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Archive for Monday, May 27, 2002

The Color of Money: Tips on buying home insurance

May 27, 2002

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For many areas of the country this is the season for storms. So, every time a thunderstorm moves through my neighborhood I pray that our home doesn't sustain any damage.

But if there is storm damage that isn't substantial anything under $1,500, which is three times our deductible you better believe my homeowners insurance company will never know a thing.

That's what having insurance has come to. Insurance, especially homeowners insurance, isn't bought to protect you from any loss. It's evolved into a protection from major loss.

Otherwise, if you file repeated claims, even for legitimate but relatively minor repairs, you could find yourself either paying a higher premium or without insurance at all.

So where does this leave homeowners?

You have to manage how often you file a claim. You'll have to consider the consequences of filing a claim for repairs, even those costing several hundred dollars.

I know. It's aggravating. What's the point of having insurance if every time you have a legitimate problem you have to pay out of your own pocket?

But the sad and unfortunate point is that several relatively small claims could mean a higher premium, and over the years that can add up.

Some insurance companies will cancel a policy if you file more than three claims in three years.

Here's something else you're going to be aggravated about. Experts suggest you consider raising your deductible, which is the amount of money you agree to pay yourself before tapping into your coverage.

Moving from a $250 to $500 deductible can save a customer between 12 percent and 13 percent of their premium, according to a spokesman from Allstate.

According to Insure.com, a consumer insurance Web site, raise your deductible to:

$500 and save up to 12 percent on your premiums.

$1,000 and save up to 24 percent.

$2,500 and save up to 30 percent.

$5,000 and save up to 37 percent.

However, if you are going to raise your deductible, be sure to put some of the savings from lower premiums in the bank so you'll have the money you need to make minor repairs.

Insure.com recommends these tips to save money on your home insurance policy:

Buy your home and auto policies from the same company. Many companies will give you a discount for doing so.

Consider the cost of insurance when buying a home. A newer home might cost less to insure. Call around and get an idea of how much it will cost to insure the type of homes you are considering.

Insure your home, not the land. While your home and its contents are at risk from fire, theft, or windstorms, the land your home sits on is not.

Don't include the value of the land in deciding how much homeowners insurance you need to buy. Your agent can help you assess the coverage you need.

Stop smoking. Smoking accidents account for more than 23,000 residential fires every year. Some insurers offer to reduce premiums if no one in the home smokes.

Look for senior discounts. Insurance companies have found that retired people stay at home more and spot fires sooner than working people.

Older people also may have more time for maintaining their homes. If you're at least 55 and retired, you might qualify for as much as a 10 percent discount.

Ultimately, when it comes to your insurance coverage you have to decide what's your claim threshold. In other words, decide what amount in damage it will take before you call your insurance company. If you have a $250 deductible if may not be worth it in the long run to put in a claim of $500 and risk a ding against your home insurance record.

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