Do not expect an insurance agent to automatically give you the best rate on a home insurance policy. Insurance agents often receive a percentage of the yearly premium, giving them an incentive to sell you as expensive a policy as possible. However, if you do not renew your policy, they lose a commission, so they will be willing to strike a bargain to sustain a long term relationship with you.

Make sure you do your homework before you meet with your agent to discuss a policy. Check your state government website because every state has an insurance department responsible for monitoring the insurance companies. They have information available to help with your negotiation. For example, in Pennsylvania, the government website publishes an online brochure entitled “Your Guide to Homeowners Insurance” which contains a rate comparison, along with a glossary of insurance terminology. You also want to get accurate competitive home insurance quotes. Identical coverage can vary greatly among companies. Be armed with competitor pricing by asking for quotations using the SAME information each time. When calling other carriers for quotes, have a written list containing the description of your house, distance from the nearest fire department and hydrant, square footage, security devices and coverage and limits you want.

Moreover, check with your mortgage company regarding mandatory home insurance coverage. Most mortgage companies only require that you are covered for the balance of your mortgage. Many insurers try to add the land into the policy, claiming it is mandated by the mortgagor. However, in some states such as Texas and Pennsylvania, legislation has been passed banning this practice. Additionally, check the actual cash value versus the replacement cost coverage. Insurers may require you to be covered for the “replacement cost” of your home. This is not the same as “market value”, which is the actual sale price of a home. Replacement cost is the current cost for labor and materials to rebuild your exact home on your existing lot. Yet, there is no requirement that you rebuild the exact home in the event it is destroyed.

A large number of insurers use the same company, named Marshall and Swift, to calculate these “replacement cost”values. If your current agent refuses to write a policy for actual cash value, and your current market value is substantially less than the replacement value, you may want to look around for another company. But be sure your policy covers the balance on your mortgage at a minimum. It would be wise to consult with an insurance adjuster before purchasing a policy, to interpret exactly what types of incidents the insurance carriers are committing to cover.


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