Saturday, November 5, 2011 at 11:32AM Saving Money on Home Insurance
There are ways to save money on home insurance. However, its not what you think. Home insurance has many more moving parts than auto insurance. Most people know how to look at the coverage amounts and can tell if they are roughly similar. Many consumers pick the cheapest priced policy and assume they are all the same as long as the coverages are equal - WRONG! Home insurance is not as interchangeable as auto insurance. You can't look at the limits and know with relative certainty what you are buying.
There is a reason why GEICO and Progressive do not sell homeowners insurance. (They broker it for other companies) The main reason is that it takes more skill to accurately assess home insurance needs than that required to quote auto insurance. Not only are there far more endorsement options, the contracts themselves have fairly significant variation and require in-depth knowledge in order to select among the most appropriate policies for a given risk.
While it is true that the coverage amount is important and should accurately reflect your rebuilding cost, the real devil is in the details, in this case, the detailed exclusions. Remember that 20-30 page policy you got in the mail with all that boring legal jargon? if you read the contract closely, you will notice a list of things your policy DOES NOT COVER. What's more, you will not find this list until AFTER you purchase your policy from the insurance company, assuming of course you take the time to carefully read and understand it. Even worse, the list of exclusions as they are known, can vary from 18 to 25 items or more items that your policy specifically does not cover.
Generally, a cheaper policy has more exclusions. This may come as a shock to you, but if a company is charging you less, it is probably because they found a way to pay out less in claims. This isn't necessarily a bad thing. Many of the exclusions in a contract are designed to eliminate coverage for items that degrade over time or are likely to happen in large frequencies in concentrated locales. An example: one contract excludes coverage for losses that occur over a period of weeks, months, or years. This exclusion is designed to except claims for maintenance items that should be addressed by the responsible homeowner. If your house is less than 20 years old, this exclusion might be a welcome compromise for a premium reduction. However, if your home is older, it would be unwise to buy a policy that eliminates these items which are more likely to occur.
Another example: freezing. Let's say you live in an area that routinely experiences freezing temperatures. Some policies will not cover your landscaping and pool pipes if they freeze during the winter. Again, if you live in a more temperate climate, this may not be a concern for you and you can easily exchange this exclusion for a lower premium.
Someone needs to make these important differences known to the public. It is about time someone compares contracts in an accessible way that the average consumer can understand and really use to accurately compare quotes. We are creating a simple guide that will easily contrast all of the major policies offered by the leading home insurance companies. Don't wait until after your home is damaged to find out that the $100 you saved on home insurance is now costing you $25,000 in uncovered repair bills.
We will be reviewing home insurance contracts from State Farm, Farmers, Allstate, Travelers, Liberty Mutual, Safeco, Mercury, AAA, USAA, and many more. Keep checking back to learn more about insurance than you ever thought possible.
Reader Comments (2)
This is a very helpful article as my husband and I are looking to purchase our first home together as well as homeowners insurance. We really didn't know where to begin when shopping around for insurance. But the above tips sure do help some.
I'm so glad we were able to help you Kelly! We are planning some really cool rating studies going forward, please check back for more detailed information.