Even if you do not have a mortgage, homeowners insurance is a must-have to protect you and your family. The premium may sting a little, but that is nothing compared to the expense of dealing with a large loss such a flood or fire. Even break-ins present a variety of bills, from repairing damage such as broken windows to replacing your belongings.
Read on to discover some tips for choosing the best insurer and preparing for disaster. In addition, learn five ways you can lower your premiums.
Choose a Top-rated Insurer
The first step in buying the right homeowners insurance is choosing the right insurance company. Consumer Reports delivers yearly ratings on insurance providers, including customer satisfaction ratings from thousands of homeowners. It began this annual survey in 1988; Amica has earned the top spot every year. That is 27 years in a row at number one, an impressive feat.
Rounding out the top three in customer satisfaction are USAA and Auto-Owners. According to Consumer Reports’ readers, these top three insurers go beyond when handling their customers’ claims. Compared to their competitors, Amica, USAA, and Auto-Owners are more likely to pay promptly and handle claims quickly. What’s more, they are much less likely to drop a client for a single high-dollar claim (typically characterized as a claim in excess of $30,000).
Steps You Can Take Before Disaster Strikes
There are a couple of things you can do before disaster strikes that will make your life easier in the event your address lies in the path of a tornado, hurricane, or other natural disaster. Start by working with an agent or broker you trust and ask many questions. You want answers to the following:
1. What is the home’s value?
2. What is the minimum coverage required that still offers full protection in the event of a total loss?
3. What are the policy’s perils?
4. What are the exclusions?
a. Follow-up assignment: Obtain separate insurance to fill those gaps, concentrating on whatever natural disaster threats your region faces.
Question: How difficult do you think it is to find a good contractor after a tornado touches down in your area? The answer? Pretty darn difficult. It is not that all the contractors left town with the twister, it is that they are all booked with the repairs of your friends and neighbors. You can mitigate this somewhat by developing a professional relationship with a contractor now. If you have a couple of small projects around the house, hiring a licensed contractor gives you a preexisting relationship, someone you can call in the event of an emergency. Contractors are like mechanics; it never hurts to know a good one.
Why Is My Mortgage Company Named on this Check?
So, you have filed your claim, met with the adjustor, gotten estimates, and done everything your insurance company asked. Finally, you receive that first check for your claim. You are ready to deposit it when you notice your name is not the only one on the “Pay to the order of” line. For some reason, your mortgage company is there as well.
The purpose is to protect your mortgage company’s investment, but it actually protects your interests as well. It ensures the money paid to enact those necessary repairs goes to those repairs. Unfortunately, this likely involves extra steps, and may even involve extra fees.
5 Ways to Save on Homeowners Insurance
Although buying the cheapest insurance policy is not the ideal long-term move, there are ways to lower your premium and save money.
1. Don’t underinsure. It may be tempting to lowball your coverage, but don’t do it. If the worst happens and you do have to file a claim, you’ll wish you had that extended coverage rider (it adds up to 30 percent to standard replacement value limits) and add-on coverage for sewer backups, jewelry, and other expensive items. Additionally, check your home’s value every few years. You want your insurance policy to reflect your home’s current market value.
2. Choose a higher deductible. Although you do not want to be underinsured in the event of a claim, the reality is that you likely will not need to file more than one or two claims. Even so, nearly half of America’s insured choose deductibles of $500 or less. You are better off choosing a $1,000 deductible, which greatly reduces your annual premium. Just make sure you save a sufficient amount to cover that deductible. Start by putting the money you save on your premium into savings.
3. Bundle your policies. It seems obvious to us, but we are always surprised when we learn how many do not bundle their home and auto insurance. The potential savings are huge, up to 30 percent. If you are not bundling, call your agents to find out how much you can save by consolidating your policies.
4. Don’t be afraid to shop around. Insurance is not like your significant other; you can take a peek at what else is out there from time to time to see if it is better. Search online or use an insurance broker and see what you can find. It might be better than what you have right now.
5. Lower your loss risk. The more claims you file, the higher your premiums. You can prevent that with some risk-saving measures, such as equipping your home to withstand dangers common to your region. This may include roofing that holds its own against hailstorms, storm shutters to protect against hurricane winds, or bolting the frame to the foundation if you live in an earthquake-prone location. Standard fixes for any location include never leaving stoves unattended (a leading cause of house fires) and reinforced hoses for your washing machine to prevent flooding. Also, look for discounts for items such as fire and burglar alarms. Even deadbolts may cut your premiums.
It can feel like walking a tightrope, making sure you have enough insurance without paying too much, but a little homework goes a long way. Talk to a broker or your insurance provider to discover steps you can take to lower your risk as well as your premiums, and make sure you know what gaps are hiding in your policy. If you ever have to file a large claim, you will be glad you did.