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For most people, purchasing a home is the largest investment that they’ll make in their lives. Buying a home requires hard work, planning and saving.
After all the time and money you’ve put into this investment, you want to be sure that it’s well protected. That means getting the right homeowners insurance.
Homeowners insurance often amounts to a significant monthly expense. To help out, we’ve found some of the most trusted and affordable insurance companies in the marketplace.
We’ve also included a some tips to save you some money when it comes to paying those monthly premiums, no matter which company you decide to go with.
Before you start the process of picking an insurance provider here’s a few things to keep in mind.
How Much Insurance Do You Need?
There are a number of factors that will go into determining your monthly premiums on your home insurance. The properties location, the amount of crime, and the frequency of natural disasters in your area will have a huge impact on your premiums.
In addition, your homes construction type and the materials used will affect the rebuild cost, impacting the premium. If you have an older home, expect to be paying more. New homes in low crime areas, with low risk of natural disasters are cheapest to insure.
Your rates will further be determined by how much insurance you’re going to need. If you’re like most people, you’ll require a loan in order to purchase your home, that’ll mean a mortgage.
Your mortgage company will require you to have a policy to cover the cost of your mortgage in case of a loss. They want to be sure that if something happens they’ll get their money back.
It’s recommend that you hire an independent appraiser to determine the replacement cost of your home, then compare that with your insurance company.
Remember, they want to pay as little as possible if something happens to the home. Make sure you get your own number on what the rebuild cost is expected to be.
You’ll also want to have enough coverage to replace the items within your home. Most policies will cover possessions for about 50% of the property.
This means if you have a $100,000 policy, you will have $50,000 of coverage on possessions. Try to think about any items you have in your home that you’ll need to have to replace in case of a disaster.
If you have many high-end belongings, it might be worth it to purchase extra coverage.
Be sure that you don’t undervalue the replacement amount of the dwelling or possessions just to get a lower premium. While it might seem tempting to save some money, the point of insurance is protection against unseen circumstances.
Should the unthinkable happen, you could be out tens of thousands, or even hundreds of thousands of dollars, just trying to save a few dollars a month.
Types Of Insurance
ACV insurance is going to be the cheapest type of coverage you can purchase. It may also leave you with a hefty out of pocket cost if something does happen to the residence and your possessions.
ACV is typically calculated by taking the value of an item and subtracting any depreciation on the life of the item. For example, assume you bought a television for $1,000. Assume it has an expected life of 10 years. For every year that you owned the television it’s ACV would drop by $100.
With ACV coverage, you might be getting substantially less money than you need to replace the items in your home.
RCC is usually more expensive, but it can be beneficial if there’s a need to file a claim. RCC will repay you based on the cost that the item was purchased for. This means the payout will be closer to the replacement cost of the items that have been lost.
When you’re comparing the various insurance companies it’s important to make sure that you are comparing the same types of coverage to find out who is really giving you the best deal.
Other Types Of Insurance You Might Need
It’s important to note that a regular homeowners policy might not cover you in all circumstances. There are many types of disasters that are not covered under a typically policy.
Flood damage is not covered in a traditional homeowners policy. Additional coverage to protect against floods is important if you live in any area near water, and in some cases, flood insurance is federally required.
“Earth movement” events also require an additional add-on. Earthquakes, landslides, and sinkholes fall under this category, and will need additional policy protections.
Damage due to neglect on the part of homeowners is also outside a typical policy. This can include sewer backups, and mold damage due to neglect of the owner.
Some events may or may not be covered under your policy. Wind damage may be covered your policy, but it often depends on what was damaged and the condition of the structure before the event.
The same is true of acts of terrorism. These may be covered under typical fire and smoke damage, but you should check with your insurer.
If you have high-end items or collectibles in your home, such as art, classic cars, or jewelry, you should notify your insurer and see if you need additional coverage on these items.
And don’t forget about liability insurance on that home. If someone hurts themselves on your property and you don’t have liability insurance, you’ll be stuck with the bill.
These are just a few of the additional coverages that you might need. Be sure to check with your insurer to make sure that you know your policies limitations.
Before You Pick An Insurer
To get started, let’s look at some tips to lower your rates before you make your choice on which insurance company to go with.
1. Shop Around
If you’re doing your homework and researching insurance on a website like Frugal for Less then you’re off to a good start. There’s a lot of insurance companies out there, and they’re all trying to compete for your business.
