Finding a plan that’s a good balance of wide coverage and low costs might take a while. But knowing your home inside and out, as well as exactly what you want from a contract, will make it much easier. Purchasing home insurance takes perseverance. It’s a large investment that you’ll be conveniently reminded of every month by your premiums.
- Where do you need extra coverage?
- What are you likely to file a claim on in the next few years?
- Will paying for a more expensive plan be worth it in the end?
None of these questions have easy answers.
Here are 19 essential questions to help you work your way through the buying process.
1. What are my home’s strengths?
- In what ways is your home a low-risk proposition for insurance companies?
- Is your area safe and relatively crime-free?
- Is your home modern and well-maintained?
- Are the electrical and plumbing systems new or old?
If you know your home’s strengths, you’ll know where you need extra coverage and where you don’t. You’ll also know exactly what to highlight when speaking to an agent if you want as many discounts as possible
2. What are my home’s weaknesses?
- In what ways is your home a high-risk proposition for insurance companies?
- Do you live in an area where crime and break-ins are common?
- Are there lots of natural disasters?
- Does your home have a pool, a thin roof, an old plumbing system or anything else that looks like an insurance claim waiting to happen?
This knowledge should give you some insight on what you most need to insure, and the areas you can improve upon if you want to lower your premiums.
3. What are my most valuable appliances and pieces of furniture?
You’ll likely want to cover not just your home, but also your most-valued possessions in your homeowner’s insurance policy. That could include anything, from a flatscreen TV to a treasured family heirloom to an expensive set of furniture. Before you start shopping, it’s useful to have a list put together of everything you want to be covered. That’ll give you the most accurate read on how expensive a potential policy could be, and whether or not it’ll be a good fit for you and your possessions.
4. and 5. What kinds of damages am I the most concerned about? AND What are this area’s most common crimes and natural disasters?
Knowing the common crimes and natural disasters in your area will give you hints as to the type of insurance you need the most. If you live in the mid-Atlantic, for example, extended coverage on earthquake protection probably isn’t a big deal. But a robust policy on hurricanes or home fires might be absolutely essential. If you live in an area with mild weather but lots of crime, coverage for break-ins might be more important than coverage for hurricanes or tornadoes. This is one area where a little bit of research could pay dividends in the future.
6. What materials is my house made out of?
Once you know what the common natural disasters of your area are, it’s good to figure out exactly what your house is made of.
If your home is made of a wood frame, your premiums might be higher in a dry area where fires are common because it’ll burn easily. A brick home would be cheaper to insure because of its higher fire resistance. On the other hand, a brick home will almost certainly be more expensive in an earthquake-prone environment because it’s not as safe. Knowing your home’s materials is the same as knowing what you most need insurance for.
7. What does this policy say about fire and smoke damage?
In a previous blog post, we talked about the difficulties of filing a claim on smoke-related damages. While house fires themselves are almost always covered, policies on smoke damage can vary from contract to contract. Taking a look specifically at the section on fire damage isn’t a bad idea. No matter where you live or what your house is made of, a kitchen fire could always occur.
8. Are there any vaguely-worded sections in this contract?
It might be hard to suss out yourself, but try to look out for any vagueness in the fine print. If anything doesn’t quite seem specific enough, that could be a warning sign. Ambiguous wording could mean that the company will try to weasel out of making good on certain claims. Knowing exactly what’s in the contract while you’re buying is better than finding out in ten years when your claim gets denied because your company says they don’t cover it.
9. Do I have any plans to renovate in the near future?
The bigger your home is, and the more expensive the materials are, the more costly it likely is to insure. That said, renovation can also be a good way to lower your premiums if you know what to go for. Minimizing risk by, say, installing a security system or a good set of storm doors, could save you some money in the long run. Either way, any major renovations will have consequences not just for your home, but for your insurance as well — so take them into account when you’re buying.
