What Companies Offering Free Home Insurance Really Mean

Although free home insurance advertisements look appealing, if you are a savvy consumer, you know that there is no such thing as a free lunch or free insurance. Anyone offering something for free will find a way to recover the cost of the item somehow.

Homeowners insurance is no different. Although you may see an advertisement for free homeowners insurance, there are hidden costs involved. Here are some of the things these companies may really mean rather than actually free insurance.

Free Insurance Means a Free Quote

Most of the time when you see an advertisement offering free homeowner’s insurance, the insurance is not actually free, it’s simply a quote that is free.

Although giving out free quotes is a standard operating procedure for insurance companies and has been for years, many companies still emphasize the word “free” in their advertising for insurance quotes.

Although the words may say free homeowner’s insurance, looking more carefully into the advertisement will often reveal the truth – it’s only the quote that’s free; you still pay for the premium.

Free Insurance Means It’s Part of Your Monthly Payment

Some home sellers, particularly new home sellers, will advertise free homeowners insurance as part of their incentive package to sell you a new home. They may include the insurance for a year or two, or they may say the insurance is free for the life of the loan.

All this means is that the cost of your homeowner’s insurance is wrapped into the cost of your monthly loan payment.

Since a standard house payment is often quoted to include payment, interest, insurance and taxes, the sellers in this case focus on the monthly payment and tell you that you are receiving the homeowners insurance free. In reality, you are paying for the insurance, it’s just included in the amount of your monthly payment.

There are significant drawbacks to this kind of arrangement. Often the builder has a “sweetheart” deal with a particular insurance agency if they are offering this “free” insurance. Each homebuyer is automatically signed up with a particular agent for the insurance, so they don’t have the chance to shop around for rates and the “free” rate is likely to be more expensive than the rate you could find with competitive shopping around.

If the free insurance is offered for a period of time, such as a year or two, the insurance company is counting on homeowners being too preoccupied with the rest of their lives to concern themselves with shopping around for homeowners insurance.

Free Homeowner’s Insurance Means You’re Overpaying

If an agency offers you free homeowner’s insurance when you insure two or more cars or when you buy a particular item or home.

In this kind of a deal, you a frequently paying too much for the product you did buy – either auto insurance, the home or whatever other product.

Free Insurance Means a High Interest Rate

If a person thinks they are getting free insurance, they may be paying the mortgage company or the bank such high interest rates that the extra you pay covers the amount of the premium.


There is no such thing as free lunch or free homeowners insurance. There is always somewhere else that you are overpaying in order to get anything for free, including homeowner’s insurance.

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