5 Tips to Get the Most Value from Your Homeowner’s Insurance

“Price is what you pay. Value is what you get.” – Warren Buffett

Make no bones about it, shopping for homeowner’s insurance can be a daunting process especially when looking on the coast. While it may be the easiest to compare, premium should not be the sole deciding factor in your insurance.

Below are five items to look at while shopping for homeowner’s insurance.

Premium. This is the first thing that clients look at, but it shouldn’t be the only deciding factor in this decision. A policy with a low premium may have more expensive deductibles than a policy with a slightly higher premium.

Deductible. Most people don’t fully consider the implications of their deductibles until they have a claim. However, this can make a major difference in how your policy will respond in the event of a claim.

First, let’s talk about what a deductible is and the different types of deductibles. A deductible is the amount of money that you are responsible for paying in the event of a claim. The most common type of deductible is a All Other Perils (AOP) Deductible. This is found on every homeowner’s insurance policy, whether it is coastal insurance or not. This is the amount that the insured is responsible for paying in the event of a covered loss. However, on the coast there is much more exposure for wind and hail damage than there is inland. So, on coastal homeowner’s insurance policies you’ll see wind and hail, named storm, and hurricane deductibles. A wind and hail deductible is the amount of money the insured is responsible for in the event of a loss due to any sort of wind or hail damage. A named storm deductible is the amount of money the insured is responsible for in the event of a loss due to a named storm. This includes a tropical storm or hurricane, so just your run of the mill thunderstorm or even a tornado (not associated with a named storm) would be covered under your AOP deductible. Finally, we have a hurricane deductible. This deductible only comes into play in the event of, you guessed it, a hurricane. Any other wind and hail damage would be covered under the AOP deductible. Most often, these deductibles take the form of a percentage. So, if you have dwelling coverage of $200,000 and a 2% hurricane deductible, you are responsible for $4000 (2% of your dwelling coverage) in the event of a hurricane. Occasionally, you will see a flat rate wind and hail  or hurricane deductible as well.

Now, let’s put it into a real life example. John Doe has three quotes that he is trying to decide between. All three quotes have $250,000 Dwelling Coverage and the same endorsements. Company A annual premium is $2200 and has a $2500 All Other Perils Deductible and a 2% Wind and Hail Deductible. Company B’s annual premium is $2300 with a $2500 All Other Perils Deductible and a 2% Named Storm Deductible. Company C’s annual premium is $2600 with a $2500 All Other Perils and Wind/Hail Deductible. Of these three quotes, our recommendation would be Company B or Company C. Company A is a competitive policy, but for less than $10 extra dollars per month he could greatly lower the chances of having to pay more than an AOP deductible. Statistically speaking, you are more likely to have a wind and hail claim than a named storm claim. If John wanted to go further to decrease his personal exposure in the event of a wind or hail claim he could choose to go with Company C’s flat $2500 Wind and Hail Deductible. In the event of a wind and hail claim, John would only be responsible for $2500. If a hurricane or tropical storm damaged his property, this would cut his personal exposure in half compared to Company A & B.

Exclusions. Homeowner’s Insurance Policies, also known as Ho-3s, are written on an Open-Perils Basis. This means that if the peril is not excluded from the insurance policy, then the peril is covered. Confused yet? Common exclusions include: collapse; mold, fungus or wet rot; earthquakes; and floods. Flood insurance is always a separate policy, but coverage for many other exclusions can be added back in via an endorsement.

Endorsements. Again, if you’re not familiar with insurance you may think an endorsement has more to do with a political candidate than your homeowner’s insurance policy. Endorsements on your policy change the coverage- they can add, modify, or take away coverage. There are quite a few endorsements that we always include in our quotes because we believe they add value without adding too much extra premium. Below are a few to be on the lookout for when you’re shopping:

Personal Property Replacement Cost- On a standard HO-3 policy, personal property loss settlement is on an actual cash value basis, meaning that in the event of a loss you would be compensated for that property after age and depreciation is taken into account. This endorsement modifies that coverage so that personal property is covered on a replacement cost basis. This means that you will be compensated based on what it costs to replace your property with like kind and quality, not taking age and depreciation into account. Keep in mind that there are sub-limits to every policy for valuable items such as fine art, jewelry, furs, etc. so we highly recommend scheduling those items on a separate Personal Articles Floater to ensure they are covered properly.

Extended Replacement Cost – Also known as Additional Amounts of Insurance. This endorsement gives you an additional amount of dwelling coverage (usually 25%) in the event of a total loss. This protects you from inflation of prices you might see after a disaster that damages many homes, such as a hurricane.

Water Back-Up and Sump Discharge or Overflow – This, along with Mold, Fungus, or Wet Rot, are also typically excluded but coverage up to a certain limit can be added back in.

Coverage. This is the most important part of your policy. Make sure you are comfortable with the amount of coverage that is provided for your Dwelling, Other Structures (fences, sheds, detached garages, etc.), Personal Property, and Loss of Use. In the event of a loss if you don’t have adequate coverage, you could find yourself paying more than just your deductible to rebuild your home.