Home Insurance Buying Guide
Unfortunately, there is no one-size-fits-all approach to buying home insurance.
The seemingly infinite number of factors that come into play when trying to decide what home insurance provider to go with and which policy to buy can seem incredibly overwhelming.
To make the world of home insurance smaller and more approachable, we put together a practical guide you can use to tackle home insurance with confidence.
Specifically, we tackled the following five questions every home insurance buyer asks:
- How do I make sure my individual needs are accounted for?
- How do I choose a trustworthy home insurance provider?
- How do I protect my home from as many threats as possible?
- How do I lower my home insurance costs?
- How do I get my claims paid out as quickly and reliably as possible?
How to make sure your individual needs are accounted for
As previously mentioned, different people have different home insurance needs.
To make sure you’re not jumping into some copy-and-paste policy, it’s important to choose home insurance providers that take your individual needs into account.
One easy way to do this is to go with one of the many providers that offer you policies based on the specific information you provide them.
For example, Lemonade Home Insurance asks you to fill in a short questionnaire before offering you any policy options.
With this information, Lemonade then offers you three policy options to choose from (which you can further customize if need be).
How to choose a trustworthy home insurance provider
Think about the research you do when deciding to buy a new car – examining the parts, knowing the milage, reading the reviews, looking at the certifications…
There’s no reason you shouldn’t conduct the same, if not more research when buying home insurance.
Prioritize providers that are transparent about who they work with (partners), what the asset value of those partners is (asset value can indicate how capable any given provider is of paying out claims quickly and reliably), and their track record (how many years the provider has been in operation, how many claims they’ve paid out, their average payout time, and so on).
In addition to this, prioritize home insurance providers with at least one of the following accreditations:
- “A-Rating” by A.M. Best (the home insurance industry’s gold standard)
- “Financial Stability Rating® of A-Exceptional” from Demotech Inc.
- “B-Corp®” Certification from B Lab (granted to for-profit companies that meet rigorous standards of social and environmental performance, accountability, and transparency)
How to protect your home from as many threats as possible
The world is an unpredictable place. The number of things that could potentially damage your home and/or possessions is nearly limitless.
To make sure you’re covered against as many potential threats as possible, it’s important to go with a home insurance provider that offers a diverse coverage portfolio.
For example, a diverse coverage portfolio might provide coverage against the following:
- Fire and Smoke
- Bad Weather
- Crime and Vandalism
- Liability (if someone injures themselves at or around your house and accrues medical bills and/or decides to sue you)
- Loss of use (if, due to repairs, you have to temporarily relocate)
- Water Damage
- Dog Attacks
While it’s important to get as much coverage as possible, it’s also important to keep in mind that certain kinds of coverage require you to pay extra.
For example, a provider might cover all of the above but require you to pay extra if you want coverage for the following:
- Fine Art
- Musical Instruments
If you need additional coverage for something specific and the provider doesn’t have it obviously listed on their site, it’s worth asking what kinds of extra coverage the provider offers and how much it costs to add them to your policy.
If it’s not implicitly stated, it’s also crucial that you understand what’s not included in your policy.
As a fail-safe, take some time to think of what threats against your home might be possible and ask your provider what kinds of coverage you would need if any of those situations were to happen.
How to lower your home insurance costs
Apart from the more common ways of lowering your home insurance costs, such as bundling your home insurance with other kinds of insurance (like car insurance, for example), and paying a higher deductible, another great way to lower your costs is to choose home insurance providers that offer discounts in exchange for you taking preventive measures.
While there are all sorts of preventative measures you can apply to your home, the most common one is adding security devices to your home (such as alarm and monitoring systems).
For example, Lemonade Home Insurance automatically applies discounts to your premium if you answer positively to any of the following questions:
- Have you undergone any renovations recently?
- What is your home made of (wood frame or masonry)?
- Do you have any safety devices installed (wind protection, theft protection, fire protection, etc.)?
- Which specific devices do you have installed?
- Do you live in a gated community?
In Lemonade’s case, the more preventative measures you apply to your home, the more discounts are applied to your premium.
Another example of a provider that rewards preventative measures with discounts is Hippo Insurance. They even provide you with a complimentary home monitoring systems with the purchase of any policy.
If you decide to use these home monitoring systems, Hippo automatically applies a discount to your premium for protecting your home against common risks from fire, water damage and break-ins.
How to get your claims paid out as quickly and reliably as possible
Like most things related to home insurance, many different factors affect how quickly claims are paid out (the accuracy of the details you provide, as one example).
One thing that many people don’t consider, however, is the different ways in which home insurance providers operate.
Many traditional home insurance businesses generate profit from money they don’t pay out in claims.
This technically means that whenever they do pay out a claim, they lose profit. While not always the case, this can sometimes explain why getting your claims paid quickly and in full is sometimes difficult.
However, other providers, like Lemonade Home Insurance, for example, take a fixed fee out of your monthly payments, pay “reinsurance” (basically insurance for insurance companies so they always have money to pay out claims), and use the rest for paying out claims.
This model allows them to pay out your claims as quickly and reliably as possible (as quickly as three minutes, as documented on their site).
The moral of the story is that it’s worth understanding the different ways in which home insurance providers operate because this can potentially have an effect on how quickly your claims are paid out.
Organize your notes, fire up your browser, and start applying the tactics above to help you find the best possible home insurance for your specific needs.
If after narrowing down your options you need help picking a winner, you can use a tool like Young Alfred to easily compare different providers and what they offer.