Getting the most for your insurance dollar
Reduce the Cost of Homeowners Insurance
TDS Reader Solutions
Reduce the Cost of Homeowners Insurance
What are some good ways to reduce the premium on homeowner's insurance? I told 4 agents what coverage I currently had and asked for quotes. I currently have home insurance with a nationally recognized insurance company. They give all sorts of discounts, yet all the quotes I received were less than what I am currently paying. I have had no claims.
One of the quotes was way less than what I currently pay. I have never heard of a couple of these companies who are sold through agents who deal with a number of insurance companies. Just wondering if one should stick with a big nationally recognized company and how these other companies which I'm sure are big companies, too (just don't hear about them) are able to give such low rates for supposedly the same coverage?
An Agent's Cost Tips
It is best to check rates for your insurance (house, car, etc.) biyearly or yearly. Most companies rates change within this time period and what may have been the best rate last year may not be today. Companies big and small offer discounts for various reasons such as loss free, good credit, smoke alarms, security systems, multi-policies (auto, car, business, recreational vehicles, rental properties, etc.) that can add up to big savings. You can also save money by carrying a higher deducible, if you carry a $250 deductible ask for the price difference for a $500 deductible. All insurance companies must follow rules for the states in which they sell, so going with a small company should provide you with coverage that your state requires and maybe more.
It is very important that you read your policy, so you know what coverage you already have included in the price that your paying and the coverage you pay extra for. For example, some policies include coverage for backup of water or sewer, others charge extra for this coverage. If you live in house with a finished basement then this is a coverage that may be important for you to have.
My experience as an agent is that the small companies are just as good as the big ones. Rates fluctuate often and the reason for that is the amount of claims the company had the year before. If the companies are paying out on claims in excess of what they had predicted they would, then that's a sure sign that that company's rates will increase the following year.
Remember to shop around and ask questions. Even if you don't understand the basics of your policy, your agent should be able to assist you in your needs.
An Ohio Agent
Be Informed on Home Insurance
I discovered one way to save on any kind of insurance. I have all my insurance with a major company and would prefer to stay with them. So I went online and got several quotes, took those quotes to my insurance agent, and he met the lowest!
One way to check out the companies that you are getting quotes for and have never heard of is to contact your state department of insurance. You want to make sure you are going with an A+ company. Some companies give lower rates because they eliminate the agent. They are direct writers. You will usually save money that way, but if you eliminate the agent you need to be prepared to not get the same kind of service. You will never get to talk to the same person when you call and they may not have as quick a claim service if you were to ever have a claim.
One way to lower your rates at your current company is to check into increasing your deductible. If you are happy with the company you are at, you should probably stay there. Sometimes increasing your deductible can save you quite a bit. Also, ask your agent to run a replacement cost estimate to make sure you are insuring your home for the correct amount.
If you carry your auto insurance with the same company you should also get an additional discount, or if you have an alarm system. Make sure you are getting all the discounts possible.
Coverage as Important as Costs
Having been in the insurance business for 28 years, I will attempt to answer some of your inquires. First of all, if you own your own home, there are 3 different forms of coverage primarily that can be purchased. There is a HO-1, a basis form of coverage, and usually only used for low valued homes which still qualify for homeowners. There is a HO-2, a broader form of coverage, but still not the best you can get. The best coverage form is HO-3, which provides the broadest coverage. You first need to determine that each agent is quoting the same coverage form, same limit of coverage on the home, and same liability limits. This will allow you to compare "apples-to-apples".
You can usually achieve a substantial discount on your homeowner's coverage if you carry your auto coverage with the same insurance company. Note that I said insurance company, i.e. St. Paul, Nationwide, etc., not agent. The company determines the amount of discounts, and agents have nothing to do with the ability to apply or not apply discounts.
If you have quotes from insurance companies that are not familiar to you, ask the agent for a "Best's Rating". Accept no rating less than an A+. This rating determines the financial stability of the company, and the ability to pay claims should a major disaster occur. If all companies are quoting "apples-to-apples", and I would bet the considerably cheaper one is not, and the "rating" of the company you are considering is A+ or better, then being in the same situation, I would move the coverage at renewal date.
