How to Shop for Homeowners Insurance: 6 Helpful Tips

Thinking of shopping for homeowners insurance?

What you don’t about how to shop for homeowners insurance know could cost you!

Consider the classic scenario: You receive a renewal notice from your current homeowner’s insurance carrier, and the rate has increased. Frustrated, you begin to entertain bids from other providers, looking to save money over what you presently pay. Thus begins the time consuming process of comparing quotes and companies.

Granted, finding a competitive rate on your homeowners insurance is important, however I would pose a few questions:

• How much time do we spend considering not just price, but coverage as well?
• What about the agent? Are they looking out for our best interest as a client? Or simply looking for the sale?
• If we are saving money, are we receiving comparable (or better) coverage than we had?

I think many of us would agree that when insuring one of your most valuable assets, your home, there should be a balance between a competitive price offering and the breadth of coverage that you receive.

When considering a new insurance provider, ask yourself a few questions:

• What type of policy do they offer?
• What are the exclusions in the policy?
• How are they rated in terms of claims and customer service?
• What is the company’s financial rating?

You wouldn’t go out and buy the least expensive television without doing a bit of research would you? Or a buy a car without “looking under the hood”? Insurance should be no different! After all, the purpose of insurance is to provide protection in the event of a loss, and it is important to make sure you get what you pay for.

Here are a few key items to consider:

How to Shop for Homeowners Insurance

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1. Not all homeowners insurance policies are the same

Whether it is an HO-A, HO-B, HO-3, or HO-5 policy, not all homeowners insurance is the same. Read your policy carefully to determine what specific exclusions exist. If considering a new carrier, ask for a copy of the policy to compare to your current provider.

2. What are the most noticeable differences?

All companies cover the basics: Hail/Wind; Fire; Theft; Vandalism; Smoke Damage; etc; but, what items are sometimes excluded? What coverage items should you specifically look for?

Here are a few:

• Water Damage-Does the company cover sudden and accidental water damage? If so, are there limitations?
• Water/Sewer Backup-does the company cover back up through a sewer line?
• Slow Water Leak-if I notice a leak in my home that may have been going on for a while, is this covered?
• Foundation-what happens if I have a problem with a water leak under my foundation?
• Mold- Does my current carrier provide coverage for mold remediation, or damage resulting from mold?
• Replacement Cost for Contents-Will my belongings be replaced with like/similar kind and quality, or will the claim be depreciated out based on length of ownership?

3. Not all homeowners insurance policies are rated the same

Most insurance companies use a variety of rating variables to determine what to charge for insurance, and no two policies (or companies) are exactly the same.

Key items that determine how much insurance costs include:

• When your home was built (discounts for newer construction)
• Security features-do you have a monitored alarm system? Is your home wired for such a system?
• Construction type-is your home brick or frame construction?
• The county you live in (determined by your zip code)
• Distance from a fire hydrant/fire station
• Prior claim history
• Credit
• Do you also insure your automobile with the same carrier (multi policy discount)

4. Why do they check my credit? What does this have to do with insurance?

Most major insurance companies use your credit score as part of the rating process. This does not mean that your credit report is pulled, as would be the case if you applied for a vehicle or home loan.

Rather, specific credit data (such as credit score, payment history, length of credit, number of open accounts) is used as part of the rating process in order for an insurance company to compile a risk assessment profile. This data is used by insurance companies as an indicator of financial stability, as well as a probability variable in a person’s likelihood to file a claim.

5. How do I know that I am getting the most value for my insurance dollar?

An independent insurance agent can offer quote comparisons through a variety of different insurance providers. An independent agent is not an employee of that respective company, but rather represents that company, along with many others. Speaking with an independent agent gives you the option of gathering multiple quote comparisons at once. Rather than calling several companies for quotes, imagine the convenience of getting independent quotes through as many as eight different companies with one phone call.

Most people generally think of 2-3 insurance companies when shopping for insurance. My advice would be the take the process a bit further. Call an independent agent, and let them do the work for you.

6. How will I be treated in the future?

Do your homework. Ask a friend or neighbor who they use for insurance. What has their experience been? Do they have someone they could recommend?

If you are considering coverage with a specific carrier, visit their website. How are they rated financially? What do other people say about insuring with them? How are they measured in terms of claims service?

By now I am sure you are thinking: these are all great ideas, but who has the time?

Here are a few helpful links to assist you in the process:

• Texas Department of Insurance/Office of Public Insurance Council-compare companies and coverage side by side to analyze differences. www.opic.state.tx.us
• AM Best- check a specific company’s financial rating, read about company related events. www.ambest.com
• JD Power-see how insurance carriers match up to one another in terms of claims service, customer service, and other factors www.jdpower.com/insurance

While everyone would agree that shopping for insurance is not at the top of your “to do” list, asking the right questions, finding the right agent, and taking the time to do a small amount of research will ensure that you find the right company, the right policy, and the right price for you.

Remember, saving money is great, but make sure you get the most value for the savings.