Peace of Mind Policy: How to Improve and Save On Homeowner's Insurance

As published in NWI.com, by Eric J. Martin, November 30, 2014

It's impossible to plan for the unexpected. But as a homeowner, the closest you can get is to purchase adequate homeowner's insurance that covers your property in the event of an injury, fire theft or other disaster.

While mortgage lenders typically require borrowers to maintain sufficient hazard insurance coverage on their properties, homeowners often can get complacent with their longstanding policies in place and don't investigate the potential for savings they may be eligible for, experts say.

"Without asking questions and shopping around, how can we really know if we have secured the most comprehensive coverage at the absolute rock bottom price?" asks Frank N. Darras, founding partner at DarrasLaw in Ontario, California, who recommends inquiring about discounts with your current carrier and comparing plans offered by competing insurers. Other ways to possibly earn a discount, according to Darras, include:

  • Living close to a fire station or fire hydrant
  • Recently replacing or upgrading your electrical system, plumbing, or roofing
  • Installing deadbolt locks on all exterior doors and motion-detector security lights around the property's perimeter
  • Clearing away overgrown foliage from your property line and trimming trees
  • Being retired and/or present at home more often to reduce the risk of burglary and vandalism.

Mark Carrasquillo, account executive with E.G. Bowman Company, an independent insurance agency in New York City, says several factors can result in lower premiums and a better value, without sacrificing important coverage.

"Bundling policies (for home, auto, and/or life insurance) with the same company usually triggers a discount," says Carrasquillo. "Securing the services of a central station burglar/fire alarm monitoring system can yield savings, too, as can taking the highest deductible option you can afford."

Improving your credit history is another way to potentially decrease premiums. Research from insuranceQuotes.com revealed that consumers who have a fair (median) or poor credit score may pay, respectively, 29 percent and 91 percent more for homeowners insurance than someone with excellent credit. Additionally, try not to file any damage claims unless absolutely necessary, as that also can lead to premium increases.

As a general rule, experts suggest consulting with your insurance agent at least once a year to review your policy and check for every discount you may qualify for.

When it comes to ensuring that you're insuring at the right coverage levels, go for the highest limits of protection you can afford, says Darras. That means choosing guaranteed replacement cost over actual cash value. The former reimburses you for the actual cost of the damaged or stolen property if you were to replace it brand new; the latter is equivalent to the replacement cost minus any depreciation based on age, wear and tear.

"When you buy homeowners' insurance, don't insure it for what you paid for the property. Don't insure it for the amount of your current mortgage. Insure it for what it would cost to rebuild right now," says Bob Freitag, president of AmeriClaims, a public adjusters company in Indian Trail, North Carolina. "Even a small fire or storm can cause significant structural damage to a home. Make sure your policy limit is sufficient to rebuild your house from the ground up. Call a couple of builders and get estimates on rebuilding costs."

In addition, Carrasquillo says to take the maximum liability coverage available - usually $500,000. "Choosing only $300,000 might save you very little, like $40," he says.

Be aware that antiques, artwork, collections, rare items, business property, detached buildings, pools and fences may have to be insured separately to be fully covered.

"Ask your agent if these items are covered in your main policy contract," Freitag says. "If they aren't, you can request additional coverage for them in a separate listing, called an 'endorsement' or 'rider,'"

Lastly, opting for separate optional earthquake and/or flood insurance - where it isn't required but in areas where your home may be at risk - is another smart decision.