When consumers compare homeowners insurance, they tend to focus too much on the price and discounts without giving much thought to other aspects, such as the company’s customer service, claims processing, terms and conditions, financial stability and solvency.
Take note that no discount and rebate programs can make up for poor customer service and inefficient claims processing. Consequently, there is a myriad of factors that you should take into account before you pick out your homeowners insurance policy.
To further ensure that you save money without facing the risk of being underinsured, it is also important that you know the types of coverage that suit your needs based on the value of your home and personal belongings, your other insurance policies, your budget and financial status.
To reiterate, when scrutinizing the roster of home insurance policies in the market, price should not be the only factor that you should look into. You should also consider other critical variables, such as the company’s reputation, business practices, and consumer satisfaction rating, among others.
When selling themselves through ads, almost every home insurer highlights their reliable and cheap coverage options. While this factor plays a critical role when you select a provider, be sure that they also have efficient and quick claims handling processes and good customer service.
Simply put, look for a home insurer that follows a customer-centric approach.You can check customer satisfaction ratings from JD Power and the consumer’s complaints ratio and data from the National Association of Insurance Commissioners or NAIC.
The median complaint ratio from the NAIC is always 1.00, which means that half of home insurance policies providers are above this ratio, while the rest are below it. Numbers lower than 1.00 are better, but higher than this means a company has received more complaints than the median.
Most companies pay out within a month of you filing your claim, although it still varies from state to state. Also, certain factors can affect the speed of the claims process, such as evidence gathering and negotiation. Nevertheless, many insurers review how fast they pay because they can use this information to market their home insurance policies to potential customers.
According to surveys, delays in claims is one of the most common home insurance complaints. Again, refer to JD Power if you want to know the customer service satisfaction ratings of some of the largest insurers.
It is a sacrosanct rule to choose a home insurer that boasts financial stability and solvency, allowing it to pay you a claim, particularly after a widespread catastrophe, such as a hurricane, where it has to meet its financial obligations to a huge number of policyholders.
When choosing an insurance company, refer to Standard & Poor, Fitch, or AM Best for their rating. Though many industry experts suggest that the most trusted ratings firm is Weiss Ratings because providers do not pay it to rate them and so there is no conflict of interest.
You can also visit online forums if you want to know policyholder’s first-hand experience of different insurance companies.
Surveys have shown that about half of homeowners are underinsured as many of them would only choose to be insured for repairs, which is not enough for catastrophic damage that requires rebuilding a house from the ground up.
Furthermore, most lenders only require the minimum dwelling coverage, which is based on the selling price of the home. This sometimes results in a home being either over-insured or underinsured. In a state like Massachusetts where house prices tend to be higher, insuring your property based on the selling price would probably cause you to pay additional insurance that you don’t need. Whereas, in a state like Florida where house prices have plunged, your property is likely be underinsured if the coverage is based on the selling price. After all, the lenders are mostly concerned with protecting their investment in the event of a total loss. This means that your personal belongings such as electronics, furniture, appliances, jewelry, clothes, etc. might be either over or underinsured by your homeowners insurance policy.
Be sure to understand your coverages limits to prevent costly mistakes and “surprises” in the event of catastrophic damage. Hence, you must know what most standard home insurance policies cover, which is explained below:
- Dwelling coverage – this covers the damage to your home. Typically, the home insurer pays for the repair, although you have to make sure that this coverage is also sufficient to cover the cost of any potential rebuild.
- Other structure coverage – this covers damage to other structures on your property, such as the garage, fence, or shed, among others.
- Loss of use coverage – if you have to move out while your house is being repaired or rebuilt after an insured risk, this coverage pays for your additional housing and living expenses (such as meals).
- Personal property coverage – this covers the personal items in your home—e.g. appliances, furniture, electronics, sporting goods, clothes, etc.—that are damaged by a covered cause.
- Personal liability insurance – this protects your at-risk assets by paying for the cost of injury and damage for which you are legally held liable. Contrary to popular belief, this coverage applies even if the person who sued you experienced injury or damage outside your property. Meanwhile, you may want to increase the coverages limits if you have significant assets.
“Medical payments to others” is a less expensive version of personal liability insurance since it only covers the minor medical bills of anyone injured in your house, such as slip and fall, burns, cuts, etc.
A standard homeowners insurance policy does not cover weather-related flood damage, which can be a costly mistake if you live in a floodplain or near an area with large bodies of water. However, you may want to drop this coverage if you reside in a very low risk neighborhood, allowing you to save money.
But if you require flood insurance, it can be purchased through the National Flood Insurance Program.
Many homeowners also think that personal property coverage reimburses the cost of replacing valuable items in their house without realizing that it has coverages limits or, to be more precise, a specified dollar amount. Hence, you may want to purchase “floater” coverage to insure high-priced items such as jewelry and art pieces.
And lastly, a standard homeowners insurance policy does not cover wear and tear and mechanical breakdowns. After all, it is mainly put in place to protect you from sudden and unexpected events such as fire, catastrophic weather events, and flood.
The cost of mechanical breakdowns, e.g. water heaters, furnaces, and important home appliances, is also not covered by a standard homeowners insurance policy. These systems fall under the umbrella of general maintenance (a separate coverage that comes with a higher premium), which also covers the cost of damages to plumbing, certain roof replacements, garage doors, and electrical systems.
Now that we have explained the non-price factors that you have to consider when choosing a home insurance company, we can delve into issues involving the cost, discounts, and rebate programs. The idea is to choose the cheapest homeowners insurance policy from a reputable provider.
When shopping for home insurance policies, a good rule of thumb is to make sure that you compare rates from at least three reputable companies, and that the deductibles, coverages limits, and coverage options are all similar.
While many insurance providers give loyalty discounts to policyholders who stay with them for five years and longer, it still pays to shop around. According to a recent survey, about one-third of homeowners don’t compare rates to make sure they are getting the best deal.
It is prudent to compare quotes from multiple companies whenever your policy is up for renewal, or at least get different rates every 2-3 years. To further save money, be sure that you also review your policy periodically, which enables you to drop coverage that you no longer need and only pay for the ones that will prove useful.
It may come as a surprise, but several surveys have shown that homeowners insurance policy rates vary significantly by company and zip code. For instance, a large home insurer might be asking for a $150 monthly premium, versus $75 with a regional company that offers the same type of coverage and deductibles. However, you should still always look at the claims processing, financial solvency, and consumer reports to pick out the best provider.
Each home insurer has its own discount and rebate programs and so it pays to compare multiple policies to make sure that you save money without being underinsured. Meanwhile, the list below explains the most common discounts for “good homeowners”:
- Multi-policy discount – when you bundle your homeowners insurance policy with your auto insurance, you can expect a 10-15 percent discount on average.
- Claim-free discount – if you haven’t filed a claim for at least 10 years, you may qualify for a huge discount (up to 20 percent) because most insurance companies see you as someone who is “cheap” or “less risky” to insure.
- Group rebates – if you are a member of certain professional or alumni associations, or employed by a business that is included in a group savings network, you may enjoy an exclusive group saving.
- Newer homes – newer homes and newly renovated abodes are generally cheaper to insure than older homes (about 25 percent lower) because their modern electrical panels and wiring, plumbing, pipes, furnaces, and foundations can reduce the risk of fires, shortages, and water damage.
- Safe home discount – if you install smoke detectors and other fire alarm systems, security systems, deadbolt locks, fire extinguishers, and other features that improve the safety and security of your home, you may enjoy a “safe home discount” as most insurers reward consumers who make extra effort to eliminate or control risks.