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!
Since I’m moving into my first home next month, my biggest priority is buying enough homeowners insurance so that I’m covered and protected. I like how you give the advice to learn what’s included and excluded in the homeowner policies being proposed as homeowner policies aren’t equal. I bet if I talk with an insurance representative, I will be able to pick a plan that covers every aspect of my house.
Good for you Elsa. Talk to several insurance agents & put together a list of what sounds most important to you. Then send all of them an email, asking them to clarify these requirements … but always check the contract as too many sales people will tell you anything to close the deal (and it won’t mean a thing).
My husband and I are about to buy our first house and now we need to get homeowners insurance to go along with it. I am glad that you mentioned that when it comes to looking at the different agencies that one thing we need to do is give them the same information so that we will know that we won’t get ripped off. This is something that we will have to remember to narrow down our options.
My husband and I have recently bought our first home for us and our two kids. We want to get some home insurance to make sure that we’ll be covered in case of an emergency. Thanks for suggesting you ask your agent to include the features that are the most important to you.
Congrats on becoming a homeowner
You made an interesting point when you talked about how it can be a good idea to compare insurance companies against national brands. When looking for home insurance, would it be a good idea to work with a local company? I would think that working with a local company could be a good idea since they might offer more personalized services.
Henry, That’s a great question although you might not like my answer (because you own an agency). The reality AND something very few homeowners understand, is that insurance agents are simply sales people and they have very little or no involvement in handling claims. Now I’ll be honest and say this is true for both independent (work with multiple insurance companies) and captive agencies that work with a single company. However, I’ll compare the only 2 claims I’ve ever had …
So Henry, what did I learn. The tier 1 insurance companies like Allstate and State Farm, have a better process & better resources to handle claims. For example, I had to call, text and email my Florida adjuster more than a dozen times to schedule his walkthrough … and the in-house guy would share no information. It’s also impossible for an agency to truly understand the homeowner policies of 6, 8 or more different companies (plus car insurance), especially when they’re changing one or more times a year. So what expertise do independent agencies offer? Maybe you can shed some light here as I would be speculating …
Henry, I’m not comfortable with a local company as regardless of who you buy your insurance from, they’re simply sales people & really don’t know much about restoring a house and therefore can’t help you. Wish there was a good solution but it will ultimately fall back on the shoulders of the homeowner or a public adjuster but even there, I had to fire mine as he wasn’t doing his job.