A recent Ernst & Young survey of 24,000 policy holders found price to be an important consideration for homeowners when deciding which insurance package to buy. Other factors are brand, product features, access to information and personal interaction with their insurance broker, to name a few. Ultimately, the choice you make for your home insurance has to factor in all these considerations as well as your personal situation. That way you can ensure your coverage comes at a cost you can afford and also delivers value by meeting your needs.
Below is some simple financial help to guide you through the decision-making process, whether you rent a one-bedroom pad or own a sprawling mansion.
Get the best coverage for you
All insurance plans are not created equal. Your focus should be on getting the best coverage for you.
You may opt for a “comprehensive” plan, for example. This provides the widest ranging coverage possible by insuring both the building and contents from all risks, except those specifically excluded. While premiums may be higher, it provides the most peace of mind. On the other hand, “basic” coverage insures the homeowner only against “named perils” indicated in the policy – that means you have to ensure every type of damage you want coverage for is specifically identified. This allows you to reduce your premium by carrying the financial risks of some losses yourself.
When choosing a coverage plan, pay particular attention to extensions of coverage. These are the little extras insurers add to their policies to differentiate them from the competition. They often provide the latest, no-cost add-ons to a policy and may include identity theft insurance or coverage of the personal property of family members who are away from home, including seniors residing in an assisted-living or retirement facility.
Regardless of the plan you chose, earthquake insurance is a vital component of complete property insurance coverage, since we live in a seismically active region. In fact, many lenders require this before they’ll give you a mortgage.
Take advantage of ways to save
Insurance plans and costs can vary widely, so do your research. Talk to a few brokers and get quotes so you can compare premium costs. There are various ways to reduce your insurance payments. For example, insurers save administrative costs by bundling several products into a comprehensive plan and then pass on these savings to customers. Generally, these comprehensive bundles cover building, personal property and liability insurance, reducing any potential gaps in coverage. Also, a bundle package policy with one provider simplifies the claims handling and ensures there is only one deductible per claim.
Chatting with your insurance broker is key to getting all possible discounts. For example, you may be able to negotiate a premium discount if you’ve had a claims-free track record; if your home is new; if you are mortgage-free; or if you can show added security such as alarm systems or a neighbourhood watch program. Mature citizens may also receive a discount. And of course, you can save on premiums costs by increasing your deductible, but use this wisely to ensure you don’t carry a heavier financial burden than you can reasonably manage.
Be careful to do it right
Your property insurance policy is a legally-binding contract based on your statements and representations. Take the time to understand it and ensure the information provided is accurate. Be clear about what’s covered in your policy and what isn’t. Is your grandmother’s porcelain tea cup collection covered? What about your rare African masks and Louis XVI boudoir? Ask as many questions as you need to ensure items that are important to you are not missed. Equally, be sure you have a firm understanding of which items have special payment limits. These can include stamp collections, bicycles and jewelry. You should also find out what hazards your property isn’t insured against, which may include flooding or vacancy.
To avoid surprises, make sure you accurately declare the description, ownership, occupancy and any non-residential use of the property, such as incidental business activity. For example, if your mother is on the title, it’s wise to include her in the insurance policy so that she’s covered in any potential legal action regarding the use or ownership of the property.
It’s important to work with a good broker who can help you dot all the I’s and cross all the T’s of the insurance process. A good broker will take the time to listen to your needs and educate you on the products available. You may also want to ask your broker about their track record for responding to claims in a timely fashion – you hope you never need to file a claim but if you do, you want to be sure it will be processed in a prompt and professional manner.
Kathy McGarrigle is chief operating officer for Coast Capital Savings.