Make sure you talk to multiple insurers, compare their products, services, and price to find the right fit for you.
Different customers are looking for different requirements from their insurer. Some people are more comfortable talking to a live agent in the event they need to file a claim or make a change to their policy.
Others are more comfortable handling the process online. Some customers require special coverages. Still others are only interested in the cheapest option.
Make sure that you pick a company that fits your individual needs. Just because your friends of family found that a particular company was the cheapest for them, doesn’t mean they will be the cheapest for you. All policies are different so make sure you shop around yourself.
2. Check If You Qualify For Discounts
You’re insurance company won’t usually go out of their way to find out what discounts that you might qualify for. Be proactive and check with your insurer to see what kinds of discounts they offer.
Insurance companies offer discounts for a number of things. Long time customers, members of professional associations and organizations, seniors, and non-smokers are all groups that might qualify for lower premiums.
3. Bundle Your Policies
Most insurers offer a discount if you have all your policies with them. Since homeowners insurance is going to be one of your largest bills, it might be worth it to see how much you could save insuring your car and home together. Or check the price to have a home, auto and life policy with the same company.
When you’re considering the cost of doing this, make sure that you’ll actually be paying less than you would to have three separate policies with different companies.
4. Make Some Home Improvements
Simple home improvements can help to bring down your home insurance premiums.
Smoke detectors and fire extinguishers are an easy way to get a discount with many insurers. In addition, carbon monoxide detectors and deadbolts also might save you a few dollars.
More expensive add ons such as a security system can also save some cash. Before installing a security system however, weigh the costs of installation and the monthly service price to see if it’s actually going to save you money to go this route.
In certain areas, improvements such as storm shutters, shatter-proof windows, and storm proof garage doors will help with the monthly insurance costs.
It’s also a good idea to re-think some home add-ons, or to think about things that insurance companies view as “high risk” activities and life choices.
A swimming pool will definitely increase your premium. If you haven’t put one in yet, think about the extra costs before you install it.
Trampolines are dangerous, as least from an insurance companies point of view. If you make a claim based on a trampoline injury, expect your premiums to rise.
Some companies will even increase your premiums based on certain dog breeds. Check with your insurer.
Every time you make a claim, expect your insurance to go up. If you make multiple claims during the year, you could be bumped into the “high risk” category, which could mean an increase of 20% or more on premiums.
5. Maintain Good Credit
If you live in California, Maryland, and Massachusetts, this doesn’t apply to you. For everyone else, insurance companies use your credit score to help determine premiums.
A poor credit score can have a dramatic effect on your insurance premiums. Insurance companies consider those with good credit to be less of a risk to file claims, and that means lower premiums.
If you got your insurance years ago, and your credit score has improved since then, it’s worth it to check with your insurance provider and see if the premium can be recalculated to reflect your new higher credit score.
If you do have a low credit score, check out some of our other articles about helping you get that score back up.
6. Increase Your Deductible
If you’re willing to take the chance, increasing the deductible is a great way to get a better rate on your monthly insurance premium.
Insurance companies consider that a person with a higher deductible is less likely to make a claim, which means a better monthly premium for you. Increasing your deductible can lower your premium by 25% or more.
The one thing to take into account is that if you do increase your deductible, you’ll need to make sure you have that money available in the event that you do need to file a claim order to cover that expense.
Only raise your deductible to a level that you will be able to afford in case something goes wrong.
7. Don’t Over Insure
It’s important to make sure that you have enough coverage to pay to rebuild your home, but you don’t want to be over insured.
Remember that the price you want to have insured is the price to rebuild the home, not to rebuy it. The insurance should help rebuild the structure and replace the items inside, but you’re not going to need to money for the land or the location.
It can be beneficial to inventory the items in your home, especially the large ticket items to make sure that you’re not under insuring, but also not over insuring your belongings. If you are over insuring your house, you’re paying too much money in premium every month.
8. Adjust The Policy As Your Life Changes
Life events are going to mean changes to your insurance needs.
Did you redo a kitchen or bathroom? Did you add another structure to the property, or add another room to the house?
Check each year to see if you qualify for new discounts, or if you need to change your coverage. While you don’t want to pay more in monthly premiums, you also don’t want to lose coverage on an item that you didn’t report.
