What Makes a Good Home & Auto Insurance Policy?

What features should it have? What terms should it offer?

Have you thought about bundling your insurance? You may want to consider that, as insuring your house and vehicles with the same carrier could save you some money.

Most people buy insurance without doing much homework. That holds true for auto insurance, property & casualty insurance, even life insurance. Some people just buy on price. Some just choose the company their parents chose. Others follow the suggestion of a title company, a real estate professional, or a friend or relative.

Due to these quick decisions, households frequently pay out more in premiums than they should and receive more paperwork than they prefer. By contrast, combining home and auto insurance under one policy means one deductible, one premium payment, one yearly bill, and one agent as a point of contact.

A spring 2015 study from financial education website NerdWallet reveals that the average U.S. household spends $2,438 annually on life, auto, and homeowners insurance – 5.6% of its annual income. Mom and Dad may not know that simply bundling their home and auto insurance may save them as much as 15% annually on both premiums. According to a recent InsuranceQuotes survey, the average savings from that move is $270.1,2

What distinguishes good multi-line coverage from the run-of-the-mill? Often these policies are of the good-better-best variety. The good ones provide you with medical expense coverage for accidents at home or in your car, landscaping coverage and lock replacement, liability and dwelling coverage on a rental property, built-in coverage for precious-metal collectibles, and reimbursement for certain police and paramedic services.

The better ones offer more. It is not uncommon to see a policy offer all of the above plus higher coverage levels (150% or 200% of a home’s value), coverage for land restoration, accident forgiveness, roadside assistance plus coverage for towing, reimbursement for rental cars, no-deductible windshield repair, trip interruption, even coverage against libel or slander.

In addition, the really deluxe policies may insure your septic tank, your collectibles, and even a fleet vehicle or other vehicle you drive that is provided by your employer, offer coverage for additional living expenses incurred as a result of an auto accident or damage to the home, and provide reimbursement against identity theft – all while offering even greater coverage levels.

Select home and auto policies come with some little-recognized perks. The better car insurance policies will also provide you with rental car coverage, and pick up the cost of a replacement car seat for your infant after a car accident (even if the seat appears undamaged to the eye). They may also cover rodent/animal damage to your vehicle’s interior or engine.3

In some cases, homeowner’s insurance coverage even extends to the dorm your child lives in at college. There are policies that insure homeowners against damages claimed by guests who eat spoiled food from a refrigerator or pantry. Others cover damage to “other structures” besides the primary residence – meaning damage to a guest house, a tool shed, a treehouse, a fence.3

What are some of the top mistakes people make when buying multi-line insurance? Compare features and deductibles, not just premiums. A really cheap plan may not offer enough protection to restore a home to its full value or provide a car of similar quality after an accident.

Many homeowners and vehicle owners make the mistake of equating market value with replacement cost. The present value of your home or car is not necessarily what it would cost to replace it. Some homeowner insurance includes ordinance or law coverage – raising the coverage limit by as much as 25% to account for the cost of rebuilding an older home to suit newer construction codes.4

Homeowner policies typically have caps – they insure the contents of the home up to a certain dollar value. If you have really valuable stuff at home, look for a rider that can be added to the basic policy to cover the additional cost of replacing such valuables. If you run a business out of your home, you may need more homeowner’s coverage than you assume.2

Another mistake is to dismiss regional risks. Some people move to the desert, near a dry riverbed, and never consider flood insurance. In the Southwest, there are many stories of dry riverbeds suddenly filling with flash floods that wash away cars, RVs, yards, or whole homes. People move from the west coast and believe they have no need for earthquake coverage – but fracking is unsettling the ground in some areas in the South and the Plains states.

When should you review your coverage? You should do so annually, by comparing bundled quotes from few different insurers. You should also review your coverage after a life event – a marriage, a new addition to the family, even a new job with a change to your daily commute. As you shop, ask for quotes from independent agents as well as those affiliated with one insurer. The independent agents can introduce you to a variety of coverage from different companies, possibly opening the door to more savings options.

This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note – investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

1 – nerdwallet.com/blog/life-insurance/where-people-pay-most-least-for-homeowners-health-auto-life-insurance-2015/ [6/22/15]
2 – thestreet.com/story/13190620/1/even-your-marriage-requires-an-insurance-policy.html [6/18/15]
3 – money.usnews.com/money/personal-finance/articles/2015/01/22/7-perks-hiding-in-your-insurance-policy [1/22/15]
4 – fool.com/how-to-invest/personal-finance/2014/03/16/tips-to-find-the-best-homeowners-insurance-coverag.aspx [3/16/15]