union or professional organization.
3 - Compare apples to apples
When shopping for insurance, you want to make sure you're comparing similar products. So make sure the various offers you're looking at feature the same levels of coverage, cover the same situations and have the same deductibles as the other policies, to make sure you're not getting a lowball offer that gives you less coverage.
4 - Adjust your deductibles and coverages
Basic insurance policies are designed to cover what the company thinks a typical homeowner will need, with certain adjustments. However, such a base policy could leave you over- or under-insured in some ways.
Consider the deductible, for instance. A standard policy may come with a $500 deductible, but you may decide that you could afford to pay $1,000 out of your own pocket in the event of a claim. Taking the higher deductible will reduce your premium.
You might also consider your various coverage limits. Many policies cover home possessions at a value equal to 50 to 75 percent of the coverage of the home itself. You might ask yourself if you need that much coverage, particularly if it's the higher figure and you live simply. Be aware, though, that the cost of replacing your furnishings and other possessions can add up more quickly than you expect. It's best to do a home inventory before settling on a figure here.
Another thing to take into consider is add-ons. Add-ons are separate riders included in the policy to cover specific things - for example, jewelry and other luxury items, firearms collections, artwork, musical instruments and specialized hobby equipment may all be covered by add-ons.
In some cases, ad-ons provide coverage for that particular type of loss itself; in other events add-ons may increase coverage above what's included in the base policy. Going through the list, you can often find add-ons you either eliminate or reduce the coverage offered - for example, if you don't have a dog, you might eliminate a rider for dog bite liability and save some money that way.
5 - Special features
Having certain things in your home can reduce your insurance costs. A burglar alarm or sprinkler system, for example, will usually get you a discount, though they can be costly to install. Smoke detectors, deadbolt locks and fire-resistant building materials can get a discount as well.
In an older home, upgrading the electrical wiring can lower insurance costs, although it's expensive to do. Closing off a damaged or otherwise unused fireplace can lower your premium as well.
6- Location, location, location!
If you're still in the process of shopping for a home, where you live can have a big effect on insurance rates. Two adjacent zip codes or communities can have significantly different insurance rates. Costs for individual neighborhoods can vary as well, particularly if one has a higher crime rate.
Proximity to a fire station is another factor insurance companies look at - the closer you are, the better. Another factor is whether your neighborhood is on municipal water and is serviced by fire plugs. If the fire department would have to come out with a pumper truck, that's considered a higher risk factor and would raise the cost of your insurance.
Finally, susceptibility to flooding is another factor. Homes in a flood plain cost considerably more to insure, though flood insurance is typically not included in a standard policy and must be purchased as an additional rider. The same is true for earthquakes, though it's harder to avoid those by simply choosing a different neighborhood if you're going to be living in an area susceptible to them.
7 - Insure for rebuild cost
When buying homeowner's insurance, you generally want to be insured for the actual cost of rebuilding the home itself, rather than the market value of the property. There are two reasons for this. First, the property value includes the cost of the land itself and that won't have to be replaced. Second, real estate prices fluctuate, so the cost of the property could either be significantly higher or lower than the cost of rebuilding.
Both can cost you money. If the property value is higher than rebuilding, you're paying for more insurance than you need, while if home values have fallen and the price is less than a rebuild, you won't collect enough to replace the structure and its contents.
8 - Compare insurers
Finally, you want to size up the various insurers and see what kind of track record they have. There are few things worse than filing a claim and then feeling like you're literally having to pull teeth to collect.
You can check with friends and associates to see what sort of experiences they've had with different insurers, but this usually won't provide a very broad sample. Another way is to check out the ratings published each year by J.D. Power and Associates, which each year ranks over two dozen home insurers on a variety of factors, including customer satisfaction, pricing and claims. Consumers Union, publisher of Consumer Reports, provides their own ratings as well.