Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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Written by Jeffrey Johnson
Insurance Lawyer Jeffrey Johnson

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman

UPDATED: Mar 22, 2022

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It’s no secret you have seen double-digit homeowners insurance rate increases in the past decade. It’s no wonder premium jumps occurred because of a rough economy and the sheer devastation caused by mother nature in that same time period.

Think for a minute what you would guess are the most costly big-time disasters in your lifetime. According to the Insurance Information Institute the following events cause the most damage:

  1. Tropical storms
  2. Fire
  3. Tornadoes
  4. Hail

If you live in Colorado, Texas, and California, then you know the ravages of fire. It starts as quickly as it spreads and its pathway is as predictable as a loose canon.

No one knows how long it will take to put out fires, when it will be done damaging lives, homes, businesses, and nature.

The True Purpose of Homeowners Insurance

Homeowners insurance is made to help you rebuild following catastrophic events.

It should provide the financial helping hand to rebuild your life following devastating fires, terrorist attacks, tornadoes, hurricanes, earthquakes, and sinkholes.

Yes, you buy separate earthquake insurance and sometimes even a hurricane policy.

Evaluating What Matters Most

best rates for home insurance

When you are buying homeowners insurance, one of the most important aspects of your policy is the company behind your insurance. The insurer can further traumatize you and your family or help ameliorate one of the most stressful and disruptive experiences in your life.

Helpful ways to evaluate potential insurance companies include the following:

  1. Insurers’ past treatment of big-time disasters indicates whom you can trust. Read newspaper articles about the Colorado fires of 2009. Take note what insurance companies graciously paid out claims to the herds of newly homeless members of an affected community. Which insurers made excuses, dragged their feet, and tried to deny claims for their homeless policyholders.
  2. Use the Internet to find customers who write about their good and unpleasant interactions with insurance companies
  3. Check financial health of insurance companies with corporate credit rating agencies such as A.M. Best and Fitch Ratings. The corporate grades assigned to insurers indicate whether they have the money to pay claims.

Doing Your Work

Beyond scoping out excellent insurance companies out there, there’s even more work you need to do. The next step is to figure out how much insurance you need to buy. There are a few areas that the homeowners policy includes, which are:

  1. Dwelling, or your house
  2. Other structures on the property, such as detached garages
  3. Personal property, such as your furniture, clothing, and kitchen-ware
  4. Liability, for instances when your dog bites the mail carrier

Basically, hire a contractor and appraiser to determine how much it costs to rebuild your house. Buy inflation guard, which will ensure your house gets rebuilt even if the cost of materials doubles between the time you buy your policy and devastation occurs.

This is your warning.

Do not use real estate values to determine your insurance coverage.

If you lived through 2008, then you know how low real estate can go. Was your 140,000 home suddenly valuated at 40,000 dollars? Well, 40,000 dollars would not have paid to rebuild your home following a fire that destroyed it. Never use the market valuation.

The next step is to inventory your belongings that reside in your home with you. Take pictures, video, catalog receipts, and note model and serial numbers. Keep inventories in the cloud, at a site away from your home, and with you in your house. That way, if you see disaster coming your way, you have an inventory to make your claims process easier.

This information helps the insurers verify your true losses. Otherwise, they may and will be within their right to question your claims. Help them help you to speed up the process and make sure you get paid the money that you are due for paying your insurance premiums.

What determines insurance rates?

When an insurance company decides to sell you a homeowners policy, they take into account the chance that they will have to pay out a claim. In addition, they try to assess how often and how much those claims will equal.

Specifically, underwriting looks at:

  1. Location
  2. Construction type and materials
  3. Values within the home

Did you know that the underwriters look at something called Comprehensive Loss Underwriting Exchange (CLUE) and fire response? If you have a great fire department nearby who are capable of quickly putting out a fire, then you pay lower insurance rates. Clue report on the property’s history.

rates for home insurance

Fire hydrants close to a property used to be an instant discount. Now, the underwriters look at whether the home is set far back on the property or sits behind an enclosure that prevents anyone from entering.

Such gates and walls prevent firefighters from doing their job, putting out fires on your property and home.

It’s a risk unless you communicate with the fire department to alert them on how to get onto the property.

If your community’s fire department has spent a lot of money and time to upgrade hydrants and response times, then you might want to include such information when applying for your insurance. It may save you money on your policy.

In addition, the underwriter evaluates your house’s construction. Most wood-framed homes are more susceptible to fire and windstorms than other structure types. If you have any of the following, let the insurance agent know when applying for your insurance.

They will need to send such safety features onto the underwriter for you, which should also save you money on your policy.

  1. Break-resistant glass
  2. Roof strapping
  3. Tie-downs
  4. Retro-fits that further reduce risk of damage and loss.

The underwriter also wants an idea of how well you upkeep your home. Maintenance is an important aspect for securing your home from many unnecessary and very costly insurance claims. For instance, if you see water running down the walls and you ignore it, then when mold grows, your insurance company may not pay the expensive mold remediation claims.

Comparing Quotes for the Best Coverage

Now that you are thoroughly aware of your whole situation and how the underwriters view your home, you are ready to compare quotes. Just input the information you are asked. Any quotes that you receive are subject to your now discerning eyes.

Disqualify any insurers whose creditworthiness is not up to par, or in the A-range.

Only include insurance companies who treat their customers well and pay up on valid claims efficiently. Next look at cost. Go for the lowest price to maximize your savings.

Use the FREE comparison tool below to start your search for quotes instantly!