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Homeowner
Insurance
Homeowner
Insurance
Where to look to save bucks on your homeowners'
insurance!
It's
costly, confusing, and unrewarding, until you have to use it. Often
that's when you often find out whether you bought the right coverage
from the right company. But it's better to be sure before you ever file
a claim.
We will show you how to purchase
peace of mind.
What do I need to know?
You're a statistic. To an insurer, you're not a
person; you're a set of risks. An insurer bases its premium (or its
decision to insure you at all) on your "risk factors," including your
occupation, who you are, what you own, and how you live.
What is the value of your home? Before you choose a
policy, it is essential to establish your home's replacement cost. A
local builder can provide the best estimate.
The many different among insurers. As
with anything else you buy, what seems to be same product can have
different prices from different companies. You can save money by
comparison shopping.
Price is secondly, quality is primary! A low price
is no bargain if an insurer takes forever to service your claim.
Research the insurer's record for claims service, as well as its
financial stability.
A little more coverage won’t hurt. A basic
homeowners policy may not promise to entirely replace your home.
Don’t forget to ask for discounts. Insurers provide
discounts to reward behavior that reduces risk. However, Americans
waste some $300 billion a year because they forget to ask for them!
Insurance companies for who you are, when you need to
file a claim! Your idea of fair compensation may not match that of
your insurer. Your insurer's job is to restore you financially. Your
job is to prove your losses so you get what you need.
Before you file a claim, make sure you have the facts!
Keep your policy updated, and reread it before you file a claim, so
there are no surprises.
Why does insurance costs
so much?
You are judged not only on your record, but also on your
demographics
.Risk:
That’s what the insurance companies are looking at!
To an insurance company, you are a collection of risks. Your sex, your
age, your marital status, and what neighborhood you live in all
contribute to an insurer's prediction of whether you'll file a claim.
If, for example, you are a homeowner who lives in a coastal area prone
to storms, or a rural region far from fire stations, you are judged to
be a higher risk because people in those situations have tended to file
more, and more expensive, insurance claims.
The good news is that all insurers don't price the same risks
identically. While insurers are highly regulated in many states, they
still operate as competitive businesses, focusing on certain markets
and avoiding others. What's more, some operate their businesses more
efficiently than others, passing on the savings to consumers.
That means you may be able to save hundreds of dollars a year by
shopping regularly, even if your insurer rewards long-time customers. A
great quote from a new carrier may trump the loyalty card.
In the following sections, we'll look at some sensible ways to find the
best coverage, whether you live in a mansion or studio apartment.
How to Value your home
Know how much insurance to buy.
First,
you need to determine the cost of rebuilding your home.
Insure your home for its replacement cost, that is the amount it would
cost to rebuild it if it were totally destroyed. That means determining
the average local building cost in your region, and applying it to your
home's size, style, and quality of construction.
Your best resource for this is a builder. For a flat fee, you may be
able have a local contractor go through your home and provide an
estimate. Try to find someone who builds individual, custom homes that
don't benefit from the economies of scale that tract homes offer. If
you want the same antique moldings, stone fireplace and
plaster-and-lathe walls as before, make sure the builder takes that
into account. Otherwise, the estimate may reflect less costly modern
materials.
If you can't get a builder, you can try a few Web sites that will allow
you to quickly estimate your rebuilding cost. You'll need to estimate
the exterior square footage of your total living space, excluding
basement. You'll also have to guess at the construction quality of your
home. Try the Home Rebuilder
Tool.
You could also invite an insurance or real estate agent to your home.
An agent who visits your home can eyeball the construction quality, and
point out any special features. If you deal with a direct marketer (a
company with no local agents), you can better ensure proper coverage by
accurately reporting your home's details, like built-ins, antique wood
and glasswork, upscale kitchen appliances, marble bath tile, etc.
Tips for getting the
proper home insurance coverage.
Making the right choices for your homeowners' insurance.
