Home Insurance Buying Tips

The following information is provided as a courtesy of JBR Group, Inc. While much of the information is generic and common sense, not all of it may apply to every state. So when in doubt about a topic (like a discount), seek the advice of an insurance professional from within your home state or from the state in which you plan to relocate. For this reason JBR Group, Inc., can not guarantee the accuracy of all information.

Homeowners insurance policies sold in most states will offer these three basic kinds of protection:

Liability Coverage - pays for bodily injury to another person or property damage for which you, members of your household or pets are legally responsible. It may also pays for a lawyer to defend you if required.

Medical Coverage - pays for injury to another person who is accidentally injured on your property, or injured by you, members of your family or your pets. It does not apply to your own injuries or those of family members living with you.

Property Coverage - pays for physical damage to your house, personal property and unattached buildings on your property. It will also reimburse you for additional expenses if you cannot reside in your home because of a covered loss.  

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Optional Coverage’s

(In most cases many of these items are not part of a normal home insurance policy, however some companies may include coverage for one or more. To find out if your policy does or does not contain a specific item contact your insurance agent for a detailed explanation)

Inflation Guard Coverage - automatically raises your coverage limits annually to adjust for increased prices in building materials & labor. If you buy this coverage, you should still review your policy limits every year to make sure your home is adequately covered. Many agents will offer an annual review of your policy, consider taking advantage of it.

Additional Personal Property Coverage & Floaters - extends beyond the basics of your policy and can covers such items as jewelry, furs, coins, antiques, artwork and silverware for higher limits.

Replacement Cost Coverage - pays for the cost to repair or replace your home with no deduction for depreciation. You may be required to insure your home for at least 80% of its current replacement cost.

Guaranteed Replacement Cost Coverage - pays for the full cost to replace your home even if it costs more than your policy limits. Some companies will settle covered losses to your home up to 125% of the limit of liability. With this coverage you are usually required to insure your dwelling to at least 100% of its replacement cost.

Mine Subsidence Coverage - covers damage to your home's structure caused by a mine collapse or cave-in. This coverage may be required if you live in an area prone to such mishaps and may require a rejection in writing if you choose not to have it as part of your policy.

Sewer Back-up - covers water damage caused by sump pump failure or sewer back-up. Water seepage is not covered.

Flood Insurance - available through the National Flood Insurance Program. Some companies participate in the Write Your Own (WYO) Program for the National Flood Insurance Program. Contact your agent for more details. Some lenders may also make this coverage a condition in your loan when purchasing a home it located in a area identified as prone to flooding.

Earthquake - covers damage to your house or contents from earthquakes. As with mine subsidence and flood insurance most lenders will require an earthquake policy as a loan condition if you live in an area prone to quakes. 

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Rating Factors

The following details could effect the price you may pay for homeowners insurance:

Policy Type - the more protection provided, the higher the cost.

Location - urban areas (cities) may have higher crime rates while rural (country) areas may have a lower quality fire protection or longer response times. Some areas just by geographic location may be more susceptible to perils, such as earthquakes, flooding or mine subsidence. (this is where an old mine may exist under the home, if the shaft gives way it could effect the stability of the ground on which the home is constructed)

Public Fire Protection Quality - the closer your property is to the nearest fire hydrant or fire station and, and the better your fire department's rating, he lower the premium.

Construction - frame structures (such as wood, stucco or siding) are more susceptible to fire damage while Masonry structures (such as brick or stone) are more fire resistant and less susceptible to fire, but more susceptible to earthquake and mine subsidence damage.

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Types of Homeowners Insurance Policies

Most insurance companies sell a limited variety of homeowners insurance policies. Like other products you purchase, homeowners insurance also comes in good, better and best models, How much your insurance costs depends upon the model you choose and the options you add to it. (would you like fries with that?) Most describe their policies with a form number: HO2, HO3, and HO8 for homeowners, HO4 for renters, and HO6 for condominium owners. While some companies may use generic terms and titles to describe their policies, such as Standard or Broad form, Special, Comprehensive or Deluxe. still others may use their own policy titles; for example, a Gold, Silver or Platinum Policy.

When you obtain price quotes, ask the agents “What type of policy they are quoting” Then ask what it is the equivalent of in other companies. This will insure that you are accurately comparing prices.

The portion of your policy that deals with “Property Loss Coverage” outlines the kinds of hazards and perils covered by your policy. The more types of losses a policy covers, the more you will pay.

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Determining How Much Coverage to Buy

Usually a home is your largest single investment, and every effort possible should be made to fully protect it. Your homeowners coverage should be equal or close to the cost to replace your home if it were totally destroyed. At the very least, your coverage should be equal to 80% of the current replacement cost of your home.

ACV or “Actual Cash Value” Policies - pays replacement cost minus depreciation. With a $100,000 ACV policy, the most you would ever receive if your house is totally destroyed, is $100,000, even if it actually costs $125,000 to rebuild your home.

Replacement Cost Policy - pays the full cost to repair or rebuild your house. Using the previous example, with a replacement cost policy you could receive the full $125,000 to rebuild your home. Home improvements and Inflation both increase the value of your home, so review your coverage annually and update it as needed.

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Ways’ You May be Able to Lower Your Rates

There are several methods you can employ to lower your homeowners insurance costs:

Ask About Discounts - some companies offer discounts for non-smokers, for alarm systems, and for purchasing more than one policy from the same company.

Take The Highest Deductible You Can Afford - insurance is meant to protect you from the financial consequences of major losses. By raising your deductibles, you may be able to significantly lower the price for homeowners coverage, but you will pay more out of pocket each time you have a claim.

Maintain Good Housekeeping Habits and exhibit a pride in ownership by keeping your home and grounds free of accumulated trash and by keeping roofs, siding and brickwork in good condition and freshly painted. This will not lower your costs immediately but will go a long way to eliminate the shock of having your policy terminated.

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Household Inventories

In the event of a loss, your policy may require you to give information such as : the description of the damaged item; place of purchase; original cost or receipts, if possible; and the current value or replacement cost of an item.

The period of time directly after a loss can be very traumatic. By completing an inventory of all your possessions, you can immediately determine what has been stolen by a burglar or lost in a fire and make a much more accurate claim.

Your inventory should include a complete list of your possessions, serial and model numbers, the original costs and available receipts. Take some photographs or a video of your home and property to support a claim. Keep a copy of your inventory photos and/or video in a safe deposit box or at a friend or relative's home. Your agent may also be able to provide you with an inventory "guide" to help you get started . Click to return to Options

Factors To Consider When Choosing A Company

In addition to price, there are other factors and intangibles to consider when buying or changing insurance policies:

Acting in accordance with the law - If you want to know whether an insurance agent or company is acting in accordance with the laws of your state, or just have a general question about insurance, you may contact the your states Department of Insurance.

Service - Some companies sell through local agents and some through direct marketing or group plans. If the ability to discuss problems or questions with someone you know is important to you, you should find out whether the company services its policyholders through local agents, or through its regional or home office.

Financial Stability - Financial stability helps ensure that a company can pay its claims. Several independent organizations that rate the financial stability of insurance companies are listed below. Each organization has its own criteria and may charge a fee for its services. Your public library may also have published ratings from these sources.

A.M. Best Company

Moody's Investor Services

Standard & Poor's Insurance Rating Services

Weiss Ratings, Inc.

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