Getting the best rates on homeowner insurance policies

Mon Dec 19, 2011 3:49pm EST

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Dec 19 (Reuters) - In just the last year alone, we've seen epic snow, wind, fire and rain. There were a record 12 extreme weather events in 2011 according to the National Oceanic and Atmospheric Administration, each causing at least $1 billion in damages. With climate change rearing its ugly head, Mother Nature may even become surlier. Depending upon where you live, that means it may be more difficult to find affordable insurance coverage.

I routinely shop this time of year for the best homeowner's policy, and I've found that it's gotten more complicated than ever. Several insurers have put in exemptions for certain kinds of storm damage while others insure less by low-balling the replacement cost of my house.

Since my policy is hovering around $1,000 a year - it's climbed in recent years by $200 - I was hoping to find a better deal. So I asked Robert Hunter, director of insurance for the Consumer Federation of America, how I should vet homeowner's policies.

The most fundamental question he says to ask is how much coverage do you need? That's largely dependent upon where you live, the value of your home and how much you want to pay. The first rule of thumb is the higher the deductible, the lower the premium. You'll need to replace your home and its contents and need to be compensated for loss of use in case of catastrophic damage.

Watch out for some sneaky anti-consumer language, though. Hunter notes that several insurers have loaded policies recently with "anti-concurrent causation clauses." Although it sounds like a blow to the head, if you're hit with wind and water damage at the same time, you're not covered for either, so you have to avoid that kind of policy.

Other insurers will simply raise the deductible for weather-related events such as wind and hail loss. Say you have a $1,000 deductible for all potential losses. I've seen one quote that raises the deductible to $1,500 for wind and hail in the fine print, so that will effectively reduce your coverage.

If you live in an area prone to floods, hurricanes and tornadoes, you will at least want to have federal flood insurance. To make coverage more affordable in the most storm-prone areas, consider higher deductibles. You can buy it through an agent.for more details.)

Make sure that when you're comparing policies that they are similar. Generally, the standard policy form you should quote is called ISO HO-3, Hunter advises.

Here are some key guidelines to follow:

- Look for policies with "guaranteed replacement cost." Over time, the cost of rebuilding or replacing certain items will rise, but your coverage might not track those expenses. This clause will cover most everything.

It wouldn't hurt to ask a local builder or real estate agent what it would cost to replace your home on a square-foot basis. If you want to save some money on the premium, look for "cash value" replacement, although it will pay you less due to depreciation after a catastrophic event. Make sure to insure your home for at least 80 percent of its replacement value.

- Avoid companies that may not pay claims or give homeowners a hard time about filing them. You can find complaint reports filed with your state insurance commissioner (). You can't judge a company's service by its premium, though. Hunter said it's not true that lower-priced companies provide poor service. "Many low-priced companies provide good service."

- Liability insurance is important. This part of the policy covers you in case someone falls and injures yourself on your property, among other things. How much coverage you need depends on how litigious your area is. An "umbrella" liability clause would cover a number of events and starts at $300,000 worth of coverage. In most urban areas, $1 million worth of coverage is a suggested starting point.

- Discounts are plentiful. Agents want most or all of your business, so they will quote discounts for insuring your cars, valuables and selling you life insurance. The life policy might be a bad deal - you can probably get a better price online - so just start with your home. Other discounts are offered for being claim-free; having smoke detectors, alarms and fire sprinkler systems; and having newer homes.

Keep in mind that getting a homeowner policy isn't like shopping for a commodity item like tires. The lowest premium may not give you the best insurance. And initial quotes are subject to claims and credit checks, so your final premium may be higher. Even if insurers have pulled out of your area, still shop around by getting quotes from multiple carriers on sites likeor

After reviewing six quotes for my home in the Chicago area, I discovered that I was better off staying with my present insurer. Keep in mind that recent claims may raise your premiums, which was the case with my policy.

You have to decide what's most important and how much you can cover in terms of out-of-pocket expenses. You never know when the next storm is coming.

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The author is a Reuters columnist. The opinions expressed are his own.

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