If you’re honest, you might be scratching your head as you sort through home insurance plans. You start reading into deductible percentages or out-of-pocket fees and you’re having flashbacks of high school algebra.
How do you know which is the right choice? If it’s the right choice, is it the right price?
Finding the right plan with an affordable price tag is important and can be accomplished. Let’s say you could save forty dollars a month without compromising your plan’s benefits, that’s an internet bill back in your pocket. One of the ways to ensure you’re making the right choice is to do a little research.
Here are some of the basic coverages home insurers provide, these factors are also how they calculate risk.
Dwelling Coverage – This portion protects the physical structure of your home, hence the name dwelling coverage. It will help protect you from any unfortunate events such as:
- Fire and Smoke Damage
These are some of the typical events, but these may vary upon the provider.
Personal Property Coverage – In the event of a break-in most every provider will cover your losses in the event of a theft. Some of the major items like:
Other Property – This section covers items that aren’t attached to your home, property like detached garages, sheds, fences and things of this nature.
Liability Coverage – If a guest injures his or her self at your home liability coverage covers you in the case of a lawsuit. Additionally, if you accidentally cause damage to another person’s property.
Living Expenses – In the event your home is uninhabitable, insurance providers will cover living expenses needed.
These five coverages are what make up the foundation insurance providers take into consideration when establishing coverage rates.
What the average consumer might not know is that insurance providers compete with one another by calculating risk differently. For example, StateFrarm might have a higher premium if your house is located in a crime saturated area. Yet, USAA will give you a discount if you have a home security system installed.
Major insurance providers like StateFarm, Esurance, or Allstate are always analyzing data. They want to know, what their competitor’s rates are, what factors enhance risk, and how to entice new customers. One way to gain a competitive edge is to make a calculated risk.
For example, let’s say you have a trampoline and you live in a rural area. Allstate might have a blanket coverage policy, meaning you have a trampoline your rates go up. However, let’s say Esurance found that homeowners who live in rural areas are 50 percent less likely to file a claim. Esurance decides not to raise your rates based on their data. You, the consumer, could save money by taking the time to compare insurance plans.
However, there are multiple risks for every household. One of the best things you can do is first examine your surroundings. Conducting a simple exercise of examining what coverages you might need and which ones you don’t is a great start.
Perhaps, you live around family members, or in a rural area with no close neighbors. Liability insurance is something that might not need a lot of coverage on. However, you might live in a neighborhood and love to host, in this case, more coverage is needed. Simply evaluating your environment and comparing insurance plans can help protect your home and your wallet.
Once you do your part of calculating risk it’s time to examine how insurance providers calculate their risk and play matchmaker. Find a provider that best suits your environment.
Consider this, Allstate might reward you with a lower monthly premium because your home is in close proximity to a police station. However, StateFarm might consider your home a low risk for theft and not reward you. By evaluating more than one provider you will find these discounts.
An additional element to consider is choosing a high deductible or a low deductible. A deductible is the amount of cash you will pay upon filing a claim. Insurance providers have set deductibles you can choose from. If you choose a lower deductible you will have a higher monthly premium (payment). If you choose a higher deductible you will have a lower monthly premium. Having a lower monthly payment sounds nice but you run the risk of paying more money down upon filing a claim.
Finding the right provider is similar to car shopping. It’s wise to consider three to four options and then weigh the pros and cons. The key to getting the right plan at an affordable price is studying your living situation and comparing and contrasting insurance providers. Having the right coverage gives you and your family peace of mind; finding this at an affordable gives you more freedom. You have the freedom to invest, pay off debt, or save for a vacation. Whatever it is you do with the extra cash, it’s yours, you earned it by doing a little homework before you chose your coverage.