Shopping for homeowners' insurance isn't fun. At best, it is overwhelming. At worst, it is frustrating. This explains why a 2019 PolicyGenius report says that one in three Americans never shopped around for home insurance a second time after settling on their initial policy. As an unavoidable cost that comes along with a mortgage, most people invest the time just once in finding a carrier that will fit the bill.
But over the life of a 30-year mortgage, many things can change—so why not your homeowners' insurance? Don't let fear or frustration keep you from finding the best coverage to meet your current needs. Here are three things to keep in mind as you weigh your options.
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1. Read your current policy.
It's not enough to have known your policy when you first bought your home. You have to know what the current terms are right now. Year after year, renewal terms change, and very few people take the time to read the fine print. Premiums might have inched up, while limits might have backslid. To find price comparators, you have to set the baseline at what you're currently getting. Pull out your most recent policy and actually read it. Know the right meaning of the applicable terms:
Premium: The monthly or annual fee you pay for insurance.
Deductible: The payment you must make before your insurance kicks in.
Personal Property: Contents of your home, such as furniture, clothing, electronics, etc.
Riders: These are extra policies you can take to cover specific items that were not originally included in your insurance coverage.
Sub-Limits: Standard homeowners insurance policies include limits, but there are also sub-limits. The sub-limit of personal property is usually 50% of your dwelling coverage. There can be sub-limits on wind and water damage.
Check for additional coverage for floods, hurricanes, tornadoes, etc., based on common natural disasters where you live. Also, consider things that your home has that others in your area might not—sump pump and fine art coverage, for example, are add-ons that may or may not be worth having.
Other subtleties matter, too. Do you have interior and exterior coverage? Do you have personal liability coverage? What are the expected payouts and will they be enough, based on current market value for labor and materials on these kinds of repairs? Does the current insurer pay out up to the price of the home when you purchased it or the current market value or the full rebuild cost? The devil is in the details.
2. Shop for options, not restrictions.
Alan Himmel, a public adjuster and founder of Florida Allstar Public Adjusting Inc., advises people to be aware of potential pitfalls and opportunities. While it is possible to buy a policy that is 50% less expensive than everyone else, he says to beware of policies with restrictions or limitations.
"As an insurance adjuster, one of the things that I see very often are managed repair programs," he says. As a tradeoff, you agree to a discount on your policy, as long as you allow the insurance company to send their own contractors and workers to do the repair. He says the problem is that then the insurance company controls the claim; they decide how damage is defined and how the repair gets done.
"This sounds okay on the surface, but you must remember that your insurance company's goal is to pay out as little as possible," Himmel reminds. "With the managed repair program, you now have less leverage to argue about the damage to your house." Worst-case scenarios put insurance companies and repair services on the same team, sharing the objective of keeping repair costs low, though a better solution might be available.
Himmel also says to watch for sub-limitations on water damage coverage. Although a policy might have $500,000 in coverage to loss or damage to your property, it may have significantly less in water damage coverage.
"Since the vast majority of all claims are due to water leaks and pipe bursts, it would not be smart to buy a policy with this restriction," Himmel says. "Even the most basic water damage to a kitchen can be at least $10,000. This limit almost always leaves the homeowner short and can be devastating financially. As an adjuster, unfortunately, we see this every day. One of the biggest problems is that people don't find out that they have these restrictions until they have a claim."
Instead, look for good discounts that include those for home upgrades such as a new roof, a monitored alarm system, and glass or hurricane shutters. And keep as many options as possible available for repair.
3. Know what adequate coverage means to you.
Shopping around before signing a policy will not only save you money but can also earn you value should any emergencies arise. The rule of thumb is to send your existing policy to three different companies to look for matching or superior quotes, but some say to go up to five. Each insurance company will present prices that are quite different, and the details and features of your home might be weighed differently by each company.
Of course, the key to finding the right coverage is not just to get a lower price, but to get more benefits, too. This means that you must know the replacement value of what you own. Get an appraisal on jewelry and art. Check the receipts of electronics purchased over the past five years; if they are damaged or stolen, you'll want replacements.
If you've installed a trampoline or a pool, mention that to the insurance representatives and learn what coverage is right for your family. The Insurance Council of Texas suggests shopping the legacy carriers and some of the newer insurance start-ups too.
As you go about shopping for the right insurance company to sign a policy with, take note of the various factors that could cause price differences. Ask follow-up questions to tweak your quote to your needs. Your credit history might also play a role in determining the price tag of your policy, so ask the insurance representative directly if you should work on improving those numbers. Even try bundling car, home, and umbrella insurance for bigger savings.
Don't commit to signing up for a cheaper policy until you are sure that it offers all the protections you need today.