Finding the best home insurance deal isn't rocket surgery or even brain science. In fact, buying a policy is pretty much like buying anything else. You look at the price tag, you consider what you need from the goods you're buying, you see how closely the ones you're examining meet those needs, and you choose the one that that delivers the best price/performance ratio.
The main difference is the consequences if you make the wrong choice. People spend hours online comparing, say, home theater systems, even though differences in performance are usually minimal, at least to the untrained eye and ear. But they resent spending a much shorter time finding the best and most affordable way to protect their most valuable assets (their homes and contents) even though picking the wrong one could have a disastrous and literally life-changing outcome. Go figure.
So here's what you need to know to find, recognize and buy the best home insurance product for you in 2017.
Your Price Point
If you're a homeowner with a mortgage, you're going to be obliged to insure your property. And that compulsion can make you feel resentful, and inclined to cut costs to a minimum.
But, with this sort of insurance, the question you should ask yourself isn't "How much can I afford to pay?" It should be "Can I afford to pay too little?" Underinsuring your home can come back to bite you if you later have to make a claim.
So take some time to think about the coverage you need. The Consumer Reports website quotes data from Marshall & Swift/Boeckh, a company that tracks the costs of rebuilding. It reckons 61 percent of homes in America are underinsured. That's 80 million properties, and the average shortfall in their coverage is 18 percent. Imagine that: Your $200,000 home burns down, and you have to find the 18 percent shortfall (that's $36,000), plus any "deductibles" in your policy. (Deductibles are dollar amounts or percentages you agree to contribute toward any claim you make.)
As with other goods and services, you often get what you pay for when you buy homeowners insurance, and too-good-to-be-true quotes should be a red flag. But there are bargains to be had, and you can make significant savings if you shop around for the best home insurance deal.
According to the Insurance Information Institute (III), your homeowners coverage breaks down into five important components, any of which can be triggered by a range of hazards:
- The main structure – Repairing or rebuilding your home
- Secondary structures – Repairing or rebuilding separate buildings and facilities, such as detached garages, pool houses, other outbuildings, decking, fencing and so on
- Contents – Repairing or replacing lost, stolen or damaged personal possessions
- Liability – Protects you from claims arising from death, damage or injury caused to visitors', neighbors' or passersbys' person and possessions
- Loss of use – Some policies will pay for hotel rooms or rentals when you can't occupy your own home due to a covered risk
You need to make sure that the policy you choose provides the right levels of coverage for each of these. Too high of limits may mean you're paying too much for your insurance, while too low ones could see you seriously out of pocket if you have to make a claim.
Talk to your insurer about your needs, in particular, asking if when you build an addition, upgrade your kitchen or make other expensive improvements, add new outbuildings, install a pool, or acquire new possessions and valuables how should your policy be adjusted. Insurance companies normally let you tailor your coverage, though expect to pay more for greater levels of protection.
Pay particular attention to any valuables you have. Most policies have caps on the amounts payable for categories of these, so if you have individual items or collections of significant worth (jewelry, art, antiques and so on), you may need to ask to raise those caps. For the best coverage, you can "schedule" (list) items individually and specify their value.
If you rent rather than own your home, your landlord should normally insure the building structure(s) where you live, but you still need to protect your possessions – and yourself against liability claims. Look out for renters insurance policies.
Too many consumers buy insurance solely based on price.
You're relying on your insurer to pay out when you make a claim, so you want to be sure it's in robust financial health. But you also want it to pay out quickly, so you need one that handles claims efficiently. Remember, you may be making a claim when you're at your most vulnerable – you might, God forbid, even be homeless – so having a company that doesn't give you the runaround or take ages to cut a check is vital.
The internet makes it easy to find out a lot about an insurance company in seconds. Ratings agency A.M. Best lets you search for financial information on your company. And you can make further checks with the Better Business Bureau and often with your state's insurance regulator. If you use online message boards and chat rooms, remember that even the best company that serves a large number of consumers will have some dissatisfied customers, so don't get too spooked by occasional horror stories. J.D. Power publishes an annual league table of customer satisfaction scores for home insurers, but a company's absence from these may not necessarily mean much.
Discounts and Deductibles
Discounts can make a huge difference to the sum you end up paying for your coverage, so it's important to make sure you're getting all the ones to which your due. In particular, check whether you're entitled to a group discount that's been negotiated by your employer, union, church, club or other organization to which you belong, because these can be among the most valuable of all.
You can often get another serious discount by "bundling" your home and auto (and maybe other) insurances. Bundling is when you take more than one policy from the same company.
But also, once you've chosen an insurance company, talk to a call center agent and ask him or her to run through all the possible reductions you could be due. You might shave off a bit more from your bottom line.
It's very important you retain your focus on that bottom line. Some companies quote high top-line figures and then dangle flashy discounts, while others start low and reduce only a little. Sometimes the second sort provide the better deal.
Deductibles are a different sort of discount and can be a great way to reduce your premiums. But, in effect, you're taking back some of the risk from your insurer, so be aware of what that involves. You need to be comfortable you can afford your chosen deductible every time you make a claim.
Perhaps Your Biggest Saving
Your insurance needs and risks are constantly changing. And the insurance market is constantly changing, with companies becoming more and less competitive all the time.
This means the policy you have today may not suit you best or remain a good value tomorrow. And the only way to make sure you keep getting the best home insurance deal is to shop around for quotes every time you amend or renew your policy.
To discover how to assess those quotes, read How to Compare Home Insurance Quotes.