Some items which can affect your premium:
- High liability limits
- Addition of liability coverage for rental properties
- Jewelry, fur, or other special items scheduled separately on the policy
- Replacement cost coverage on contents (this is a valuable coverage, and you might want to have your agent quote it)
- Home office/business exposure
- Home being located in a small town, with voluntary or small fire department to respond
- Secondary residence premises
- Adverse loss history (not applicable in your case)
Also, be sure and check on payment options with both companies. Some offer better suited payment plans than others. This may affect your decision.
Be Sure to Compare "Apples to Apples"
I am an insurance agent for an independent agency in Iowa. From my experience, that some "big name" companies can sometimes be the most difficult for the money. In our agency we write coverage with many different companies. We strive to have only the best-rated companies to have contracts with. This means that you should check the AM Best ratings for the companies should probably be at least an "A" or "A+" rating. This is important over the name.
You need to take into account the kind of service you receive when you have a claim. Ask questions like "Is there a local adjuster, or at least one close enough to take care of my claim when I need help?"
Also, there is a difference between Independent agents and Captive agents. Independent agents that write for many companies try to find the best market for you when you ask for a quote. Not just what is cheapest, but what am I getting for my money. Be sure to get "apples to apples" quotes when you call around.
Be sure they are getting the proper value of your home. Not what you can sell it for, but what the home would require to be rebuilt at today's cost. This is replacement cost. This is very important in the event of a total loss. Be sure you are getting high limits of liability and medical pay. Are you scheduling your valuable items at additional cost? This can be beneficial for rings, bikes, furs, etc. Are you getting water/sewer backup, coverage for refrigerated products, there are a lot of things to think about.
Sometimes people get so caught up in price that they forget that just like anything else, you pay for what you get. Same as if you are buying a car. Sometimes it is best when shopping around if you have the time to take your current declarations sheet into several different agencies and have them work from that. That way you are at least getting equal coverage and maybe they have packages to help you get more coverage.
Don't forget that most companies will give you a "longevity discount". The more years you stay the more of a discount you will get. You can also benefit from having both home and auto with the same company for a multi-policy discount.
Not Happy With Smaller Companies
I have a "lesser known" insurance company that has the insurance on my house and truck and my son's car. If I could have my choice I would go with a company that is bigger and much better known. I have had two claims on this house so far in the six years that I have owned it and each time I end up doing all the "leg work" that normally my agent should be doing. I am thinking about changing companies after this latest claim and going to something much bigger and dealing with agents that know how to be an agent and get claims done correctly. I am disappointed with the smaller no name insurance companies. I think in the long run instead of saving me money they are costing me money.
Good Idea to Video Tape Contents
Many people think that going with a nationally recognized insurance company means faster or better claim service. This is not always the case. You should always shop your insurance for the best rate and ask the agent what the company's AM best rating is. If the rating is not A, then do not accept that coverage.
A couple of ways to receive credits on your policy are as follows:
- Put your auto and homeowner's with the same company and you should receive a credit on both policies.
- Put in an alarm system. The amount of credit varies by company so beware of how much you put out compared to the credit you will receive.
- Some companies give credits for non-smokers.
- Some give credit for going 3 or more years without a loss.
Be sure to video your entire house. Open all drawers (even if they are messy!) Pull each item in your closet out as you pan through it, open all your dresser drawers, video tape underneath sinks, in linen closets, storage closets, china cabinets, silverware & utensil drawers, anywhere at all that may be something you would need to remember in the event of a fire. If a fire or even a burglary occurs, most people are too upset to remember all the big items, let alone how many pairs of socks and jeans they owned. But when it comes to claim adjusting, the company will want those type of details and if you video, you provide them with the recording and continue in your own assessment without worrying about forgetting something. Just be sure to keep the tape in a fire safe box!
Updated December 2017
Take the Next Step:
- Find out why you need a home inventory for insurance purposes.
- Use this handy cheat sheet from a 30-year veteran of the auto insurance industry to get the best auto insurance deal that you can.
- The mortgage refinance window could close for many people this year. Consider these 5 reasons to refinance your mortgage while you still can.
- Get control of your financial life. Subscribe to Financial Independence, a free daily email that provides you with the tools to help you gain that control and achieve financial independence. Subscribers get a copy of Are You Heading for Debt Trouble? A Simple Checklist for FREE!