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The Ins and Outs of Homeowners Insurance

Essentially, the insurance game is a gamble: The insurance company takes a certain risk profile, which determines how much you pay for premiums, and they gamble that you will seldom use your insurance, if at all. You gamble that if something happens, the insurance company will be there to take care of things for you.

Unfortunately, insurance companies and insurance agents often take advantage of consumers, either offering them too much insurance, costing them money for things they do not need, or they offer customers the best price in the area, but often on inferior policies that won’t pay in the event of certain disasters.

This is especially true of homeowners insurance. The highest rates in the country are still in Texas, followed closely by other Gulf states, at least in part due to the weather patterns there. While it is important to be adequately insured, as the recent fires in California have shown us, we also know that insurance companies are skittish. Even filing a single claim or inquiring about a possible one can increase your premiums or even cause your homeowners insurance to be canceled.

How do you protect yourself from being taken advantage of by your homeowners insurance company? Here are some tips when evaluating your current policy, starting a new one, or shopping around for a better rate.

Location, Location, Location

While we know that rates vary by state, they also vary by location within that state, a city, or even a rural area. There are many things that affect your coverage, and it is important to know what they are from the start. One of the most important is location.

For instance, if you live in a more rural area, the distance you are from emergency services has a huge impact on the cost of your policy. “Your proximity to emergency services can actually make a huge difference in price,” says an article by DC Building. “Living next to a fire station specifically, has the advantage of possibly saving you thousands.”If you own livestock of any kind and want to insure them, that is another factor, as is the amount of development happening in your area.

Live in a more urban setting? There are still a number of factors that determine the cost of your policy and things you should make sure you are covered for.

  • Flood Zones: If you live in a flood zone, you may be required by your mortgage lender to carry flood insurance, and it might not be a part of your homeowner’s policy. In some jurisdictions, you are also required by planning and zoning codes to have it. You can buy separate flood insurance at an additional cost.
  • Earthquake Insurance: If you live outside the state of California and you are in an area at risk for earthquakes, make sure your policy covers you. This insurance is often also sold separately or may be an option on your policy.
  • Crime Rates: Yes, the crime rate in your neighborhood and the surrounding area will determine your insurance costs. While you can’t do anything about this, you can get discounts by adding alarms and security systems.
  • Home Business Insurance: If you have a home business located in your home, your business expenses will not be covered unless you have a separate policy. And while you can deduct the business insurance from your taxes, your homeowners insurance cannot be written off.

There are many other factors about the location of your home that help insurance companies calculate the cost of your premiums. The more you know about these going in, the less likely it is that your insurance company will be able to take advantage of you.

Check Deductibles and Limits

Is the deductible on your insurance less than $1,000? You could be paying as much as 25 percent more than you should be. The higher your deductible, the lower your premiums, but let’s put that in more practical terms.

Let’s say you live in Texas and your homeowner’s insurance currently costs you $1,500 annually with a $500 deductible. By increasing that deductible, you can reduce your rate by $375, bringing your annual rate down to $1,125. You will save that $500 difference in insurance premiums alone in just over a year.

However, if you put more money in savings, the following year you can raise your deductible again, saving yourself even more money by at least partially self-insuring against disaster with emergency savings.

Beyond deductibles, you need to know your policy limits. One that is too high could be costing you money. One that is too low could mean that in the event of a catastrophe like a fire, you would not get enough from your insurance company to purchase a new home and replace the belongings you lost.

This can get complicated. There may be limits for water damage, a different limit for fire, personal property limits, and separate policies to cover specific items like jewelry, firearms, or even an expensive bicycle. Whenever you have a change in your circumstances or make a large purchase, check with your insurer to make sure you have adequate coverage.

The rule to remember is that increasing limits on what the insurance company has to pay will cost you more, and increasing your deductible will cost you less. When looking at any coverage, either current or when you are making a change, know limits, deductibles, and what each means to your bottom line. It is another way to make sure your homeowners insurance company is not taking advantage of you.

High and Low Maintenance

What do we mean by this? First, you must be vigilant in the maintenance of your home. For instance, insurance companies are especially vigilant about any claims related to water damage or mold. The reason is that these have the potential to multiply and turn into larger expenses down the road.

One of the most common scenarios is that you will have a pipe burst, but the insurance company will deny your claim or even cancel your policy if you have had a slow leak for a while that you did not take care of. If they can prove any issue happened due to your negligence, they not only won’t pay, but your rates will probably go up.

This means you must be extremely vigilant about taking care of your property. Fix small issues right away, and make sure you keep receipts for proof of any work you have had done or have done yourself.

At the same time, avoid filing small claims if you can help it. Anything under your deductible, simply take care of yourself and work to replace that money in savings. A series of small claims will cause your rates to go up. If you even call about a potential claim, even a small one, and then don’t file it, you can get a reputation as a high maintenance client, affecting your rates.

The key is this: be vigilant and maintain a high level of maintenance for your home. When it comes to your insurance company, though, be low maintenance and stay under their radar. You will have a much better experience if you ever actually need them, and they will be less likely to take advantage of you.

Compare Carefully

Feel like you are already getting taken advantage of? Before you shop around, understand that you need to compare carefully, apples to apples so to speak. Make sure that the new policy has the same coverages, deductibles, and limits as your current one before you decide it is a better deal.

Even if your rates have been rising over the last few years, you may be getting loyalty discounts from your current company you won’t get elsewhere. Go into the process with an open mind, but also with some caution. Don’t let a new homeowner’s insurance policy provider take advantage of you.


Bob Kraft

I am a Dallas, Texas lawyer who has had the privilege of helping thousands of clients since 1971 in the areas of Personal Injury law and Social Security Disability.

About This Blog

The title of this blog reflects my attitude toward those government agencies and insurance companies that routinely mistreat injured or disabled people. As a Dallas, Texas lawyer, I've spent more than 45 years trying to help those poor folk, and I have been frustrated daily by the actions of the people on the other side of their claims. (Sorry if I offended you...)

If you find this type of information interesting or helpful, please visit my law firm's main website at You will find many more articles and links. Thank you for your time.

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