When purchasing and financing a home, mortgage companies require borrowers to buy home owners insurance to protect the lender as well as the home owner. In 2009 I purchased the home I live in now; so naturally, I called my insurance agent and added the Home Owners Insurance policy to my current auto, umbrella, and life insurance policies. Combining policies in this way usually saves money. So, my first year cost of home owners insurance was $1064. A year later, when it was time to renew the policy, I noticed that my policy jumped up in price by $116 to $1180! I called my insurance carrier and asked why the price went up so much and their answer was because replacement costs went up by 5% I said fine but your raising my premium by 11%! I inquired why that was, but they couldn’t give me a direct answer.
This drastic jump in price prompted me to shop around for Home Owners Insurance. To my surprise, I was paying way too much for home owners insurance! I compared my current home owner’s insurance policy to the quote from another insurance company. The policies were not exactly the same, but they were pretty close. Here is the comparison chart that I put together, comparing the two policies. I should point out that the purchase price of my home was nowhere close to the amounts listed for coverage. Both Insurance companies determined that it would cost over $400,000 to replace my house. I think that figure is too high, my house isn’t spectacular. I would describe it as a very modest home; in fact, the purchase price of my home was priced well below the average Southern California home in my area. Because of this I recently had the house appraised and they determined replacement costs at $320,000. Unfortunately I couldn’t get any insurance company to go below $400,000. So here is the best option I had:
| Section 1: Property | Original Insurance Company | Other Insurance Company |
| A: Dwelling | 450,000 | 416,000 |
| B: Separate Structures | 45,000 | 41,600 |
| C: Personal Property | 337,500 | 312,000 |
| D: Loss of Use | 90,000 | 166,400 |
| Extension of Coverage | 10% | 10% |
| Identity Fraud Coverage | 0 | 30,000 |
| Section II: Liability | ||
| E: Personal Liability | 500,000 | 500,000 |
| F: Medical Payments to Others | 1,000 | 1,000 |
| Deductible | 1,000 | 1,000 |
| Cost | $1,180.00 | $979.26 |
But it gets even better. When I switched insurance companies, I moved my auto, life, umbrella, and home owners insurance into the new insurance company also. The total overall savings was over $500! My first insurance company was overcharging me for all of my insurance needs.The first difference between the two policies is the total coverage. Both Insurance companies are over insuring my home, but Insurance Company #2 is closer to the actual replacement cost of the home. The second big difference is in the loss of use. I have more coverage with the second policy than with the first. I also have identity theft coverage with the second policy, which is not offered in the first policy.
The moral of the story is to always, always shop around for insurance.
What do you think? Do you shop around for insurance?
About Peter Serrano
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It is generally seen that bulk of the people are overpaying for insurance. Any kind of insurance, whether it is life, car, home, travel, or medical insurance, presents a challenge to even the most seasoned client. Obtaining the best insurance plan is not an impossible job we only require to research all possibilities.