The Insurance Corner: Shopping for homeowner insurance more complex

Shopping for homeowner insurance has become much more complicated over the past several years. There was a time when auto insurance was a much tougher market than homeowner insurance. That led to a rise in the marketplace of monoline auto insurance companies like Geico and Progressive. They found a market niche and are now two of the top five companies in premium volume in property and casualty insurance. Now companies will more readily write the auto exposure by itself but will not write homeowners coverage without supporting business such as autos. Most companies offer a discount from 10 percent to 20 percent on each policy to write them in a package. What has changed and what should you do to get the best coverage at the lowest cost?

Weather is the biggest culprit affecting higher costs of insuring your home. This could be due to fire damage with the use of space heaters in cold weather, wind blowing trees onto houses, lightning striking houses or hail damaging roofs. This does not take into account catastrophic losses from hurricanes, earthquakes or tornadoes. The primary coverage affected by these perils is coverage A on your policy, which is the value of the dwelling. That value is based on the replacement cost of your home not the market cost or what you can sell it for. In most cases today the replacement cost exceeds the market cost.

Most companies use a software program that takes into account location, quality of construction, age and square footage to determine the value the company will insure a home for.

Once the value of the dwelling is established, the amount of insurance for other structures such as detached garages or storage sheds, personal property and loss of use are a percentage of the dwelling amount. Medical payments coverage, personal liability and deductible amount are written for the amount the customer wants. Many carriers also include fungi and mold coverage at specific limits. Be careful not to over insure on any coverage. What you are insuring against is a major loss that you cannot cover out of pocket and would set you back financially.

So how do you get the best rate for the best coverage? First, know the coverage that adequately protects your risk. What amount of liability coverage is needed to protect your assets? What amount of medical payments coverage is adequate? Do you need replacement cost on contents instead of actual cash value (depreciated cost)? Other optional coverage may also be needed. Then contact an agent or company and market both your auto and homeowner policies. Make sure you get the rates for different deductibles on your homeowner quote. Most companies will start at $1,000 deductible, but price $2,000 or $2,500 deductibles.

Most companies use your credit score to determine the tier of premium they put you in. The higher the credit score, the lower the tier and lower the rate. Independent studies have shown a direct correlation between credit history and loss proclivity. Companies also base their rate on past claims experience. Insure your home for a major loss, and save money by paying any small claims if there are any. Install deadbolt locks and smoke detectors and test the smoke detectors every six months. If you can afford it, install a centrally monitored security system. The discount on your homeowner premium could offset over half of the annual monitoring cost.

Rather than be placid about the cost of homeowner insurance, be proactive. Reduce the hazards around your home such as updating wiring and reducing clutter. Understand how much coverage you need and shop for the product that meets your needs at the best price. Remember the package discount. It is offered in the marketplace so take advantage of it and save money.

Dave Pushman is the former regional vice president of Geico in Macon and is now an independent insurance agent with Tidwell and Hilburn Insurance. He can be reached at davep@th-ins.com.

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The Insurance Corner: Shopping for homeowner insurance more complex