We know we need homeowner insurance because lenders require it to get a mortgage, and who wouldn't want to protect the investment they've made in a house. But we tend to pick an insurance agent or company, and put the annual policy renewal on autopilot. It doesn't feel any different than a mortgage, and who wants to waste time researching new insurance if we don't think we can find lower rates? The truth is, when you learn how to buy homeowners insurance, you can save significant dollars and we're going to tell you how.
Time to Learn How to Buy Homeowners Insurance
Having owned 15 houses and bought many homeowner insurance policies, it's hard to admit I was doing it all wrong … but that's the truth. You might say my insurance woes of last year provided the wake-up call to learn what I was doing wrong. Mistake #1 was switching my insurance coverage to a friend without researching companies, getting competitive bids or making her prove she was giving me the best coverage. My decision was based on her knowledge of the industry and willingness to help me learn more to write articles like Flood Insurance Might be a Bargain.
But last year seemed like the perfect storm for insurance. While maintaining our primary residence in New Hampshire, we bought a second home in Arizona to see how we'd like staying warm in the winter. But trust me, juggling mail between two homes is a nightmare. Our first problem seemed simple enough — getting flood insurance documentation to the mortgage holder. Then Safeco sent a letter saying they wouldn't continue our homeowners insurance and the final straw, they dropped our car insurance when we failed to pay a bill we never got.
The Right Time to Buy Homeowners Insurance
While I wasn't dealing with the typical homeowner insurance emergency (roof leak, flooding or fire), it was Thanksgiving week and there wasn't enough time to research several companies. Fortunately I had an existing relationship with Allstate for my Arizona homeowners insurance. Monday morning I called my local Allstate office and within two hours, got a call from their counterpart in my New Hampshire home town. That's because insurance is regulated at the state level, so you have to buy insurance based on the state where the property exists.
We had a short, maybe 15 minute conversation and they provided me with quotes (no paperwork required, just an address) for my NH homeowners insurance and car insurance. Jim recommended leaving my flood insurance in place until the policy lapsed in the spring and the new homeowner policy went into effect on Wednesday!
The Right Way to Buy Homeowners Insurance
From all I've learned, here's how I plan to research insurance providers every other year. That's the only way I believe you can avoid premiums from creeping skyward unchecked.
- Select at least four insurance companies to get quotes from. Compare your current provider to at least one online insurance company like Amica (recognized in J.D. Power industry ratings) and national brands like Allstate that continue to focus on insurance versus diversifying into financial investments. Don't assume your insurance agent is recommending the best company for you. They're motivated to maximize their commission.
- Give all insurance companies the same information and NEVER give them what you're currently paying. It might be easier to give them an account summary but black out the costs so you don't get ripped off. I foolishly gave my friend the sheet so of course my new Safeco policy cost (should have been half my Start Farm costs according to ValuePenguin.com). But my new Allstate policy is cheaper than Safeco policy, and I feel like I'm in “good hands”.
- Learn what's included (and excluded) in the homeowner policies being proposed as homeowner policies aren't equal. Over time you'll learn which features are most important to you like coverage for a home office and identify theft restoration. And don't be shy about asking your insurance agent to do this, as that's how they earn their sales commission.
- Research the insurance companies too, as things like customer service and claims history are just as important as price. Below is a summary of the top rated insurance companies based on About.com's article, Who are the Top-Rated Homeowner's Insurance Companies?
Here are the best websites I found for additional research. Use websites covering the industry versus those sponsored by a group of insurance companies, like HomeownersInsurance.com.
- National Association of Insurance Commissioners can help with some companies like Allstate, but I found that Safeco (Liberty Mutual?) is really a collection of companies so it's not easy to evaluate them.
- American Customer Satisfaction Survey offers benchmarks by industry or company. The challenge is trying to understand a company like Safeco, that's owned by Liberty Mutual, and has more than 30 underwriting companies.
- J.D. Power & Associates's, U.S. Household Insurance Study on Homeowners Insurance, seemed to treat the topic fairly but not every well know brand can be trusted based on my experience as a small business owner (Business Directory Madness).
This article begins a series on how to research and buy homeowner insurance. Many of the tips are equally useful for other consumer products like car insurance. I'll be adding an insurance checklist for readers to download in the next few weeks, so leave a comment below if you'd like a copy. The checklist will go into more detail about things like discounts and deductibles.
Good luck getting the right homeowner insurance for your home. Share your stories or questions below as together we can become much more savvy homeowners!