An Overview Of What To Expect With Cheap House Insurance Purchase

Written By: Sal Marino on September 8, 2010 No Comment

For just about everyone, finding ways to save money is one of their top concerns. With so many bills to pay and expenses that come up, one of the first areas that many people try to cut back on is their insurance premiums. The rationale is that an event where insurance becomes necessary is often highly unlikely, and it can feel like throwing money away every month for nothing. But before completely slashing that premium in half, make sure you are aware of exactly what to expect with cheap house insurance, because you may be dissatisfied otherwise.

High Deductibles

As with any kind of insurance, a lower premium always means a higher deductible. This means that if something does go wrong, you will have many more out of pocket costs. While some people are very willing to take this risk, foreseeing no problems, it can put you in much more financial trouble if something does go wrong and your deductible is impossible to afford. If this happens, you have essentially wasted all the money you spent on monthly premiums. Although wanting a low premium is understandable, make sure that your deductible is still low enough that it would be possible to pay off if it becomes necessary.

Cost to Replace Vs. Actual Value

Home insurance will always claim that on top of your actual property value it will insure a percentage of the value of your possessions, typically around forty percent. This claim, however, can be misleading, since there are two ways to calculate the value. The ideal and most useful way is the replacement value, or how much you could expect to spend on replacing a damaged item with a brand new one as similar as possible to the lost one. But cheap policies often use another way to calculate value. They generally value your items strictly on the actual amount of cash they are worth, minus depreciation. This is often significantly less than you will actually spend on replacing your possessions.

The Value of Your Home

Of course, any insurance policy will insure your home for the amount it is worth. But what does this actually mean? Cheap insurance policies will rarely cover more than the market value of your house, or the amount you could expect to sell it for if you were to put it on the market right now in its current state. This value can fluctuate greatly based on the current housing market, and is almost always less than it would actually cost to repair or reconstruct your home if it were to be destroyed in an insurance claim. In fact, it can even end up being less than you paid for the home at the time. A much better way to calculate the worth of your home is to look at the amount it would cost to replace your home with a new, comparable one, or to reconstruct it after damage was done. This, however, is only included in more expensive policies.

These cautions are a basic overview of what to expect with cheap house insurance. Of course, some individuals may still choose a cheaper policy for various reasons, but make sure to be aware of these facts and heavily consider them in making a final decision on your homeowner’s insurance purchase.

Not sure what to expect with cheap house insurance cover? We’ve got the exclusive down in our complete house insurance quote review.