How to Lower Home Insurance Premium by $100 ?
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When you buy home in U.S., it is mandatory to buy home insurance. It is an essential part of home ownership. The question is where you buy value for money insurance and ensure you are not being robbed. There are number of insurance companies who sell home insurance including AllState, Farmers, Liberty Mutual, AAA, Nationwide and Progressive and many more. All insurance companies are competing for your business and would provide best quotes. However their quotes perplex you as they have a large variations and therefore create confusion who is right and whom to go with? Well, this is why you are reading this article.
The home insurance policy has four primary covers:
The cost to rebuild physical structure of the home (called coverage A on your policy)
The cost to build additional structures such as fences (called coverage B on your policy)
The content of your home such as dining table, chairs tables, beds, clothes, lamps etc. (called coverage C on your policy)
Rental reimbursement limit in case your home is unlivable and you would need to live in a hotel or lodge (called coverage D)
A. Make sure Coverage A is right:
The major part of your premium is driven by coverage A. if your coverage A is accurate, chances are your premium is accurate as margins for competing are lower. Most premium differences are due the amount of home owners risk a company has taken as well as the bells and whistles on your policy. Here is what you should do as a back the envelop calculations to measure the adequacy of your coverage A.
If you are in California or in any metro areas in the country in prime residential location, use $180 X square footage of your home (not lot size). That is you have a home of 2000 square feet on a 8000 square feet lot, your rebuilding cost is 360,0000.
If you are in other neighborhoods, use $140 per square feet and your rebuild cost is 280,000.
If your quotes covers are in ball-park, then cost estimation tool your insurance company uses is accurate.
B. Make sure that the covers B, C and D are accurate:
Coverage B is generally 10% of coverage A, coverage C is 50% of coverage A and coverage D is 20% of coverage A. this is standard coverage that most carriers offer. If the quotes covers are off than standard ones, then you can discuss with your agent to get quote for standard coverage. this should bring down at least $50 on your quote.
C. In addition consider these 4 points:
1. Are home components used to estimate rebuild cost or coverage A right?
Insurance companies use software to estimate the adequate replacement cost of your home. Give them a call and ask them what parameters they are using. Sometime the agent may have added custom kitchen or cathedral roof for you house. This would increase your annual premium by at least 5% -10%.
2. Purchase decent deductible
For deductibles, try to keep you deductibles as high as $2500. I am sure if you are home owner, you have already saved enough and are saving so that you can keep your house maintained. Buy insurance for catastrophic loss of your home. 90% Chances are that yopu may not need to repair your home for at least 10 years. If you calculate the extra premium you would pay for buying lower deductible, you would see that over 10 years you would save enough to cover the deductible amount and still have money in your bank. A good practice would be to have at least 1% of coverage A as deductible.
3. Extended coverage is just adequate
This coverage provides you additional protection in case of inflation in cost values. Say in an event, the cost of repairs exceeded the insured value. In such circumstances, the extended coverage factors or amounts would kick in pay for extra cost involved. Keep this factor around 125% - 150%. this would also save you up to 5% of premium depending upon who you do business with.
4. Bundle up your Auto and Home Policy
Keep all of your insurance business with one company. Multi policy discounts are 15% - 30%. If you keep your auto and home policy with one insurance company, chances are that you would pay at least 15% lower premium on at least one the two policies.
If you follow all these tips and they all apply, you would save at least $100 or more on your home insurance premiums. So happy savings and happy researching home insurance
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