How to Compare Homeowners Insurance Policies

You can compare homeowners insurance policies to find the best deal, but you must look beyond price. These steps will tell you what to look for.

Instructions

1. Compare financial ratings. An insurance company with poor financial stability is less attractive than a financially stable company. Ask your broker or agent to provide you with the company's A.M. Best Rating when you compare homeowners insurance policies.

2. Look at the valuation clauses. Your homeowners insurance company will use one of two valuation clauses: replacement cost, which is the cost to repair or replace the damaged property, or actual cash value, which is the replacement cost less depreciation.

3. Review the perils covered. An all-risk policy, which responds to loss or damage as a result of any peril as long as it is not specifically excluded in the policy, will offer more insurance protection than a named peril policy. Named peril policies will only respond to losses arising from specific perils named in the policy.

4. Test the claims handling procedures. Call each homeowners insurance company as if you were going to report a claim. Compare how each responds.

5. Analyze the premium differences. The premium should be the last factor to consider when comparing homeowners policies. A low premium from a financially unsound company may be the equivalent of no insurance at all if the company is not around when it comes time to pay a claim.