You’re probably paying too much for homeowners insurance coverage.
Each year, most Bay Area homeowners let hundreds of dollars slip through their fingers because they buy coverage with high-priced companies. Nonprofit consumer group Bay Area Consumers’ Checkbook looked at prices offered by major insurers for several families and found that most could save more than $1,000 per year by choosing a low-priced company.
For example, a family living in Redwood City in a home with a replacement cost of $550,000 would pay only $834 per year with Hippo, $846 with Pacific Specialty or $943 with CSAA, but pay more than $2,000 per year with AIG, Chubb, Farmers, Foremost, Liberty or MetLife.
Checkbook has done these types of comparisons for property insurance for 30-plus years, always turning up big price differences among the largest insurers. And often, highly rated companies offer low premiums.
Fortunately, in California, it’s easy to compare rates. Each year, the California Department of Insurance releases its excellent “Homeowners Premium Survey,” which lists sample premiums charged by companies operating in the state. Visit www.insurance.ca.gov to identify companies that should offer low rates for your home and circumstances.
Because pricing methods and premiums can dramatically change over time, it’s worth it shop around for a better rate every other year or so. And if you’re considering an insurance switch, know that you don’t have to wait until your policy term ends to sign on with a lower-priced company: Although you might have to pay a small administrative fee to cancel your current insurance, this fee is usually much less than the savings you’ll get from a lower-cost carrier.
Even if you select a lower-priced policy, you could waste hundreds of dollars a year buying the wrong coverage. Some tips on minimizing premiums:
Take a high deductible: You’ll get a big discount, and it will make you less likely to file small claims that may generate future premium hikes.
Obtain an accurate estimate of what it will take to rebuild your home: Many homeowners do not maintain adequate insurance coverage, leaving themselves financially vulnerable in the event of a total loss. Don’t count on your insurer to keep your homeowners policy up to date. Every few years, have your insurer re-estimate your home’s replacement cost and then adjust your coverage as needed. But keep in mind that insurance agents may try to sell excessive coverage by providing inflated estimates of replacement costs. If you buy too much coverage, you’re paying for insurance you can’t use.
Limit the number of claims you make: Filing a claim will result in higher premiums from most insurers, and may cause an insurer to drop you, which will make it difficult and more expensive to get insurance elsewhere.
Editor’s note: The Chronicle is partnering with Bay Area Consumers’ Checkbook magazine and Checkbook.org, a nonprofit consumer group with a mission to help consumers get the best service and lowest prices. Checkbook is supported by consumers and takes no money from the service providers it evaluates. You can see Checkbook’s evaluation homeowners insurance companies until March 3, 2020, at Checkbook.org/Chronicle/Homeowners.
Carefully evaluate optional coverage: Raising limits for some types of coverage — such as liability — won’t increase your premium much, and most people find the extra protection worth it. But be wary of agents and companies that try to tack on extras without discussing them with you first.
Consider buying your homeowners and auto policies from the same company: Many companies offer dual-policy discounts to customers who insure both their homes and cars with them. But such discounts are usually small, and generally won’t make a high-priced company a good deal. (Checkbook also evaluates auto insurance companies for quality and price.)
If you own an older home, make sure it’s fully protected: What you get with basic coverage is particularly important if you own an older home, where you might want to make sure that expensive-to-replace features like woodwork are properly covered.
Document features of your home and keep the list up to date: If you make improvements, promptly report them to your insurer.
Evaluate earthquake risks: Earthquake coverage usually adds from $1,000 to over $4,000 to a typical homeowners policy for a house with frame construction, and usually two or three times as much for a masonry house. Most policies come with a hefty 15% deductible: If you buy $600,000 of coverage with a 15% deductible, you have to pay for the first $90,000 of damage out of your own pocket. Few homeowners in California bother buying it.