What is important when purchasing homeowners insurance?

Question

I recently got a quote on homeowners insurance. They asked me a lot of detailed questions like the layout of the bathroom's, % carpet/wood/tile and others. The worst one was, "how many "upgrades" does the house have?". I have no idea which options are "standard" or "upgrades". I have never built a house before. I know I have granite looking counters in the kitchen. Is that an upgrade?

Let's say I insure my house for $500,000.00. In reality, if I need to rebuild my bathroom are they really going to deny building it like it was because I missed something in the details? In other words, if I have enough money to pay for the bathroom can't they just build it like it used to be?

Also, is the insurance company I choose really that important? If my house gets destroyed the last thing I want is several years in court trying to get what I paid for.

Answer 1

Answer all of their questions honestly and as accurately as you can, but don't stress too much about it. If you don't know the answer to something, ask the insurance agent what it means; that's what they're there for. (If you're doing this online, email the support, or the 'live chat' feature many of them have. Or, don't do it online, if you feel better having an agent in person; nowadays, most of the major insurers are similar on price so it's not a massive savings to skip the agent.)

As far as whether it's important to pick a specific insurer - that's really your call. Read reviews, understanding that folks with bad experiences are more likely to write reviews than the 90% of folks who get no benefit from homeowner's insurance. You need to make the decision as to how important reputation and ease of claims process is versus price. That's why there are multiple insurers, after all - you can decide how important it is to you. It sounds like you would prefer a simpler claims process, so perhaps you should go with someone who is known for an easier claims process (understanding that no insurer is always going to agree with every claimant 100%).

Answer 2

The basis of homeowner's insurance pricing is the AOI, or Amount of Insurance. This pertains to the cost to rebuild the dwelling in the event of a total loss. The standard coverages (e.g., contents, loss of use, medical payments, liability) are calculated relative to this amount. Consequently, the AOI is selected by appraising the value of the dwelling. This is why it is important that if parts of the dwelling are upgraded, that the cost of those upgrades are taken into account.

The question is not one of denying claims should a loss occur, unless the nature of the upgrade is such that policy should not have been underwritten in the first place. (This can happen if, for example, the homeowner builds an extension onto the house that damages the structural integrity of the dwelling.)

In the end, the AOI is still just an estimate, but the takeaway is that, like scheduled personal property, jewelry, rare collectibles, or other endorsements, every home (and homeowner) has slightly different insurance needs, and it is in your interest to tailor your coverage to be as accurate as possible in reflecting your needs. Insurance is not a one-size-fits-all product; consequently, the selection of sufficient coverage for your mix of risks is only prudent. Now, if after you get a quote back and you find that the premium is too high, you can typically select a deductible that can reduce it, but you have to consider what amount of exposure you are willing to retain. You should shop around, too: different insurers use different methods and criteria to price their products, so even if the coverage is substantially similar, the premiums may vary: for example, some insurers ask whether you own a dog (exposure to liability claims), but others do not. Some insurers put more weight on your dwelling's geographic location (exposure to fire, theft, wind/hail) than others.

Answer 3

Answer their questions as honestly as you can, they should know that you aren't going to have the answer off hand to everything and that is ok. One way that you can cover yourself is to take photographs of everything that way if anything catastrophic does happen you will have something to show exactly how it was when the adjuster comes to do their estimates. Hopefully you never need to use that but better to err on the side of caution.

The insurance company isn't all that important, read reviews as mentioned in another answer. You can also look into multiple policy discounts. If your insurance provider for your auto insurance also offers homeowners policies they might also offer you a discount on one or both policies for grouping them. Feel free to shop around and look for the best coverage at the best price. Overall the most important thing is going to be a company that is easy to deal with. It is not worth saving a couple dollars a year to have insurance through somewhere that is going to make it a nightmare to make a claim.

In addition to answering all of their questions make sure that you have all of your own questions answered. Depending on location you might want to ask if they cover hurricanes, flooding, tornadoes, other natural events, etc. If you have any special items like collectibles, jewelry, expensive electronics, firearms, etc you might want to ask if that is covered of if you need a separate rider for those items.