Shop for the best rate

Last reviewed: October 2011

Once you determine your needs, you should shop for the best price—never the other way around. Prices can vary widely. For example, the annual premium charged last year by 44 insurers for $200,000 in dwelling coverage on a brick home in Buffalo, N.Y. (plus $200,000 in personal liability protection), ranged from $440 at Liberty Insurance to $1,538 at Nationwide Property and Casualty, according to the New York State Insurance Department.

To price-shop, check your state insurance department's website to see if it provides similar rate comparisons. You can also compare rates on insurance-shopping websites like Insure.com, InsWeb, and NetQuote. Or work with an agent who sells policies from multiple carriers.

Once you zero in on the companies with the best premiums, scrutinize what they don't cover. Ask your agent or an insurance company representative about policy limitations and exclusions, and find out whether you can buy back any excluded protection with endorsements or riders.

The best way to trim costs is to take the highest deductible available in exchange for a lower premium. With this strategy, you're paying a lower premium year in and year out and betting that you won't ever need to file a claim. But be sure you have enough savings to cover the deductible in case you lose that bet.

You can also save by taking advantage of discounts for buying auto, home, and other insurance from the same company. And because insurers often use credit-based insurance scores in setting rates, it's important to maintain good bill-payment habits.

If you've been with your carrier for a long time, you might find that its competitors can't beat your current premium because insurers often offer loyalty discounts to long-time customers. But if the rate for catastrophic coverage is unaffordable, or if your insurer drops you or stops writing policies in your area, you might have no choice but to start shopping. In some cases, you might need to get coverage from a so-called insurer of last resort. These state-run programs provide insurance to homeowners in high-risk areas abandoned by private insurers, often to cover major natural disasters like earthquakes and hurricanes. Such insurers had nearly 3 million residential and commercial policyholders with almost $758 billion in coverage in 2010, according to the Insurance Information Institute. The coverage can be more affordable than coverage from a private company.

Finally, choose an insurer that has the financial strength to be there should you ever need to file a claim. Check ratings at TheStreet.com, and stick with insurers rated A (excellent) or B (good).

This article appeared in Consumer Reports Money Adviser.

Posted September 2011 — Consumer Reports Money Adviser issue: October 2011