10. Do I own a pet or have any plans to own a pet in the near future?
If you own a pet, it could definitely affect your home insurance. Large dogs or dogs from aggressive breeds could lead to higher premiums, just like other ostensibly dangerous pets like poisonous snakes. You may also have to sign a rider saying your company isn’t liable to pay any liability claims if your pet hurts someone, which could be a whole bundle of medical and legal costs out-of-pocket.
11. Have I filed any home insurance claims recently?
Filing a claim recently could make it much harder to find insurance at reasonable rates, or to find insurance at all. If you have a recent history of filing claims, especially small ones, insurance companies will see insurance on your home as a risky investment. If you’ve filed any claims recently, it may be worth waiting a couple of years before you switch contracts. On the other hand, if you haven’t filed any claims recently but your premiums have recently gone up for no apparent reason, then now might be the perfect time to be looking around.
12. What’s the highest deductible I can afford?
If you can afford a higher deductible, it’ll lower your monthly premiums. On the other hand, if you can’t risk a high deductible of a couple thousand or more, you’ll be paying for the privilege. If possible, $1000 is a good minimum to aim for on your deductible. So ask yourself how much you’re willing to pay out-of-pocket, as well as how often you think you’ll be filing claims.
13. Are there any insured items or types of coverage I’d be willing to give up?
If you want to save on homeowner’s insurance, what are you ok with skimping on? Insuring less of your expensive appliances and furniture could mean big savings on your monthly premiums. So could going for lighter coverage on types of damage that seem unlikely. If you live in a fairly dry area, for example, you probably don’t need to pay for extended coverage on floods and water damage. So ask yourself what you truly need, and what you can live without.
14. What is this company’s claims process like?
Before you commit, ask your agent to walk you through what a normal claims process is like with your company. Ask about the timeline for seeing an adjuster and getting an estimate. Try to look at some of the initial forms you’ll have to fill out when filing. The overall process will be the same for most companies, but getting a step-by-step could reveal something you didn’t know before about your specific company’s policies.
15. What is my credit score like, and will this company take it into account?
Home insurance companies are increasingly starting to take credit score into account when they offer insurance. This could depend not only on which company you’re looking at, but also on the state you live in. In California, for instance, companies can’t use credit score as a factor in determining your premiums. But in other states, having poor credit could absolutely skyrocket your monthly insurance costs.
16. Do I have any plans to retire or switch careers soon?
Retiring or switching careers could net you a discount on your home insurance premiums. Insurers tend to reward homeowners with stable careers and long-term plans. Age and retirement are also two factors (the older you get, the cheaper home insurance tends to be).
17. Did I shop around enough for a good insurance contract?
In all likelihood, the average homeowner probably doesn’t shop around enough when buying home insurance. It’s easy to settle for whichever plan came bundled with your auto insurance or whatever was the easiest to get a quick contract with. But comparing home insurance rates could save you money for years and even decades down the road, so it’s well worth it to think about the benefits and drawbacks of different plans.
18. Do I also need auto insurance?
Many insurance companies will offer home insurance at a discount when bundled with auto insurance. It’s usually a good deal if you need both, and it could also be more convenient than managing separate policies from two totally different companies. Just make sure it’s actually cheaper than managing two plans, and that you’re not paying more simply for convenience.
19. If my premiums go up, will I still be able to afford this contract?
Finally, you should make sure that you’re not maxed out on your insurance policy. It can be tempting to make your deductible as low as possible or to eat expensive premiums because your home and your assets are important to you. We get it. But home insurance is one area where you want some leeway. All it takes is one or two claims to potentially make your premiums rise, especially as a customer who’s new to a potential agent and contract. So your financial situation should allow for at least some increase in your monthly premiums if it becomes absolutely necessary.
Sources: NY Times | SFGate | TheBalanceEveryday | HomeInsurance.org | Forbes | Insuramatch | SWBC.com | Lathampool.com | Lifehacker.com | Kiplinger.com | iii.org | ConsumerReports.com | usnews.com | Coverhound.com |