Homeowners insurance policies: Compare before you buy.

Most insurance agents do not offer you the option to compare different homeowners insurance policies before you buy and carriers do not make their policies available for review even after you purchase the policy.  Homeowners are often under the gun of a home purchase when they go out to buy homeowners insurance and many times the idea of comparing the coverage offered by different insurance carriers is simply lost in the mix of that time-crunch.

But should you compare policies before you purchase?  Absolutely.  The terms of every homeowners insurance policy are different and they can vary widely as far as what risks they cover, and not just in terms of policy limits.  The policy language is very important because it can mean the difference between repairing or replacing your home, or finding out after your home has been affected, that you have no coverage for what happened.

Two Major Types of Homeowners Insurance Policies

For example, some policies, known as “all-risk” policies cover any risk except those items that it specifically excludes from coverage.  Other policies cover only those risks specifically named in the policy.  These are called “named peril” policies.  As you can probably deduce from the policy names, an “all-risk” policy generally offers better coverage and covers many different scenarios, whereas a “named peril” policy generally covers fewer scenarios.

Coverage May Vary Substantially From Company to Company Even For Same Type of Policy

Even among the same type of coverage, the policy terms can vary quite a bit.  For example, some policies may state that they do not cover any type of water damage to your home, while other policies may cover water damage if it is caused by a pipe or appliance inside your home that is leaking, while a third policy may cover the water damage, but will not pay for the damage to the appliance from which the water leaked (while another policy will).  As another example, under the terms of some policies, if your roof is damaged by a storm and water leaks into your home, causing damage to its interior, some policies will cover only the roof repairs, and not the interior damage, while other policies will cover the interior damage, and a third policy may require proof that the interior damage was caused by a hole in the roof created during the storm.

The results of this analysis could make tens of thousands of dollars of difference in determining how much the insurance carrier pays in the event of a claim, so you should do your research.  Then purchase the most extensive coverage you can afford within your budget.  Premiums can vary greatly from company to company even for very similar coverage, so it is wise to compare not just prices, but what you are getting for your money.

homeowners insurance

Will your homeowners insurance cover this?

Don’t Rely on Your Insurance Agent

Sometimes the cheapest insurance coverage is not the way to go and often times insurance agents don’t bother to explain the differences in coverage.  Other times the agent only sells policies from one company, so they will simply try to sell you a policy from the carrier they represent and change the limits and deductibles to fit within your budget.  If you are comparison shopping policies, be sure to ask your agent to discuss the specifics of the policy you are buying and what it will cover.  Find out if it is an “all risk” policy or the more restrictive “named perils” policy.  Ask to see a policy from more than one company (and be aware that this may require you to call more than one agent if yours only represents one particular company), and if possible, examine an actual copy of the policy from each carrier you are considering.

While asking for a copy of the policy may seem like a simple idea, you would be surprised how difficult it can be to get an actual copy of the homeowners insurance policy even after you buy the policy.  Most companies don’t send you a copy of the policy until months after you purchased the coverage and they do not send a new copy each year.  The policy renews annually, but the carrier will only send pages showing changes to the policy language from previous years and almost without exception the changes will limit the coverage, not expand it.  Most of the time, homeowners do not read these policy updates, even though the changes may drastically reduce their coverage.

State of Texas’ Online Policy Comparison Website

Recently, the State of Texas’s Office of Public Insurance Counsel recognized this problem and now offers some help with comparing policies.  It has created an online tool that allows policyholders to review and compare insurance coverage (even other types of insurance coverage like auto and health) using a tool on their website.  The policy comparison page appears here at:

State of Texas’ Office of Public Insurance Counsel Policy Comparison Tool

Though the database is not always completely up-to-date, it has many companies and many policies available for comparison and actual copies (in .pdf format) available for download and detailed comparison.

Even after comparison shopping, homeowners should be vigilant about changes being made to their homeowners insurance coverage at renewal time and change carriers if need be.  Companies have begun revising their policies regularly in recent years, and homeowners need to read any policy changes sent out with renewal.  These policy changes often make the policy’s coverage more restrictive, though the premiums may still increase substantially.