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  • Writer's pictureAlan Romero

Compare Home Insurance Quotes Like a Pro

Updated: Feb 28

Comparing homeowners insurance can be tricky. Seems like price is enough but insurance is about protecting your home against loss so further investigation is needed to make sure you have the proper coverage at a price you can afford.

Each insurance carrier has their own way of computing your homes’ replacement cost. If you like to shop around for the best rate, you’re likely to find an annual premium of $1200 more appealing than a premium of $1500 for the same property. Dig in further and you’ll find that the replacement cost or Coverage A is the main reason for the difference in price. Replacement Cost or Coverage A is the core of any homeowners insurance policy, it is what protects your most valuable asset. Replacement Cost is where the comparison must be made.

Let’s examine this simple scenario. You’re shopping around and you get 2 quotes on your home. Carrier A gives you a quote of $1500 per year and Carrier B gives you a quote of $1200. On the surface it’s a no brainer, you go with Carrier B, right? Not necessarily. Look further and you’ll find that Carrier A estimates the cost to rebuild your home at $350,000, while Carrier B will say that it would cost $200,000.

Here’s where it gets tricky. Who is right? More importantly, which carrier gives you the best value? A typical homeowners policy consists of 6 basic coverages:

1) Dwelling – Coverage A

2) Other Structures – Coverage B

3) Personal Property – Coverage C

4) Additional Living Expense – Coverage D

5) Personal Liability – Coverage E

6) Medical Payments – Coverage F

Most insurance carriers determine coverages B through D as a multiple of Coverage A. For example:

• Coverage A = $200,000

• Coverage B = $20,000 or 10% of Coverage A

• Coverage C = $100,000 or 50% of Coverage A

• Coverage D = $40,000 or 20% of Coverage A

So the ultimate question is which policy gives you the best value? Here is where our expertise in finance sets us apart. We look at all the variables of a policy when we run our comparisons. We first assume a total loss. We then run hypotheticals to help us determine what we call our VPU or Value Per Unit Ratio. Our VPU Ratio defines the amount of insurance per unit of cost. Simply put we help you find the policy with the most bang for your buck.

Now let’s compare the previous 2 policies using our VPU Ratio – Carrier A with an annual premium of $1500 or Carrier B with an annual premium of $1200. Based on our VPU, Carrier A carries the best value with a VPU of 187 compared to Carrier B with a VPU of 133 (the higher, the better). When it comes to homeowners insurance I often say “its not about the replacement cost, its all about the replacement cost.”

So the next time you’re out shopping for homeowners insurance give us a shot and know that you’re getting the best deal. You also have my promise that I will never try and convince you to pay more for the same coverage. Start your search by clicking here and let us know how we compare.

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