Deciding which insurance company to place your home insurance with involves much more than determining who has the lowest price. While most consumers believe that all home insurance policies provide the same coverage, this is far from accurate. Coverage varies significantly from insurer to insurer, and numerous optional coverage extensions are typically available. But, what is the best way to compare home insurance quotes.
There are a number of key areas you will want to consider when determining which company to place your insurance with. This article will address some of the major points of differentiation and will provide some tools and helpful information to help you make your decision.
There are many home insurers to choose from. An independent insurance agent, who has access to many insurance markets, can help you to find the best insurers for your individual situation, and can help you evaluate the various coverage options that are available.
What Coverage Does The Home Insurance Policy Provide?
As mentioned above, coverage varies tremendously from insurer to insurer. We created a handy “Home Insurance Coverage Comparison Chart” that you can print off and use as an outline to help compare offerings from multiple insurance companies. Some of the main areas you will want to focus on are:
· Limits: What are the policy limits for the main policy coverages – the Home, Other Structures, Personal Property, Additional Living Expenses, Personal Liability, and Medical Payments;
· Sub-Limits: What sub-limits exist on the policy for specific classes of property, such as Fine Arts, Firearms, Jewelry, Silverware, Stamps, Trailers, Watercraft and other types of property. Are there also sub-limits for specific types of property that apply to loss by theft?
· Valuation: What valuation applies to the home and to personal property? The two most common valuation methods used by insurers are “actual cash value” and “replacement cost.” Most people will want replacement cost coverage.
Example: Your 15 year old roof is destroyed by a very powerful storm. The insurance adjuster determines that the replacement cost of the roof is $20,000 and that the actual cash value of the depreciated roof is $5,000. If you had a $1,000 deductible, your recovery from your insurance carrier for the loss (assuming no coinsurance penalties apply) would be:
o “Replacement Cost” Coverage: $20,000 – $1,000 deductible = $19,000 recovery;
o “Actual Cash Value” Coverage: $20,000 – $15,000 depreciation – $1,000 deductible = $4,000 recovery.
· Perils Insured: The three most common options are: “Basic” named perils, “Broad” named perils, and “Open” perils. Under the two “named peril” options, your policy only responds to damage to your property that is directly caused by the perils that are named. If you can’t prove that a loss resulted from one of the named perils, you may not have coverage for the loss. Under “Open Perils” coverage, the insurer covers all risks of direct loss to your covered property unless the loss is caused by a cause of loss that is specifically excluded by the policy. This is much broader coverage, and it puts the burden of proof on the insurer to prove that a loss was caused by an excluded peril if they seek to deny coverage.
- Additional Coverages Provided: Insurers generally each have their own basket of additional coverages they include in order to compete for your business. In addition, they usually have a variety of optional additional coverages that they can add to your policy. When comparing quotes, it is important to understand what additional coverages have been included. Some of these additional coverages can be very important. Examples: backup of sewers & drains, breakage, damage to foundations and slabs, earthquake, flood, hurricane, identity theft, mechanical & electrical breakdown, and mold.
- Liability Exclusions: Some insurers have exclusions built into their forms that might not work for your particular situation. For example, some insurers add exclusions related to certain dog breeds, home day care and other business activities, swimming pools, trampolines, and watercraft.
- Deductibles: Deductibles can vary tremendously from insurer to insurer and sometimes policies will have a variety of special deductibles that apply in specific situations. For example, it is not uncommon for a home policy to have a percentage wind and hail deductible of 2% or more. If your home has a value of $300,000, then 2% is $6,000 dollars.
It is important that you read your policy. When you read it, you may notice exposures that are excluded or sub-limited that you wish to discuss with your insurance agent.
What’s the insurance company’s financial rating?
If you are insuring your home and personal liability exposures, you want to make sure that your insurance company has the ability to pay your claims and to carry adequate personnel to properly serve you in your time of need. You can research the claims paying ability of insurers yourself by looking insurers up on A.M. Best’s website or Weiss Ratings’ website. A.M. Best and Weiss are companies that analyze the financial strength of insurance companies.
Insurance companies will also often display their A.M. Best rating on their websites.
How is their customer service? – Claims Satisfaction
You are buying insurance so that you will have protection when you need it most – when a loss occurs. When it comes time to deliver:
- How easy will your insurance company be to work with?
- How easy will it be to get a hold of them on the phone?
- Will they return your calls promptly?
- How long will it take them to pay your claim?
- Does the insurer offer online claim reporting and tracking?
- Does the insurer have their own loss adjusters in the area where you live?
These are the types of variables that are often measured by claims satisfaction surveys.
While it does not cover all insurers, J.D. Power And Associates conducted customer satisfaction surveys that may help inform your opinion. This survey looked not just at claims experience, but also price, coverage offerings, and other important characteristics of quality as perceived by consumers.
Your independent insurance agent will likely have a pretty good sense of which insurance companies provide the best service.
In addition, information about specific insurers, or complaint information, can sometimes be found at the website of your state’s department of insurance or commerce, or at the National Association Of Insurance Commissioners website.
Price is the final piece of the equation. Purchase decisions are usually made based upon overall perceived value. When it comes to insurance, you should consider including the following items in your overall assessment of value:
- The quality of the coverage provided;
- The suitability of the coverage provided based upon your exposures and needs;
- The financial strength of the insurer;
- The quality of the insurer’s customer service;
- Your overall perception of the insurer’s reputation.
Note: your lender, homeowners’ association, or others may require that you purchase insurance coverage that meets certain specified requirements. If this is the case, you will also need to make sure that the coverage you purchase meets the stated minimum requirements.
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Enhanced Insurance is not written by attorneys. If you’re looking for legal advice, you need to contact a lawyer. Further, insurance practices and forms change constantly and are varied from state to state. For definitive answers in your area, contact a local agent.
While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.
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