You’re probably paying too much for homeowners insurance coverage.
Each year, most Delaware Valley-area homeowners let hundreds of dollars slip through their fingers because they buy coverage with high-priced companies. Nonprofit consumer group Delaware Valley Consumers’ Checkbook collected price quotes from major insurers for four local families and found that each could save more than $900 a year by choosing a low-priced company over a high-priced one.
For example, Checkbook’s sample Philadelphia family (zip code 19119; $739,000 replacement cost; split-level home with four bedrooms and two bathrooms built in 1970 with 2,800 square feet of living space) would pay only $1,791 a year with GEICO/Homesite or $1,938 with Plymouth Rock, but pay more than $3,000 a year with Farmers, the Hartford, Lemonade, Travelers, or USAA.
Checkbook has done these types of comparisons for property insurance for 30-plus years, always turning up big price differences among the largest insurers. And often, highly rated companies offer low premiums. To help you find a low-cost, high-quality company, Inquirer readers can access Checkbook’s ratings of homeowners insurance companies for free through Feb. 5 at Checkbook.org/inquirer/homeowners.
Because pricing methods and premiums can dramatically change over time, shop around for a better rate every other year or so. And if you’re considering an insurance switcheroo, know that you don’t have to wait until your policy term ends to sign on with a lower-priced company: Although you might have to pay a small administrative fee to cancel your current insurance, this fee is usually much less than the savings you’ll get from a lower-cost carrier.
Even if you select a low-priced company, don’t waste hundreds of dollars a year buying the wrong coverage. Some tips on reducing premiums:
Keep in mind that what companies sell as their standard insurance policies vary, which makes direct cost comparisons more difficult. For example, some insurers estimate the amount of dwelling coverage needed and then automatically include an extra 25% or more of protection to make sure you’re covered in the event of a total loss. Similarly, while coverage for increased living expenses is usually set at an amount equal to 30% of the dwelling coverage, with some companies, there is no limit — they instead reimburse for actual living expenses for up to one year. And some companies automatically cover personal property using a replacement-cost provision rather than charging an extra premium for it. If you are interested in these types of enhancements, make sure you’re comparing prices for the same coverage.
Consider that what you get with basic coverage is particularly important if you own an older home, where you might want to make sure expensive-to-replace features like woodwork are properly covered. Standard policies promise to repair or replace what is damaged but not to pay for an exact replica of what was lost. Also, with older homes, make sure you’re covered in case there are additional costs to bring old systems up to code during a rebuilding process. Some insurers include this type of coverage for no additional charge, while others impose additional hefty premiums.
No matter which company you choose or which coverage you select, you’ll want a company or agent that offers unbiased information and quotes accurate prices. Unfortunately, Checkbook’s undercover shoppers often found many agents more interested in selling them too much insurance and unwanted options than dispensing solid advice and reliable price quotes. Often their information was incorrect, even dishonest. When shopping for insurance, speak with several companies and agents — and question price quotes that seem excessive or include unrequested coverage.
Document features of your home and keep the list up to date. If you make improvements, promptly report them to your insurer. Take pictures or videos of your belongings and keep this information in a safe place away from your home. Being able to prove the value of your home and belongings will ensure that you’ll be fairly compensated in the event of a loss.