Every homeowner should have a dependable homeowners insurance policy. Like other types of insurance, homeowners insurance protects against a variety of circumstances. For example, if your home burns down, your insurance policy acts as a security net. It can help you recover your losses in situations that might otherwise be financially devastating.
Though home insurance is indisputably important, it can be costly. Homeowners need to make sure they’re getting the best value for their money before settling on a policy or provider. Unfortunately, comparing policies isn’t always like comparing apples to apples. Some policies may cost less than others because they don’t provide as much coverage. To make sure you’re getting a good deal, here are five things to look for when comparing insurance rates.
1. Policy Price
When comparing different policies, it’s usually easiest to look at prices first. You should request a home insurance quote from at least three different insurance companies with good reputations. Look for companies that consistently pay out claims and are known for having good customer service. You don’t want to choose the lowest-priced provider if they won’t live up to their claims.
The price of a policy is just a starting point and doesn’t reveal what coverage options are included. However, it can help you quickly identify which policies are within your budget so you can rule out any prohibitively expensive options.
2. Compare Similar Policies
Though it’s a great start, getting home insurance quotes is not the only step you should take when choosing a policy. Different policies may provide various coverage options, so you need to make sure you’re comparing similar policies. A standard policy should provide a few main coverage types, including:
- Liability (this protects you if someone else becomes injured on your property)
- Dwelling (this will help rebuild or repair your home if it’s damaged)
- Contents (this will replace or repair personal items like jewelry, furniture, and clothing)
- Other Structures (this will replace or repair sheds, fences, barns, and other structures not attached to your home)
These are just a few of the basic protections offered by standard home insurance policies. Some policies may include additional coverage options in their basic price package. That’s why it’s important to make sure you’re comparing similar policies when checking prices.
3. Check for Discounts
Are you the type of person who checks for sales, specials, and rebates while clothes or furniture shopping? If so, you can potentially save money by doing the same thing when shopping for a homeowners insurance policy. According to Forbes, the average home insurance policy costs just over $1,650 per year for $350,000 in coverage. For $500,000 in coverage, the average home insurance cost jumps up to $2,212 annually. That’s a lot of money to dish out.
Fortunately, if you’re an astute shopper, you may be able to get a discount on your policy. For example, some insurance providers offer deals if you have certain security features for your home. They do this because they know a secure home is less risky for them to cover. Some providers may also offer discounted package rates if you bundle your home and auto insurance.
4. Factor in Coverage Gaps
You may need add-on policies for certain risks that aren’t covered by a standard home insurance policy. These are known as coverage gaps. For example, your policy may not include flood or earthquake insurance. If you live in an area that’s prone to either of these natural disasters, it’s wise to buy insurance add-ons as needed. Another common add-on is personal cyber insurance, which can help you recover costs associated with ransomware or cyber-attacks. It may also protect you in the event of online fraud or data breaches.
You might also consider adding water backup, increased dwelling, or replacement cost coverage. All of these add-ons are separate from your standard policy and will likely cost extra. When comparing insurance rates, make sure you factor in all add-ons you might want or need. If one company includes extra coverage in their policy that another company doesn’t, you have to take that into account.
5. Review Financial Ratings
Before hiring a handyman or buying anything from a company you may not be familiar with, it’s wise to do research. You might check out the handyman’s licensing and credentials to make sure he’s experienced and trustworthy. Or you might look at online reviews before shopping at an unfamiliar home goods store. You should be even more cautious when shopping for a homeowners insurance provider.
You can start by checking online reviews to see what other customers think of a policy provider. But don’t stop there. You should also research the financial strength rating of each insurance company you’re considering. Standard & Poor’s and A.M. Best are two popular rating agencies. Some banks may refuse to approve your mortgage unless they see that your insurance company has no lower than an “A” financial strength rating.
Comparing insurance rates should be about more than just the quoted price. There are many other things to consider, including coverage gaps, financial ratings, and available discounts. Use the tips above to make sure you’re getting the best coverage for your needs at a reasonable price.
