The nonprofit Consumers’ Checkbook regularly does local-market price checks, which show that among people with the same kinds of home insurance coverage, some overpay by $100 or more per month. Too many of us treat buying coverage for our homes and personal property as a set-it-and-forget-it proposition, signing off on our annual renewals with minimal scrutiny. That’s not surprising given the complexity of typical policies and the difficulty of comparing similar policies from different insurers.
What Is Home Repair Insurance?
“It can be very hard to shop,” says Fabio Faschi, property and casualty team lead at online insurance broker Policygenius. “With auto insurance, the consumer can say, ‘I want this much coverage.’ But home insurance is driven by the carrier’s determination of what it is willing to replace the property at, often packaged with its own specialized coverage offers.”
Are You Paying Too Much for Home Insurance?
The following factors can help you figure out whether you’re overpaying or under-insuring.
1. Has “inflation guard” inflated your rebuilding costs?
Homeowners insurance is usually designed to cover the cost of a new home, with requirements that you carry enough “dwelling coverage” to rebuild. (“Guaranteed Replacement Cost Coverage” covers rebuilding no matter the cost, but is becoming rare.) Many renewals include some version of an “inflation guard” to keep even with rising construction prices; if it’s not stated clearly in the renewal, you can see it at work in the coverage difference from one year to the next. But it’s possible that increases compounded over the years have outstripped actual rebuilding costs. (Conversely, you may be under-insured if the inflation guard is applied nationwide.) Regional rebuilding costs can fluctuate widely, particularly in the wake of major storms and other natural disasters. Check with local home builders and insurance agents, or do a rough estimate using an online calculator such as DwellingCost.com or BlueHammer to see if your coverage matches your home’s value. Even better, get new insurance quotes that include rebuilding costs as points of comparison.
2. Price shop to see if your rate is competitive
Loyalty doesn’t always pay. While it can be difficult to make direct comparisons, working with an insurance broker and putting in some effort on your own can make you smarter about what’s actually covered (flooding is usually not), and better prepare you to identify a deal—you can sometimes save, for instance, by buying additional or extended replacement cost coverage that increases the insurance at a lower overall cost. Chubb is a standout in stretching replacement cost, and is particularly proud of its expertise in insuring older homes and unique structures. Try streamlined online-shopping tools such as Policygenius to help standardize offers, and ask a new insurance agent or two for their best deals (agents may be independent or may work for a specific insurance company). “Carrier appetite can change over time for what they’re more or less comfortable insuring, so it’s always worth comparing what’s available,” Faschi says. State Farm, Allstate, Farmers, Liberty Mutual, USAA, Travelers, Nationwide, Hartford, and MetLife are among the largest carriers, and can be contacted directly—no need to wait for your renewal.
3. Is your “insurance score” pushing your rates higher?
Some insurers in some states use people’s credit scores in addition to their claims history to price homeowners policies. Ask if this is the case—your insurer or broker should be able to tell you whether your credit rating and claims history are factoring into an insurance quote. Sites like Credit Karma can show how your credit score could be improved, and either way, consider holding back on small homeowners claims that will end up costing you in higher premiums.
4. Consider stretching for a higher deductible
Save homeowners insurance for big expenses, not every incidental outlay, and you could come out ahead. Think replacement kitchen, not replacement kitchen appliance. Increasing your deductible from $1,000 per claim to $5,000 could save you $500 or more on annual premiums. Ask for quotes based on different deductibles; consider what you could afford in an emergency, and how many smaller claims you would be forgoing with a larger deductible.
5. Look for credits and discounts
Make a point of asking about special offers when you review insurance quotes. Whether it’s bundling auto and home insurance, or deals for being a senior citizen or a first-time home buyer, these can add up to real savings. There are often credits for reducing risk, too, from adding security measures (dead bolts, alarm systems, even water shutoff valves) and renovations (is there new wiring or did you replace your roof?) to simply not having submitted claims. Mike Gulla, director of underwriting for tech-savvy Hippo Insurance, says their Smart Home Sensor Kit can typically save customers 5 to 11 percent. Ask, too, if any policy has optional coverages that have an outsize effect on the overall cost: You could be paying for extra protection against identity theft or personal injury that you don’t need.
Renting Out Your Home? Make Sure You’re Covered
Do you list your home with Airbnb, HomeAway, or another short-term rental site?
“You may be opening yourself up to gaps in coverage and denial of claims,” warns Nick Massey of Proper Insurance, which started as a carrier for bed-and-breakfasts in the 1980s and now specializes in policies for short-term rental hosts.
Get clear if your homeowners policy includes a “business activity exclusion” that may deny claims merely because there are renters on-site. Also look for a “home sharing endorsement” that will actually provide some coverage for renting out.
Better yet, ask about policies that explicitly include at least $1 million in “commercial liability” coverage.
Check the coverage, too, against any local laws that may have their own insurance requirements separate from what’s included by rental sites.
One trick for reducing your insurance costs: Consider dialing down the “loss of revenue” protection in commercial coverage; you’ll be less insured against lost rental income—say you miss three weeks of summer rents because a lightning strike knocks out the house’s water pump—but as with higher deductibles, you may save in the long run if you can afford to shoulder more risk.