The Cheapest Insurance Companies
Now that you understand about insurance and what you’re looking for, here’s 5 of the most affordable and dependable companies that we could find.
Our list isn’t just the cheapest, we also wanted to include companies that had good customer service ratings, and financial stability to be able to pay out claimants in the event of a disaster.
Finding a discount insurance company that won’t pay out when you file a claim is a bad investment, so we relied on ratings from companies such as A.M. Best, which monitors the financial health of companies, as well as reviews from companies such as J.D. Power and Consumer Reports, which rate customer satisfaction.
Of course everyone’s needs are different. Please let us know of any other companies that you might recommend in the comments below.
Amica consistently ranks among the top insurance companies based on its price and customer service. They offer multiple types of discounts for their customers, including safety discounts for fire extinguishers and smoke alarms. They also offer paperless bill and loyalty discounts.
Amica has great reviews when it comes to handling claims and customer service as well.
In addition, Amica is a mutual insurance company, meaning that it’s member owned, not investor owned. This means any profits at the end of the year are paid out to policyholders, not shareholders.
If you decide to participate in a dividends policy, and the company does well, you’ll be getting a check back on part of your premium. This type of incentive gives all policyholders an incentive to do their best to keep claims down.
Policyholders do list some downside to the company. Because it’s a mutual company the premiums may be slightly higher, but the discounts should be more than enough to make up the difference.
Also, the website and the online resources are rather scarce, so you may find yourself calling them more often than some of the larger companies such as Allstate.
2. State Farm
Before you try and get a quote from State Farm’s website, be prepared to provide loads of information about your home. It might be because of the extensive online process that the payouts tend to be better according to customers that have filed claims with State Farm.
State Farm has some of the best reviews from J.D. Powers and Consumer Reports. Customers claim across the board that they were satisfied with the service they received.
Also, State Farm is one the most financial stable insurance companies on the list, so there’s never a worry that the company won’t be able to payout on their claims.
The one downside listed by reviews was that State Farm seems to have less discounts than many of their competitors.
Allstate is another huge name in the insurance industry, and with good reason.
It has the most robust and comprehensive website out of all of the companies reviewed. They have a wealth of educational tools on their site that will allow you to research any aspect of home ownership and insurance.
Allstate’s website will walk you through the entire insurance process to find the best coverage possible.
They even have tools that will help you understand the most common hazards in the area, such as flooding or fires. It also gives statistics of other issues in your homes area such as crime statistics, and average repair costs.
Allstate has the greatest number of discounts out of all of the providers listed, so make sure you take these into account before you decide on the final price. They even have a new customer discount that applies for the first two years of your policy.
According to Consumer Reports and J.D. Power however, Allstate’s reviews for customer service were not as good as either Amica or State Farm. However, because of the many discounts offered by Allstate, you can still get a great price with one of the largest insurers in the country.
MetLife is one of the few companies that still offers extended replacement cost coverage.
Many companies will place a limit on the amount they will pay for your home and possessions in the event of a total loss. As stated before, the replacement limit on possessions typically 50% of the insured property.
With MetLife’s extended replacement cost coverage, they’ll pay the entire amount of the replacement value. This alone is worth your time to investigate their rates.
MetLife’s customer service scored ranked very highly as well. Customer reviews state that the claims process was easy, and payouts were done quickly.
The downside of MetLife is that their website is not as user friendly as some of its competitors, and only customers in 10 states have the option to get a quote online.
Progressive has a slightly different underwriting process than the other companies listed above. They use multiple underwriters to offer competitive prices on policies.
Because of this, you’ll have a chance to get competitive quotes for your policy, from many different underwriters.
According to customers, the company gets high ratings for its many endorsement offerings. This allows you to customize your policy and coverages to your specific needs. These endorsements include free coverage of additional structures on the property, and the ability to add watercraft to the policy.
One of the downsides stated by users is that the unique underwriter approach means that Progressive is not guaranteeing the policy themselves, but essentially outsourcing it to affiliated underwriters.
While we all want to save money on our home insurance, it’s also important to remember that we are relying on our coverage to protect our house and belongings in event of an accident or disaster.
It’s important to get the best deal possible, but to also go with a company that will help you through the difficult time after facing a property loss.
Although we hope you never have to use it, we hope this article can help you find the right company to protect you.