Just
as there are different home styles, insurers offer a menu of different
policies. For the majority of single-family homeowners, the most
appropriate policy is the HO-3, sometimes called the special policy (in
Texas, for some reason, it's known as the HO-B). It insures all major
perils, except flood, earthquake, war, and nuclear accident.
You'll need deep coverage, up to and including 100 percent of your
home's replacement cost. By insuring at, say, 90 percent, you're making
the reasonable bet that your home won't ever be a complete loss. That
may be a reasonable bet. The basement usually remains intact almost
regardless of what happens to the rest of the house. Still, victims of
the devastating Oakland Hills, California fire in 1991 witnessed the
destruction of even their basements. If you want to play it safe,
insure at 100 percent.
Insurers generally cover a home's contents up to between 50 and 75
percent of the home's value. Make a list of your home's contents for a
more exact estimate of your needs. That also provides written record
that's useful when you file a claim. The industry-sponsored Insurance Information Institute
provides a useful inventory.
You'll also have to pick a deductible, which is the amount you pay
yourself before the insurance kicks in. The higher you go, the more
you'll save.
Buy the guarantees.
Traditional guaranteed replacement cost coverage promises to pay
whatever it takes to rebuild your home, even if it costs more than the
original limits you purchased. That's crucial in the event that labor
and building costs balloon after a major disaster. In many states,
large insurers now cap the guarantee at 120 to 125 percent of purchased
limits.
Your safest bet is to seek a company with no cap. However, if you've
properly valued your home's replacement cost, the caps shouldn't scare
you. It's unlikely that building and labor costs will go up to more 120
percent of your home's insured value.
If it's not built into your policy, ask for replacement cost coverage
for your home's contents. Without it, you'll end up with just the
depreciated value of any object that's damaged or stolen.
Get these important coverage’s, too.
Inflation guard. This option annually increases your
premium at the rate of local building cost inflation.
Ordinance-and-law coverage. This rider, which covers
the costs of bringing your home into compliance with current building
codes, is a must if your home is more than a few years old.
Limit your liability.
Your homeowner's policy protects against lawsuits for accidents that
happen on your property. It also covers you if your dog bites someone.
You might also consider umbrella liability coverage, which is
additional coverage over and above your regular homeowner's liability
limits.
Consider these options:
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Your homeowners insurance policy also
provides for living expenses if you're displaced;
replacement of structures such as garages and sheds; and
limited medical coverage for someone injured on your
property. Don't buy more than the minimum offered. Depending
on your situation, however, several other coverage's may be worthwhile:
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Floods Floods aren't covered by ordinary
homeowner's insurance. Flood insurance is available through the Federal
Emergency Management Agency. In California, you may need earthquake
coverage; check www.insurance.ca.gov for a list of insurers who provide
it.
Home business coverage Business property worth more
than $2,500 isn't covered by a homeowners policy, so buy a rider or
separate policy to fill the gap. Business liability coverage must be
purchased separately, too.
Riders for valuables A standard policy provides
only minimal coverage for antiques, collectibles, furs, silver, jewels,
cameras, computers, musical instruments, and firearms. For these, you
need separate coverage, called a rider.
Picking an insurance
company that will treat you fairly
Getting the right coverage without burning a hole in
your pocket.
Cast
a wide net.
First, check what's out there. Get quotes from at least four carriers.
Try a free database such as InsWeb,
which offers quotes from up to 8 insurers, or Quicken InsureMarket, which
provides up to 16 quotes. The larger the database, the better.
Try these options.
Companies like State Farm and USAA that deal directly with consumers
without using independent agents are called "direct writers". In
theory, they can pass on their savings by eliminating the middleman.
Read your junk mail. Direct marketers like Geico and Progressive Insurance Co. save
on overhead-- and pass on the savings-- by marketing by phone, mail, or
the Internet.
Let your state be your guide. Insurance departments
in 23 states offer on-line shopping guides for homeowner's insurance.
