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Should You Compare Quotes from Various Agents for Home Insurance?

Don’t be fooled by funny commercials and catchy slogans; insurance is quite complicated.  Varying levels of coverage, locations and other factors make insurance policies very different from one provider to the next.  That is why it is so important to compare various quotes from different insurance agents.

Wild Changes for Multiple Locations

Check out these findings from Bankrate for multiple quotes for various locations

Bankrate used the websites of popular insurance providers to get quotes for various cities.  The parameters for the quotes were as follows:

• Single family home
• Full replacement policy
• Value of home $250,000
• Liability policy of $300,000
• A deductible of $500
• Medical coverage of $1,000 for each person

As you can see from the chart in Racine, WI the 3 quotes for the same property varied by 37%.  For higher priced areas such as Chicago, IL the quotes differed by as much as 121%.

What Causes the Differences?

Every year the insurance department from each state will approve a set of rates which is based upon the actual losses in the state from prior years as well as anticipated claims for the upcoming year.  Each insurance company uses a team of actuaries to look at historical data to come up with a reasonable expectation of insurance claims for the upcoming year and compares that with the company’s financial ability to pay the claims.

Each insurance company has their own standards and guidelines for assigning rates.  One company may place a higher weight on the costs to build in a particular neighborhood while a second insurance company would place more emphasis on the rate of crime and possibility for a natural disaster.  This is one reason why it is so important to thoroughly investigate a new neighborhood and understand the area’s history before buying a home.

Rash of Disasters Take Their Toll

The disasters from that past few years all over the country have resulted in higher insurance in multiple areas.  Tornadoes in Missouri, flooding in Tennessee and hurricanes along the northeast have left a wake of millions of dollars of damaged buildings, automobiles and personal belongings.

All of these events, and many similar disasters, have driven up the cost of homeowner’s insurance. Along with these natural problems there is also the issue of higher costs to build a home after it is totaled and the decreased investment returns that insurance companies have experienced with the sluggish economy.

Before getting a policy with an insurance agent make sure all of your bases are covered.  You will obviously need a policy that will take care of your home and your mortgage loan if the property is completely destroyed.  You also need to take an inventory of your belongings to make sure they are protected in the case of burglary, fire or other event.  Some people have collections of valuable items such as art, jewelry and firearms.  Losing these items can be disastrous, especially if the insurance policy is not adequate for the loss.

Verona, Wisconsin Homes for Sale

Understanding your Home Owners Insurance Policy

There is no doubt that an insurance policy on a home can be tough to understand. However, going over the policy and making sure you are comfortable with the important parts can payoff down the road. Here is an overview to make sure you have the basics covered.

The Home

It is important to know that in the event you lose your home to some sort of accident or force of nature that the insurance plan will provide enough funds to rebuild the home. This goes beyond the selling price of the home when you bought it. You need to know that the home can be replaced at today's costs. Construction costs and materials tend to rise over time. It is important to have replacement cost as part of your insurance policy.

Replacement of Belongings

Besides the actual structure of the home you should also consider your belongings. This can really mean anything such as furniture, dishes, picture frames, electronics, clothes, jewelry and a host of other items.

Try to stay away from the “current market” clause. This means that your 5 year old couch would be replaced at a price that assumed 5 years of use. The same concept would apply to any item that you have owned for a considerable amount of time. Also, ask the insurance company about their process for allowing you to replace items. For instance, if your home burned down and you are staying in a small apartment, do you really want to replace your giant screen TV right now? If the insurance company only gives you 60 days to replace an item, where will you store the products? Does the company demand that you buy an item, provide a receipt and then get reimbursed? All of these items should be covered prior to getting a policy.

Deductible

The deductible for a home insurance policy works in the same manner as an automobile insurance plan. Higher deductibles will result in a lower monthly premium. However, a high deductible assumes that you have the funds to pay the amount in the event of an emergency. A smart financial move would be to save up a good amount, such as $2000, and then change your plan to a deductible of $2,000.

Liability

It is always a good idea to have a strong liability plan in place. For instance, if you have guests for a backyard barbecue and someone falls at the party, your liability policy should cover the expenses for the fall. This could be the cost for the ambulance, any stay at the hospital and possible rehabilitative therapy that is necessary after the injury.

Day to Day Expenses

Some insurance companies will reimburse you for your expenses while you are awaiting for your home to be rebuilt. Make sure you understand the circumstances surrounding this type of expense and how the insurance company will reimburse you.

A lot of the terminology used in the insurance plan is unique to the insurance world and may take a conversation with an agent to understand it properly. Understanding the policy before purchase will help you to feel confident that you are covered in the event of a major crisis.

Understanding Home Owners Insurance