The cost of homeowner’s insurance has been rising steadily for several years now. The culprits, according to Consumer Reports, are wildfires, tornadoes and hailstorms in various parts of the country. A natural reaction to rising costs is switching insurance companies or lowering the amount of coverage on your home. Before you do that, here are some tips on what to look for in a homeowner’s insurance policy.
Don’t Just Look at Price
The overall quality and integrity of an insurance company is just as important as the price you pay. In a homeowner’s insurance survey conducted by Consumer Reports last year, 7,000 out of the 81,000 people surveyed disagreed with the amount their insurance companies were willing to pay on their claims. Insurance companies with lower ratings tended to have a higher percentage of customers who disagreed with their insurance settlements. Definitely research insurance companies before settling on a lower price. Better yet, have an insurance broker do the shopping for you. They are experts in finding the right policy at an affordable price.
Figure Replacement Value Correctly
If the market value of your home is $200,000, that doesn’t necessarily mean you need $200,000 of coverage to replace your home. Replacement value is the amount of money necessary to rebuild the home. Market value is the value of your home based on certain market factors and includes your land. You don’t have to replace your land. Why insure it? The insurance agent can help you determine proper replacement value, including any special assets or features on your home and inflation costs.
Insurers Figure Add-ons Differently
If you are looking at add-ons to your policy such as sewer back-up, weather coverage, contents replacement or others, be sure to compare policies equally. Some insurance companies include certain add-ons in their regular policies. Some treat them as extras. Also, watch the replacement value of your possessions covered by add-ons in your insurance policy. Some policies only cover the cash value based on when you purchased an item and don’t consider appreciation value.
You have many factors to consider when changing homeowner's insurance policies or insurance companies. Don’t automatically go for the lowest price. Do your homework to ensure the policy you choose is right for you.