Cheapest Homeowners Insurance

Homeowners insurance is a necessity if you are purchasing or own a home. Either your Mortgage Company or common sense requires you to insure an increasingly more substantial portion of your investments. It does cost money, though.

best home insurance companyIn the lower 50 states of the USA, the average cost of homeowners insurance is $972 annually. A number of factors affect that cost, so that premium is just a guideline for estimating the amount of premiums you should be paying each year.

With any general statistic, it’s necessary to remember that there are as many individuals paying more than they average are paying less than the average.

So, how does one determine the cheapest insurance for your home? As of the 2010 Census, the average cost of a home in the United States was $272,900.

Your home undoubtedly does not match the average, so figuring the cost of insurance must be done individually. The best way to purchase insurance is to go through the following steps:

  • Determine how much insurance to purchase for your own home
  • What coverage to purchase for your home
  • How home insurance rates are determined
  • Choosing an insurance company
  • Comparing insurance premiums
  • Determine the cheapest insurance for your circumstances

How much insurance is necessary?

One caution most consumer sites give is to be careful not to purchase more insurance than you need. The cost, new, of your home is not a good indicator of the amount of insurance to purchase.

Before determining a value for insurance, decide if you wish to purchase insurance to pay for replacement cost of the building and contents of if you wish to purchase insurance to pay for the actual cash value of the building and contents.

Briefly, the difference between the two is:

  • Replacement cost – the cost to rebuild your home or repair damages using materials that represent similar kind and quality
  • Actual cash value – pays the cost of the value of your home and contents considering the age as well as wear and tear. The problem is that actual cash value may not pay the costs to fully repair or replace the building and contents.

Insuring your property for the replacement cost value is, of course, the most desirable. At this point, too, you should determine the most desirable amount for a deductible. Deductibles represent your contribution in the event of a loss.

When damage is sustained to your property, the insurance company will subtract the amount of the deductible from the payment for the damages. The advantage to a higher deductible is that the insurance company may give a ratings break for that higher deductible.

Valuation of a building for insurance, if you choose replacement cost coverage is relatively easy. There are a number of online sites that offer cost estimators. A free one is Building-Cost Net, but it’s a good idea to check with your insurance agent also.

A building contractor can give you an estimate, to make sure your insurance is adequate. In most insurance policies, you are required to purchase at least 90% of the replacement cost value.

It’s startling to consumers sometimes to realize how much the replacement cost of their home may run. Building costs have increased a great deal in the past fifty years.

Coverage to Purchase

Cost of homeowners insurance can depend upon the perils and coverage you plan to purchase. In the current insurance market, most people purchase the broad form insurance policy that provides coverage for the following perils:

  • Explosion, fire, smoke, and lightning
  • Storms – windstorm, hail, driven rain, sleet
  • Theft and vandalism
  • Vehicular damage (not your own vehicle, though), riot and civil commotion
  • Weight of ice and snow – a definite possibility close to the Great Lakes
  • Freezing, rupturing, or sudden and accidental overflow of heating, plumbing, and air conditioning systems
  • The sudden overflow of water from a household appliance – insurance policies do not pay for slow leaks because that is considered routine maintenance
  • Personal liability – from $100,000 to $300,000 depending upon your needs
  • Medical payments insurance – from $1,000 to $5,000, again depending upon your needs

companies for home insuranceIt cannot be emphasized enough that coverage for flood and earthquake is not included in any homeowner policy. Purchasing this type of coverage may be done through your local agent.

Flood insurance is subsidized by the Federal Government and can be investigated through FloodSmart. Earthquake coverage may be purchased through a local agent.

If you own anything that is particularly valuable such as jewelry or collectibles, be sure to get the item appraised and scheduled separately to ensure that the amount is included within your coverage. A flag would be if something costs more than $1,000 by itself.

The Way Home Insurance Rates Are Calculated

In addition to the perils and valuation, insurance companies take into consideration the following:

  • Construction of the home
  • Proximity to a water source
  • Quality of the fire department
  • Age and condition of your home
  • Claims history both of your home and the homes in the area

Other, more personal factors, are involved such as:

  • Purchasing insurance for your car and home from the same company
  • Your credit history – this helps determine your likelihood of filing minor claims
  • Your previous history of home insurance claims

Choosing an Insurance Company

If you see ads on television, Internet, and in the print media, you realize that there are many insurance companies selling all types of insurance. An insurance company must be licensed in your state to sell insurance since insurance is controlled by the individual states rather than the Federal government.

Choosing an insurance company or companies from which to request quotations can be done by the following means:

  • Ask neighbors, friends, and family about their insurance companies and their own experience
  • Consult with your state’s Commissioner of Insurance – you can find this website by going to the NAIC website and clicking on your state
  • The National Association of Insurance Commissioners NAIC can give you information on insurance companies, too.

Examine the insurance companies that you choose for quotations by looking at their financial ratings and complaint ratios.

Financial ratings are important to determine if the insurance company will have the ability to pay losses if necessary, especially if an area-wide catastrophe occurs.

Complaint ratios give an idea of how well an insurance company does its business.

Complaints are usually settled without a great deal of trouble, but many complaints about claims settlement may indicate that their approach to claims is more rigid than necessary.

Places to go for financial data and complaint ratios may be:

  • Your state insurance department
  • The NAIC website
  • A.M. Best rating service
  • Standard and Poor’s ratings

Getting Insurance Quotes

best home insurance ratesChoose at least three of the most reliable insurance companies from which to obtain quotations and provide them with the information to obtain like quotations.

Comparing quotations is much easier if you compare the same coverage.

This process will allow you to compare premiums.

Determining the Cheapest Insurance for Your Situation

At this point, you need to examine the quotations for premiums as well as the qualities of the insurance companies you examine. Your personal judgment will help you to determine the cheapest insurance for you based upon your research.

Depending upon your determination and the premium spread of insurance quotes; you need to figure the cheapest insurance for you.

Be sure to use the FREE quote tool below to start comparing rates instantly!