How to Compare Homeowners Insurance Companies
Wed Mar 14 2018
Learn how to compare coverage to make sure you’re actually getting the best deal.
Comparing Apples to Apples in Home Insurance Quotes
Home insurance is a necessity for nearly every homeowner, but it’s often an afterthought. The home buying process is stressful!
Deductibles? Other structures? Monthly premiums may be enough for homeowners to simply purchase from a well-known provider and move on with their day.
This strategy is a mistake. Homeowners insurance policies across providers aren’t created equal. Understanding how to compare insurance companies is key to avoiding paying for a policy that doesn’t cover what you need.
This post will teach you how to do just that.
Most homeowners insurance policies include Dwelling Insurance (Coverage A), which covers the costs of repairing your home’s main structure. Home insurance also includes additional coverages (Coverages B-F), such as other structures, personal property, and medical coverage.
Coverage limits are calculated as a percentage of your Dwelling Insurance coverage, which typically range around the following:
- Ten percent for Other Structures Insurance (Coverage B) - This varies widely based on the presence or absence of a detached garage.
- Twenty to forty percent for Personal Property Insurance (Coverage C) - This can also vary widely. Make sure to keep a home inventory and track the valuable items you’d need replaced in the event of a loss.
- Twenty percent for Loss of Use Insurance (Coverage D)
Limits that aren’t related to Dwelling Insurance typically range around the following:
$300,000-$500,000 for Personal Liability Insurance (Coverage E)
$1,000-$5,000 for Medical Payments Insurance (Coverage F)
Comparison is key: Costs vary from state-to-state, and even region to region, for the same provider.
Limits aside, homeowners need to understand that some events aren’t covered at all by their policies. Again, most exclusions are similar across providers (e.g. flood insurance), though there can be significant differences depending on your situation.
Most standard home insurance policies won’t cover the following events or items:
- Additional property structures used for business
- Floods (most often requires a separate policy)
- Hail/Windstorm Damage (most often requires a separate policy)
- High-value items like art, furs, and jewelry
- Pool Deaths
If any of these apply to you, speak with different providers to see how you can expand your policy to cover them. In most cases, you’ll be required to pay a higher premium or deductible in exchange for coverage.
While coverage should be a top factor when comparing homeowners insurance companies, there’s no denying the importance of cost. Homeowners spend on average $1,228 a year on home insurance premiums.
Even if you’re planning on sticking with the same provider after moving out-of-state, it’s worth doing more research. Costs vary from state-to-state, and even region to region, for the same provider. Some providers specialize in specific regions (Kin, for example, specializes in insurance for Florida and Texas homeowners).
When comparing costs, the three factors to keep in mind are deductibles, premiums, and discounts. Let’s take a deeper dive into them.
Deductibles and Premiums
Deductibles are the out-of-pocket costs that homeowners are responsible for paying before the insurance provider steps in. These can vary within a single policy depending on the type of claim being filed. For example, claims filed due to a hurricane may be subject to a higher “hurricane deductible,” as is the case in Florida.
Premiums are the monthly payments made to your home insurance company for your policy. Many factors go into determining your premium costs, including location, personal history, and characteristics of your home (size, building materials, etc.).
The basic rule of thumb is that raising your deductible will lower your monthly premium and vice-versa. In other words, the more money you put up now in premiums, the less you pay when it comes time to file a claim.
While this may sound tempting, every homeowner must realize the risk of a lower premium: in the event of a disaster, you can’t get around paying the deductible. This could put you in a tight spot if you find yourself short of the needed deductible payment for the insurance company to pay the rest.
Homeowners should choose a deductible that’s an amount they’re comfortable paying out-of-pocket in an emergency.
When comparing insurance costs, be sure to ask companies about available insurance discounts you can take on your policy. Home features, personal lifestyle, and other factors are used to determine your qualification. Available discounts may include:
- New Home Discounts: Some companies may give you a discount simply by purchasing a policy when moving into your new home.
- Home Safety Discounts: Having certain home safety features, such as smoke or burglar alarms, installed in your home can qualify you for discounts.
- Weather Preparation Discounts: Storm shutters, hail-resistant roofs, and other home improvements can reduce your home’s risk. Providers will oftentimes take note.
- Loyalty Discounts: Whether you’ve stayed with a provider for several years or have bundled your home insurance with other policies (e.g. auto, life), providers will offer discounts to those who’ve remained loyal.
Comparing Claims Payouts
Homeowners put up with premiums and deductibles because they believe their insurance policy will cover what’s needed come time to file a claim. Once the deductible is paid, their provider will step in and take care of everything else… right?
The answer isn’t clear-cut. While companies will pay out once a claim has been accepted, the exact amount will vary. Claim adjustments and processing times can also affect when and how much payment you’ll receive, potentially placing you in a difficult spot in an already difficult time.
To avoid being caught in limbo while waiting for payment, be sure to ask providers about the following:
Home insurance policies can use different methods to calculate payments to homeowners (just another reason to know your policy inside and out!). The most common methods are actual cost and replacement cost.
Actual cost calculates payment based on the current value of your home, building materials, or other items included in your claim. Insurance providers use depreciation to determine current value, meaning your payments will most likely not cover the costs to repair or replace what you need.
However, replacement cost means the policy will pay the amount needed to fully repair or replace what’s needed using the same or comparable materials. Replacement cost policies typically require higher premium payments, though it may be worth it depending on your home’s structure.
Even if you have a well-paying policy, the claims process may prove to be a headache to deal with. Some providers may take a long time to process claims due to a large, bureaucratic process. In the event of a natural disaster, the surge of homeowners filing claims may also slow down response time.
Coupled with claims processing is the claims adjustment, which is required before payments can be made. Insurance companies will oftentimes send out their own adjuster, who then assesses the damage and gives an estimate for cleanup and repairs.
Ratings and Customer Service
Even after you’ve compared coverage, costs, and payouts, you should always consider what others have had to say about your potential providers. What if a provider that offered you a discount ends up having horrible customer service, making them a nightmare to deal with?
What if they’ve had trouble paying out claims before?
Rating Agencies and Online Reviews
Rather than taking the risk and having your own bad experience, turn to rating agencies and customer service sites to gauge the quality of a provider. Organizations like Consumer Affairs and Better Business Bureau give reviews of insurance companies and allow for customer comments.
When reading reviews and comments, homeowners should keep the following in mind:
- How is the provider’s customer service run? For regional or national providers, is support centralized in one location or localized to better serve customers? This could affect hours of availability.
- How can homeowners get in touch with customer support? Can they call in and speak to a representative, or is everything done via email or online chat?
- What’s the provider’s financial status like? Ratings from organizations like the National Association of Insurance Commissioners can provide insight into the financial strength of the provider. Can the provider manage to pay out all claims in the event of a disaster?
Regularly Review Your Policy and Company
Circumstances always change. Perhaps over time you purchased some new high-end items. Maybe you decided to build an addition onto your home or redo your roof. All of these could affect your needed coverage limits or eligibility for discounts.
Even if you’ve found a great homeowners insurance provider, we recommend to regularly review your policy and company (e.g. annually). By keeping track any changes to your home or family, you can ensure you always have the right coverage and the right provider for your situation.
You never know, maybe there are other companies out there that can beat your current provider on costs, customer service, and more. Maybe a company like Kin just could be the provider you’ve been searching for.
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