Your state's guide may identify little-known companies with competitive
rates. Insurance News Network can
link you to your state guide. (Illinois residents will have to go
directly to the state Web site.)
Look at service.
No discount in the world will make up for slow claims processing, so
find out as much as you can about a company's service before you sign
on. Consumer Reports
periodically publishes service ratings for large insurers. You can also
ask a representative about a company's claims turn-around time; a
shorter turn-around is an indication of better service.
Focus on financials.
Nine insurers went belly-up following the unprecedented damage wrought
by 1992's Hurricane Andrew. The 23,000 affected customers waited at
least six months for a check from the state's insurance guaranty fund.
For that reason, it's wise to look at the financial ratings of your
home insurer. Ask the company for that information, or check out one of
the financial ratings services on the Web. An A rating or higher from Standard & Poor's or
an AA ranking or better from Moody's
Investor Service is a good indicator of strength. Weiss Ratings, the most
independent of the ratings services, and arguably the most stringent,
publishes a list of the currently weakest companies.
As a last resort, there's your state.
Unfortunately, if your home's in a hurricane zone, you may be stuck
with just one expensive option, your state-sponsored high-risk pool.
But try shopping again a year from now. Private insurers are
continually looking for new ways to cut up the market, and one
company's black mark is another's business opportunity. Progressive Insurance Co., for
instance, has thrived by insuring people and property that other
carriers won't touch.
Some states provide assistance, either shopping help or special
coverage for homeowners who can't find insurance in urban or vulnerable
coastal areas. Check with your insurance department for details.
Filing claims on your
insurance policy
Homeowner’s insurance is a product you buy, but hope
never to need
.The
company you've paid to protect you can become your adversary.
While it's the insurer's job to restore you financially, it's your job
to prove your losses. And your perspective on what's fair compensation
won't always jibe with your insurer's.
When to hire help
The more information you can provide on your claim, the more likely
you'll get your due. If you've taken the steps outlined in this lesson,
you shouldn't need outside help in filing your claim. The insurer will
send an adjuster to assess what was lost, stolen or damaged, and offer
a settlement to replace or rebuild. Independently, you should get three
estimates from local contractors whose reputations you've researched.
But if you've faced a very big, traumatic loss and don't feel confident
going it alone, consider hiring a public adjuster licensed by your
state to walk you through the process.
Typically, they take between 5 and 15 percent of the settlement.
Because the public adjuster works for you, he or she has no obligation
to reduce costs for the insurer.
Twelve states, Alabama, Alaska, Arkansas, Delaware, Idaho, Maine,
Nebraska, New Mexico, North Carolina, South Carolina, Texas and Wyoming
don't have licensing laws that apply to public adjusters. But you can
obtain the names of public adjusters in every state who have passed the
voluntary certification process sponsored by the National Association of Public Insurance
Adjusters.
Information is the best protection
Whatever your claim, your best protection is good records. Record your
version of the event; take photos, if possible. Get the police report.
Call your insurer as soon as you're able, and keep notes of all related
conversations. Track resulting medical, home-care, baby-sitting, or
housekeeping bills, since some policies cover a portion of those costs.
Keep track of living expenses if you're forced to live elsewhere
temporarily.
Read up on your policy…
Truth be told, you'll be most satisfied with your settlement if you
know in advance what's covered. That means eyeballing your policy now.
Pay particular attention to the exclusions section, which, as the name
implies outlines what's not covered.
Why subject yourself to such torture? An insurer's definitions can make
the difference between comfort and calamity. Check out the declarations
page, which outlines the limits of your coverage’s. Coverage D of the
homeowners policy, for instance, outlines how much an insurer will
cover if you have to relocate temporarily. Does your insurer pay up to
10 percent of your home's insured value, or offer to pay "reasonable"
expenses over 12 to 24 months?
Finally, update your policies regularly. Inform your insurer of
improvements and additions to your home, including redecoration of
$5000 or more.
Homeowner
Insurance
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