Most people get their home owner insurance when they buy the house, since the price of home insurance is much cheaper than health or auto insurance, they would buy it at the time of property purchase and renew it every year, set and forget pretty much.
In average if we look at the Networth statement of any individual, property wealth makes a big chunk of the pie. It is where majority of our savings are held, in-spite of this, surprisingly large amount of homes are under-covered.
Here’s how you can make sure to have right insurance coverage, pay right premium and protect yourself from large bills of uninsured property damage.
Don’t make small claims
You’d think that when you buy homeowners insurance, you could submit claims for any damages covered under your policy irrespective of the size of claim –small or large.
While you do pay your premium diligently, entitling you for a protection against property loss either big or small, but you need to have long term view of what’s at stake.
Insurance company is obliged to pay claims that are covered by your policy, in long run though smaller claims will cost you lot more.
Most insurance companies provide claim free discount-saving you about 5 to 10 percent discount on the premium, at the least you are at the risk of losing this discount which might add up over years. A claim of few hundred might end up costing you thousands in few years.
Insurance companies always look for opportunity to decrease risk, in reality it might actually cost the company more to process your small claims than the claim amount itself. If you have a series of small claims done then you could potentially be denied a policy renew when it’s due.
To make matter worse once an insurance company drops you it will be expensive and hard to find an insurance company for required cover.
Insurance companies share information with each other through a giant database called the Comprehensive Loss Underwriting Exchange (CLUE). After one company drops you, the others look at your CLUE record and are less likely to offer you insurance if you’ve filed series of claims over the past few years.
Some insurance companies consider claim enquiries as claims on their customer records, before contacting them get an estimate to see how much it costs to fix damages, anything less than $1500 is not worth submitting a claim.
Increase your Excess/Deductible
All insurance companies will provide the option of increasing Excess. The amount of premium you pay decreases with increase in excess amount.
Increasing excess from $250 to $1000 could cut your premium by 20 percent. If it isn’t safe to submit small claims for fear of your insurer dropping you, then you might as well get some benefit from if by increasing excess/deductable.
One thing to note is that when you increase your excess, you need to have an emergency fund build up to at least twice the amount of excess.
Shopping around to save money
Amount of premium that you have to pay varies in hundreds of dollars between companies. Insurance companies assess risk separately, basing your premiums, on the age of your home, the materials, its claims history, location, their profitability, and a slew of other factors.
The difference in the cost between insurers might just come down to fact that not all companies have extensive historical database of all areas. Underwriters get around this problem of unknown by adding certain percentage of penalty to mitigate risk.
Spending dollars for pennies
Gauge what’s at stake when you change your insurance between companies. Don’t move away from long time insurer just to save few dollars.
Moving away from your current insurer means leaving built up history behind.
Moving away means you are not only losing on any additional loyalty premium savings you would have accumulated but also no claim discount for the current and future years.
Having pets might cost you more premium
Pets are great to have around home they bring harmony and balance in life. Do you know that household pets are the cause of significant amount of house fires, insurers have been paying huge payouts for damages caused by pet.
Not only damage to home but also risk of liability increases, in case if your dog bites someone then they could potentially sue.
Other way to reduce your premium is looking for policies that don’t cover damages caused by pets. This will exposing you to high risk, and I wouldn’t recommend taking this kind of policy- better off having a pet free home if your aim is to reduce premium.
% of Discount has no value
There are lot of insurers advertising 5% to 20% off, but at the end of the day the cost of premium to coverage is what it matters. Don’t get carried away with discount percentage, look at what you are getting for the same amount of money elsewhere.
Ask what isn’t covered
When getting a new policy ask your agent what is not covered, you will be surprised to learn how much more will be revealed by just asking this question.
Home security systems
With the technology advancing, a decent security system will cost you almost nothing compared to the amount of premium you save over a period of time. You don’t need a professional to install a security system there are many DIY systems that can be done with no help.
Smoke detectors and fire alarms
It is mandatory that all houses, while built and rented out need to have smoke detectors. It is responsibility of the owner to make sure smoke detectors and fire alarms are functional, insurers reserve the right to void any fire damage claims in case of non-functional detectors or alarms.
Don’t just renew
Most of the insurance companies preferred payment method is credit card, they store the details of credit card in the system to renew it automatically. Don’t let it renew without any effort from you, before the due date make an effort to shop around for a better deal.
Call them for a deal
Even though the online quote is always a bit cheaper than call centre, you will get a better deal and more information by talking to an agent.
Combine Multiple Policies
Reduce the premium even further by combining multiple policies, i.e. combining your car and home policies can save you at least 10% in your premium depending on insurer.
Task of shopping for a proper home insurance cover can be time consuming, to compare like for like ask the insurer if you could lower premium by any of the following or if the following have been considered in premium estimation process.
Check list to review with agent:
- Claim free history or discount
- Combining multiple policies
- Retirement/ aged pensioners discount
- Non-smoker discount
- Smoke alarms and fire alarm in house
- Storm shutters and other storm-resistant improvements
- Quality of building material, brick, veneer etc
- Double lock doors and windows
- Home that is recently build as per building standards
- Valuables stored in bank locker for safety.