Cheap House Insurance Doesn’t Mean Less Coverage
October 5th, 2009 by Jamery ClarcksonDoes it seem that all your money goes to either insurance or taxes? Well, you can't do much about taxes except carefully select public officials but you can save money on your house insurance. Cheap house insurance doesn't mean that you're mincing on coverage. It simply means that you're a wise shopper.
Homeowner's Insurance companies adjust their rates with two factors. The first is the losses they experienced. That means if a lot of people filed claims, your rates increase. This doesn't seem fair but it's true. Companies need to have adequate money to settle claims if that money goes out the back door in claims, they have to replenish it. One method is to secure new business but the most common method is to raise rates. Shouldn't you start shopping and quit paying for someone else's claim. Cheap house insurance may simply mean the company didn't have to pay for other people's claims.
Another adjustment to insurance companies' rates comes from their experience in income from investments. Rather than letting the extra money simply set in an account while they wait for claims, they invest it. The money they make from investments also reduces the amount they must charge for premiums. Have you ever noticed how the stock market drops right after a natural disaster? That's because companies need to sell shares of stock to free money to pay claims. High rates might be an indication that the company's investments went sour, not that it's a better policy. Cheap house insurance may simply be from a company with a wise investment manager.
When you compare rates, make certain that you use the exact coverage shown on your policy. Policy forms are standard. The basics are the same for each type of policy. An HO3 contains the same coverage as any other HO3, unless it's a special policy. It states special on the sheet that tells what type of policy you have. There are differences, however. Your deductible changes depending on the amount you select. Your liability coverage also might be different. You may have riders on your policy. If you have any riders, it shows that as a cost item for your policy.
The deductible is the amount you pay for your claim before the insurance company pays any money. Common deductibles include $250, $500 and $1000. The higher the deductible amount, the less your insurance company has to pay and the lower the premium charge. When you're looking for cheap house insurance, make certain you compare like deductibles.
The liability section pays for injuries to others at your house, caused by your negligence. When you do comparisons for cheap house insurance keep the same limits of liability. Don't be tricked into thinking you actually have to be negligent to be liable. Courts award money to injured people every day where to the common person, there seemed no negligence. A good attorney can make you look responsible regardless. Once you find a cheaper policy, you might increase the amount of liability that you carry. Normally it costs pennies a week but if someone sues you, it's well worth the money. If you only carry $100,000 and an injured person wins the suit for $300,000, the last $200,000 comes out of your pocket.
When you look for cheap house insurance, make certain your quote contains any additional riders. Also see if there are additional discounts for which you might qualify. You'll probably find that with just a small amount of effort, you can find cheap house insurance that offers better coverage than you had previously.