Compare Home Insurance With 5 Simple Calculations

When trying to compare home insurance, it is important to compare more than premiums only. While premium rates are certainly important, you should also compare the policies themselves - and often you must look beyond the price. When it comes to home insurance policy coverage, not all policies are equal. Therefore, here is a guide to show you how to compare policy limits, and the way they are determined in home insurance policies:

Things You Will Need

Policy information from two competing insurance companies

Step 1 - Comparing Financial Ratings

Choosing an insurance company that has a very poor financial rating is a gamble; furthermore, using a company with a poor rating might lead to a claim that is not paid - should your home be in involved in a catastrophic loss or event. Always make sure to ask the insurance broker insurance agent to provide you with the company's A.M Best rating when determining which policy is best for you. The higher the A.M Best rating is, the more likely that the insurance company is to be able to pay claims and to remain solvent.

Step 2 - Evaluating Valuation Clauses

All homeowner’s insurance policies use one of two valuation processes: replacement cost or actual cash value. Insurance policies that use replacement cost simply pay you the amount it will cost to replace an item, if you purchase a new one. On the other hand, policies that utilize actual cash values use amounts based on the market value of the item - minus any depreciation. Therefore, always try to choose insurance policies to use replacement cost method, as this will allow you to purchase new items to actually replace the ones you have lost. Many times actual cash value policies use valuations that will result in you receiving an amount that is not sufficient to purchase the same item or an equivalent.

Step 3 - Review the Types of Perils Covered

Some policies are considered all risk policies and they cover any type of peril loss - so long as it is not specifically excluded in the policy contract. These types of policies will always offer more insurance protection than named peril policies. Named peril policies simply cover losses for that specific type of peril, for example: fire, windstorms, thunderstorms etc.

Step 4 - Check Out the Claims Handling Procedures

When evaluating the insurance policies, call each homeowners insurance company and pretend you're going to make a claim. Next, simply compare how each company responds.

Step 5 - Analyze the Premium Differences

While the premium costs will obviously be a big factor to most homeowners, it should actually be the very last factor considered. However when you were comparing the premiums, make sure to keep in mind that policies that offers significantly less coverage will cost a lot less. Therefore, choose the premium that offers the best balance between coverage and costs.


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