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Commerce Commissioner urges Minnesotans to Stop, Evaluate Homeowners Insurance Coverage

October 15, 2012

For Immediate Release:

SAINT PAUL, MN – It’s important to protect the things you value. Life insurance protects your loved ones, auto insurance protects your car, health insurance protects your good health and homeowners insurance protects your possessions. As with any insurance purchase, it’s important to evaluate coverage and research your options to find the best coverage for your dollar. 

“Consumer information and protection is critical to help Minnesotans make informed choices about their insurance coverage,” said Commerce Commissioner Mike Rothman.  “In a recovering economy, homeowners carefully watch their family budgets and the Commerce Department can provide the tips for consumers to save money on their homeowners insurance while maintaining the right coverage.”

Here are some tips to help save money on your homeowners insurance:

SHOP AROUND

Homeowners insurance can be costly, but it is necessary. The premiums charged for homeowners insurance can vary widely from company to company, so it pays to take the time and effort to shop around to get the best value for your insurance dollar. There are 139 companies offering homeowners insurance competing for your business in Minnesota.  Annually, consumers should inventory their assets to ensure the coverage level is still adequate. 

The cost of homeowners insurance depends on a number of factors including: location; age and type of building; the use of the building, i.e., residence and/or commercial enterprise; local fire protection; choice of deductibles; application of discounts; and the scope and amount of insurance coverage you purchase.

CHANGE YOUR DEDUCTIBLE

If your policy contains a standard “all peril” deductible, of $250 for example, you would collect the amount of any covered property loss, less $250. By having a deductible, the premium cost of your policy is lower than if you did not have a deductible. When choosing the deductible amount, you bear the burden of loss up to the amount you feel you can afford. 

Deductibles save money because the first dollars of the insurance are the most expensive to buy. Contact your insurance company to discuss whether your deductible makes sense for your circumstances.

ACTUAL CASH VALUE VS. REPLACEMENT COST COVERAGE

As you shop around for homeowners insurance, one important factor to consider when shopping is whether your policy covers “actual cash value” vs. “replacement cost” coverage. While it may not affect your short-term premiums, it may make a large difference if you submit a claim.

Actual cash-value coverage will reimburse you for the cost of the property at the time of the claim, minus your deductible. It is important to account for depreciation when considering this coverage option. For example, if you lose an audio system that was purchased five years before the claim, you will be reimbursed for the current value of the system. This may result in a lower claim payment than you expect. 

Replacement cost coverage will reimburse the full value of the new audio system — after you purchase the new system and submit your receipts. While the up-front cost is greater, you are more likely to receive accurate compensation for your possessions.

KNOW WHAT TYPE OF HOMEOWNERS POLICY YOU NEED

The five homeowners “package forms” offered to owners of single family, owner-occupied homes are referred to as: HO-1, HO-2, HO- 3, HO-3 with HO-15 and HO-8. These have different coverage and policy language, which is important to discuss with your insurance agent.  

Don’t forget to check whether renter’s insurance, mobile home policies, and condo owner’s policies fit your specific needs.

These policy forms insure your home and belongings against at least 11 named perils. The more perils your policy covers, the more you will pay for the policy.

LOOK FOR DISCOUNT OPPORTUNITIES

You should also check with your insurance company to see if it offers premium discounts for the use of dead-bolt locks, smoke alarms, fire extinguishers, sprinkler systems, and security systems. 

Some companies offer discounts and group rates for seniors or members of professional or business organizations.

Non-smokers may receive reduced rates from some companies, since smoking accounts for a large number of residential fires each year.

STICK WITH THE COMPANY THAT OFFERS THE BEST DEAL

Once you’ve considered the alternatives and chosen the company that fits your needs, consider multiple policies with that company. Some companies offer what is called a multi-policy discount. If you purchase your homeowners and automobile policies from the same insurer, you may receive a small discount.

CREATE A HOME INVENTORY

Creating a home inventory can help determine coverage needs, and can be as simple as downloading the myHOME Scr.APP.book on your smart phone.  One of the best ways to make sure your possessions are fully protected is to document them with a home inventory. 

GET MORE INFORMATION

Visit the Minnesota Department of Commerce Home & Property Insurance website for more information regarding homeowners insurance policies, claims, flood insurance, and title insurance.  

Contact the Minnesota Department of Commerce Consumer Response Team if you have questions about the law concerning homeowners insurance, your policy, how to file a claim, or if you have a complaint:

Consumer Response Team 
Minnesota Department of Commerce
651-296-2488
1-800-657-3602 (MN only outside metro area)
consumer.protection@state.mn.us