Understanding The Three Basic Levels Of Coverage
There are three levels of coverage, which represent the way your home is valued and protected by insurance. You’ll be able to choose the type of policy that makes the most sense for you.
● Actual Cash Value: Actual cash value ensures the home and belongs for how much they are worth right now, not for the value you paid for them originally. In order words, it factors in depreciation.
● Replacement Cost: Replacement cost covers the value of your home and possessions in full, without deducting for depreciation. The amount you paid for them is what they are covered for. That doesn’t always allow you to replace items, and they may be more expensive now than when you bought them.
● Extended Replacement Cost: The most generous coverage protects you from inflation. With extended replacement cost coverage, you’ll be paid the amount it takes to repair or replace your home and possessions, even if they cost more now than when you bought them. The coverage usually adds around a 20-25% buffer.
The most coverage a bank usually requires is 90% of the value of your home, but many financial experts caution that extended replacement is the way to go. You’ll want to have a financial cushion in the event of a total loss.
What Situations Won’t Homeowners Insurance Cover?
Natural disasters, called “acts of God,” are not covered. This would be things like a large meteorite hitting your home or something else unexpected and uncommon. It also doesn’t cover acts of war. If you live in an area that experiences hurricanes, floods, or earthquakes routinely, then you’ll be required to pay for extra riders to cover these known possibilities.
Also, check your policy about vacant homes. If your property is left vacant for a certain amount of time, your insurance will be void. Vacant homes are more likely to be damaged in fires, floods, or invite vandalism.
How Are Homeowners Policy Premiums Determined?
The number one concern an insurance company has when determining your premiums is what amount of risk they are taking on. Insurance is supposed to be there for you when you need it, but insurance companies aren’t doing this out of the goodness of their hearts. Insurance is a business, and they do want to make a profit overall. A number of things come into play when determining risk on a property and its owner, including:
● The number of claims submitted by the owner in the past.
● The number of claims submitted at the property in the past (no matter who owned it).
● The neighborhood crime rate.
● The building material of the home, including the type of electric system.
● The amount of coverage (value of the home, possessions, etc.) the customer is looking for.
● The homeowner’s credit rating.
● Swimming pools, trampolines, and sometimes certain breeds of dogs can also affect insurance premiums and the ability to get insurance.
● Condition of the home at the time it is appraised.
How To Save Money On A Homeowners Policy
Insurance is important, but no one enjoys paying for it. You need adequate coverage that is affordable. There are some ways to get cheaper homeowners insurance premiums to lower your costs.
First, you can raise your deductible. The deductible is the amount you pay out of pocket before insurance kicks in. Deductibles help mitigate risk and reduce frivolous claims. The higher deductible you are willing to pay, the lower your premiums will be.
Next, install a security system for your home. It’s best if the security system is monitored and directly connected to the local police. This can lower your premiums by around 5%.Smoke detectors with sprinkler systems can also lower premiums, especially when installed in older homes. You can get discounts for having multiple policies with the same company. You can get10% or more off your premiums for having auto and home bundled. If you happen to pay your home off, your premiums will drop up to 10% as well. It’s assumed that once you own the property free and clear that you will take better care of it.
The last and probably most important cost savings tip is to comparison shop. Get quotes from several companies to see who can get you the best deal. You can use a web portal or an insurance broker to help you get multiple quotes. You can also compare what making changes to your policy will do to the cost
How Are Car Insurance Premiums Calculated?
Car insurance premiums are based on risk calculation and statistics. Many personal factors go into calculating your premium. It’s not uncommon for you and your neighbor to have very different premiums. Here are the most critical factors that can impact how much your car insurance will cost you.
● Personal Factors: Your age, marital status, and sometimes even your gender can help determine your insurance premiums. For example, teen drivers are extremely high risk and experience the highest premiums. Meanwhile, middle-aged married drivers statistically have fewer accidents and enjoy the lowest rates. Some states have stopped allowing gender to be considered, but when it is, men typically pay slightly lower rates than women.
● Vehicle Information: Unsurprisingly, brand new cars cost more to insure than used cars. If you have an expensive luxury car or a vintage car, you will have higher premiums. You can lower premiums by driving a car with safety and anti-theft features.
● Location: Where you live will play a significant role in calculating your premium. Population density causes more traffic accidents, areas with high crime rates make theft more prevalent, and some areas are more prone to severe weather conditions than others.
● Credit Score: This one might surprise you, but your credit score can have a major impact on your premiums. Poor credit has been associated with a higher rate of accidents; therefore, you’ll be charged more for being high-risk.
● Driving Record: If you have already had accidents or speeding tickets, then your premiums will be higher. Accidents and tickets can stay on your driving history for five to seven years. A DUI will not only drastically increase your premium but could cause you to lose your coverage with your current company.
● Insurance History: The type of policy you choose, including the amount of coverage and price of the deductible, will help determine your premiums. If you’ve ever let your insurance lapse for non-payment in the past, you will also have to pay higher rates.
What You Can Do To Lower Your Premiums
The best method for obtaining the lowest rates on auto insurance is to comparison shop by gathering quotes from multiple insurance agencies. Not all insurance companies charge the same because they all weigh risk differently and offer different discounts. You can get quotes online, by phone, or in-person from the companies themselves or from insurance brokers. To lower your premiums, try these tips:
● Drive used or less expensive cars.
● Work to improve your credit score.
● Take a defensive driving course.
● Avoid accidents and drive the speed limit at all times.
● Choose a higher deductible in exchange for a lower monthly rate.
● Take advantage of discounts that apply to you, such as accident-free, good grades, specific professions, safe-driver, and others.
● Prepay your insurance annually for up to 20% savings at many companies.
The better you understand how car insurance works, the easier it will be to identify if you have the right coverage and the best cost. Having the lowest premiums isn’t the only factor to consider in choosing auto insurance. Make sure that you also check reviews on claims payment and customer service to make sure that you’ll be happy with your service.
Why Bundle Your Home And Auto Insurance?
Home and auto bundles offer unique coverage opportunities and great discounts. It also saves you time and confusion, trying to work with multiple companies. In fact, sometimes weather conditions can damage both your car and your home at the same time. If you have bundled insurance with the same company, you’ll have a much smoother transaction getting your claims filed and approved.
Also, if you have a situation that makes it hard for you to get either home insurance or auto insurance, you can use bundling to help you obtain what you need. So if you have a high-risk home that is on a flood plain or in the path of wildfires, you have a stronger chance of staying insured (not being dropped) if you have a bundle in place.
The discounts of bundling are not minor; in fact, you can save upwards of 15-20% off your premiums when you have multiple policies with the same company. You can also get multi-car discounts and add additional coverage for boats, RVs, rental properties, and more.
How To Find An Insurance Bundle Deal
To get the best rates possible, ask your insurance agent about the option to bundle your home and auto insurance. If you’re shopping for new insurance, make sure your insurance broker knows that you’d like to bundle and to only look at companies that offer both home and auto insurance in their side-by-side comparisons.
Is Bundling Right For You?
Most of the time, bundling will save you money. However, if you have a really unique home or auto situation, poor credit, or a bad driving record or suspended license, then finding a bundle deal might be harder or not save you as much. You can find details about your home and auto plans on their respective declarations pages.
You can find the following information on the declarations page:
• Your annual premium
• Coverage amounts for each section of your policy
• Your deductible amount
• The policy’s effective dates (when your coverage starts and ends)
Carefully consider your options if you are in one of these unique positions. Sometimes there are companies that specialize in high-risk situations that can help you. Get quotes from at least three companies any time you are shopping for new insurance