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Home Insurance
The price you pay for your homeowners insurance can vary by hundreds of dollars,
depending on the insurance company you buy your policy from. Here are some things
to consider when buying homeowners insurance.
1. Shop Around
It'll take some time, but could save you a good sum of money. Ask your friends,
check the Yellow Pages or contact your state insurance
department. (Phone numbers and Web sites are listed
here.) National Association of Insurance Commissioners (www.naic.org) has
information to help you choose an insurer in your state, including complaints. States
often make information available on typical rates charged by major insurers and
many states provide the frequency of consumer complaints by company.
Also check consumer guides, insurance agents, companies and online insurance quote
services. This will give you an idea of price ranges and tell you which companies
have the lowest prices. But don't consider price alone. The insurer you select should
offer a fair price and deliver the quality service you would expect if you needed
assistance in filing a claim. So in assessing service quality, use the complaint
information cited above and talk to a number of insurers to get a feeling for the
type of service they give. Ask them what they would do to lower your costs.
Check the financial stability of the companies you are considering with rating companies
such as A.M. Best (www.ambest.com) and Standard & Poor’s (www.standardandpoors.com)
and consult consumer magazines. When you've narrowed the field to three insurers,
get price quotes.
2. Raise Your Deductible
Deductibles are the amount of money you have to pay toward a loss before your insurance
company starts to pay a claim, according to the terms of your policy. The higher
your deductible, the more money you can save on your premiums. Nowadays, most insurance
companies recommend a deductible of at least $500. If you can afford to raise your
deductible to $1,000, you may save as much as 25 percent. Remember, if you live
in a disaster-prone area, your insurance policy may have a separate deductible for
certain kinds of damage. If you live near the coast in the East, you may have a
separate windstorm deductible; if you live in a state vulnerable to hail storms,
you may have a separate deductible for hail; and if you live in an earthquake-prone
area, your earthquake policy has a deductible.
3. Don’t confuse what you paid for your house with rebuilding costs
The land under your house isn't at risk from theft, windstorm, fire and the other
perils covered in your homeowners policy. So don't include its value in deciding
how much homeowners insurance to buy. If you do, you will pay a higher premium than
you should.
4. Buy your home and auto policies from the same insurer
Some companies that sell homeowners, auto and liability coverage will take 5 to
15 percent off your premium if you buy two or more policies from them. But make
certain this combined price is lower than buying the different coverages from different
companies.
5. Make your home more disaster resistant
Find out from your insurance agent or company representative what steps you can
take to make your home more resistant to windstorms and other natural disasters.
You may be able to save on your premiums by adding storm shutters, reinforcing your
roof or buying stronger roofing materials. Older homes can be retrofitted to make
them better able to withstand earthquakes. In addition, consider modernizing your
heating, plumbing and electrical systems to reduce the risk of fire and water damage.
6. Improve your home security
You can usually get discounts of at least 5 percent for a smoke detector, burglar
alarm or dead-bolt locks. Some companies offer to cut your premium by as much as
15 or 20 percent if you install a sophisticated sprinkler system and a fire and
burglar alarm that rings at the police, fire or other monitoring stations. These
systems aren't cheap and not every system qualifies for a discount. Before you buy
such a system, find out what kind your insurer recommends, how much the device would
cost and how much you'd save on premiums.
7. Seek out other discounts
Companies offer several types of discounts, but they don't all offer the same discount
or the same amount of discount in all states. For example, since retired people
stay at home more than working people they are less likely to be burglarized and
may spot fires sooner, too. Retired people also have more time for maintaining their
homes. If you're at least 55 years old and retired, you may qualify for a discount
of up to 10 percent at some companies. Some employers and professional associations
administer group insurance programs that may offer a better deal than you can get
elsewhere.
8. Maintain a good credit record
Establishing a solid credit history can cut your insurance costs. Insurers are increasingly
using credit information to price homeowners insurance policies. In most states,
your insurer must advise you of any adverse action, such as a higher rate, at which
time you should verify the accuracy of the information on which the insurer relied.
To protect your credit standing, pay your bills on time, don't obtain more credit
than you need and keep your credit balances as low as possible. Check your credit
record on a regular basis and have any errors corrected promptly so that your record
remains accurate.
9. Stay with the same insurer
If you've kept your coverage with a company for several years, you may receive a
special discount for being a long-term policyholder. Some insurers will reduce their
premiums by 5 percent if you stay with them for three to five years and by 10 percent
if you remain a policyholder for six years or more. But make certain to periodically
compare this price with that of other policies.
10. Review the limits in your policy and the value of your possessions at least
once a year
You want your policy to cover any major purchases or additions to your home. But
you don't want to spend money for coverage you don't need. If your five-year-old
fur coat is no longer worth the $5,000 you paid for it, you'll want to reduce or
cancel your floater (extra insurance for items whose full value is not covered by
standard homeowners policies such as expensive jewelry, high-end computers and valuable
art work) and pocket the difference.
11. Look for private insurance if you are in a government plan
If you live in a high-risk area -- say, one that is especially vulnerable to coastal
storms, fires, or crime -- and have been buying your homeowners insurance through
a government plan, you should check with an insurance agent or company representative
or contact your state department of insurance for the names of companies that might
be interested in your business. You may find that there are steps you can take that
would allow you to buy insurance at a lower price in the private market.
12. When you’re buying a home, consider the cost of homeowners insurance
You may pay less for insurance if you buy a house close to a fire hydrant or in
a community that has a professional rather than a volunteer fire department. It
may also be cheaper if your homes electrical, heating and plumbing systems
are less than 10 years old. If you live in the East, consider a brick home because
it's more wind resistant. If you live in an earthquake-prone area, look for a wooden
frame house because it is more likely to withstand this type of disaster. Choosing
wisely could cut your premiums by 5 to 15 percent.
Check the CLUE (Comprehensive Loss Underwriting Exchange) report of the home you
are thinking of buying. These reports contain the insurance claim history of the
property and can help you judge some of the problems the house may have.
Remember that flood insurance and earthquake damage are not covered by a standard
homeowners policy. If you buy a house in a flood-prone area, you'll have to pay
for a flood insurance policy that costs an average of $400 a year. The Federal Emergency
Management Agency provides useful information on flood insurance on its Web site
at FloodSmart.gov. A separate earthquake
policy is available from most insurance companies. The cost of the coverage will
depend on the likelihood of earthquakes in your area. In California the California
Earthquake Authority (www.earthquakeauthority.com) provides this
coverage.
If you have questions about insurance for any of your possessions, be sure to ask
your agent or company representative when you're shopping around for a policy. For
example, if you run a business out of your home, be sure to discuss coverage for
that business. Most homeowners policies cover business equipment in the home, but
only up to $2,500 and they offer no business liability insurance. Although you want
to lower your homeowners insurance cost, you also want to make certain you have
all the coverage you need.
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