Most Property Owners Are Paying Too Much For Home Insurance, Learn How To Reduce Your Insurance Cost!
Home insurance is one of those things that you just can’t get around, and it’s for good reason. Whenever you get a loan from a bank they want to ensure (no pun intended) that the asset they are taking a risk on (the property you are buying) has safeguards in place in the event of unforeseen circumstances. Most specifically, your bank wants to be listed as the “loss payee”. Meaning, in the event the property burns down to the ground, the bank will be the recipient of that money first, not you =).
So, with that said, there’s a great deal of information that we need to discuss to help you understand what your insurance policy does for you, and what modifications you can make to your policy. Also, we will go over how to efficiently handle a claim, and what effect that will have on you for the future.
When searching for home insurance the first thing you need to realize is that YOU ARE THE CUSTOMER! This means that the insurance company needs you more than you need them. They are 100% willing and able to modify and adjust your quote based on what you and your lender want. Things are not set in stone! Next, you should get 3 quotes from 3 different companies. It’s best to try a small, medium, and large sized firm. With a small brokerage, they usually have the ability to “shop” around for rates/quotes from multiple other insurers that they work with. This will benefit you! When you go with a company like Allstate or Liberty Mutual they aren’t shopping around, they are the actual policy grantor so they give you just 1 option. Smaller companies give multiple options typically. Interesting right? So that’s why its important you shop the market because one company may tell you $2000 per year, and another may tell you $4000 per year. The insurance business is not priced like a commodity is (supply vs demand), but rather priced based on their operating costs, overall expense ratio, competing with other insurers, and other extraneous factors not known to you or I. It’s a very unique business.
Know The Potential Property Insurance Options.
Once you find the right policy you want to go over some items that may give you discounts. Here are some common ones:
- Bundling/multi-policy discount
- Loyalty discount
- Being claims-free
- Having a monitored burglar system
- Having a monitored fire alarm system or other fire safety measures
- Getting an impact-resistant roof
- Home improvements/Upgrades
- Living in a gated community
- College/University discounts
You’ll want to go over this subject with your insurance representative so that you take advantage of every potential dollar of savings!
Increase Deductible And Insure For Purchase Price.
After you get these items boiled down the next things you should look at are your deductible and replacement cost. Your deductible is the amount that you are responsible for out of pocket until your insurer starts to kick in money for damages. For example, if you have a $2000 claim with a $500 deductible you will be paying the first $500 and your insurer will be paying the remaining $1500. When you raise the deductible to a higher amount your annual premium price goes down. So, instead of having a $500 deductible you may want to have a $2500 deductible. Yes, it’s more out of pocket when a claim happens, but it’s also a savings you enjoy monthly. That’s up to you to decide!
The next item to consider here is your replacement cost amount. This is the amount the insurer believes it will cost to rebuild your property in the event of a total loss. For example, in Rhode Island (https://quotewizard.com/home-insurance/rhode-island) it is common that a 3 story multi family property goes for $200,000 to buy, but the replacement cost is $600,000 to rebuild. So, what that means is you are paying for that coverage of $600,000, not $200,000. A trick you can do is to insure the property for a lesser amount (or even just the loan amount). This will drastically save you money on your premium, but in the event of a total loss you are getting a partial claim payout. Learn more about that here: https://www.valuepenguin.com/actual-cash-value-vs-replacement-cost. So, you wouldn’t be able to rebuild the property, BUT you could have enough to pay off your bank, and sell the land and keep that money for yourself. A total loss is a very rare occurrence overall so you want to consider whether or not you want to pay for that type of coverage.
Maintain Good Records In The Event You Need To File A Claim.
Now at one point or another you will likely have to file a claim for damages. What you need to consider here is that once you file a claim and get compensated for it your insurer will likely raise your premium cost, possibly drop you from coverage, and also put a mark on your insurance record for this claim. When you obtain future insurance policies that claim will show up, and you will be asked about it. Now, if you decide to follow through and file a claim it’s extremely important to keep time stamped records of the timeline of events, take photos/videos, get witness/tenant statements, and keep invoices/receipts handy. You will want to also be present to meet the insurance adjuster so you can give a statement yourself, and provide any additional information needed. The more efficient you are with your information, the more likely that your claim is to be approved. Here is some more information on how to handle your insurance claim like a pro: https://quotewizard.com/home-insurance/homeowners-insurance-claims-tips
We would love to hear your feedback on this topic, and also, talk about your experience dealing with home insurance companies! Post a comment below so we can start a discussion!
Gregory Rice is the Vice President of franchise sales for Nexus Property Management™.
Nexus Property Management™ is a National Property Management Franchise that manages all types of rental property from single family homes or condos to large apartment buildings and complexes.
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