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How to shop for specialty homeowners insurance
If you're struggling to qualify for a typical home insurance policy, you probably need a specialty homeowners insurance policy. However, because this type of insurance is less standardized than regular home insurance, it can be difficult to compare specialty homeowners insurance companies.
SuperMoney's free specialty homeowners insurance reviews and comparison tools will help you find the best coverage for your circumstances.
What is specialty homeowners insurance, and how does it work?
Specialty homeowners insurance is designed to fill the gaps that regular homeowners insurance won't cover.
Do you own a dog breed that is considered dangerous? Have you already made multiple claims on your home insurance policy? Do you have an aging roof or need to make significant repairs to your home? Or do you own valuable artwork or jewelry that would be difficult to replace? Then it's possible insurance companies may consider you a higher risk and refuse to offer you coverage. In such cases, specialty homeowners insurance can help.
Here is a list of scenarios in which a homeowner may need a specialty homeowners insurance policy:
- You own pets that are dangerous or perceived to be dangerous.
- Prior claims, especially involving allegations of fraud.
- An older home in need of extensive renovations.
- Historic home with landmark status.
- Poor credit rating.
- Expensive or rare artwork and jewelry.
- Exotic cars, boats, or collectibles stored in your home.
- Low-value properties.
- Vacant homes.
- Rental and commercial mobile home.
Specialty homeowners’ insurance often addresses these difficulties by attaching specific requirements, exclusions, or limitations to standard homeowners’ insurance policies.
The types of requirements, limitations, or exclusions that are applied vary according to the specific issue associated with a home or homeowner. For instance, a homeowner with a pet pit bull could obtain a policy that protects his or her home but contains limitations on liability concerning dog bites from the family pet.
What are the most important factors you should consider when shopping for specialty homeowners insurance?As with most types of insurance, there are three things you should focus on when comparing specialty homeowners insurance:
- Type of coverage: As a higher risk customer, it is particularly important to double-check the specific events covered in a specialty homeowners policy.
- Coverage limits: Make sure the maximum amount of money the insurance company will pay is enough to cover the cost of replacing or rebuilding the assets insured. Standard policies typically start at $100K. However, specialty homeowners insurance companies may consider much lower amounts (e.g., $20K or even $10K).
- Deductibles: This is the amount that will be deducted from the total amount when you make a claim. Typically, the larger the deductible, the lower the cost. Ensure the deductible amount is not so high it creates a financial hardship.
- Where you live: It's not like you are going to move states based on the cost of insurance, but it is worth remembering that rates can vary dramatically by state and zipcode.
Once you have a clear idea of what coverage, limits, and deductibles you are comfortable behind, write down the details. Then ask for quotes from three or more insurance companies using the same terms. Focus on insurance companies with a solid financial rating and good consumer reviews.
SuperMoney provides free specialty homeowners insurance comparison tools and company ratings to help you find the insurance companies available in your state with the best financial rating and customer care.
What coverage types should you consider when choosing an insurance company?
It's unrealistic to write a comprehensive list of covered events because of the very nature of specialty homeowners insurance. Nevertheless, there are broad types of insurance that are useful to understand so you can be sure you're comparing apples to apples when shopping for insurance policies.
- Liability – Covers injuries that occur while on the premises, or if the policyholder accidentally injurer someone or damages property while they are away from home.
- Personal property – The policyholder's belongings are protected on an actual cash value basis if the home suffers a covered loss. Notice that actual cash value (ACV) takes into account depreciation so the amount you receive probably won't be enough to replace the covered items. Some insurance companies offer an upgrade to full repair or replacement cost coverage.
- Other structures – Sheds, detached garages, or fences are protected.
- Additional living expenses – If you have to move out because of a covered peril, the policy covers the extra living expenses until repairs are complete or a new home is found.
- Reasonable expenses – Covers the cost for emergency repairs that prevent additional damage, such as covering a roof after a storm.
- Limited burglary – In cases when there are visible signs of a burglary, such as a broken window or jimmied door, the policy covers the cost of the personal property or permanently attached items such as copper piping or even a heat pump.
- Seasonal or vacation homes: Typically, insurance companies require you to insure your primary home with them before they insure a vacation or seasonal home. Specialty homeowners insurance can offer coverage options for your seasonal or vacation property regardless of your primary home insurer.
- Vacant Homes: Empty homes come with special challenges and risks, which is why many insurers won't cover them with regular home insurance policies.
- Landlord or Rental Property insurance: Covers the unique risks that come with renting out your home for long periods of time. It typically includes property damage, liability costs, and loss of rental income.
- Older and lower-value properties: It can be a challenge to find insurance if your home's market value is lower than what it would cost to rebuild it. Many insurance companies also hesitate to cover older or lower-valued properties.
Determine which coverage types you need and use the same options when you compare specialty homeowners insurance policies.
What coverage limits and deductibles should you use when shopping for specialty insurance?
Only you can answer this question because your coverage limit and deductibles should be based on your total net worth, the value of your home and personal property, and your cash flow. However, you can use the following guidelines to inform your decisions. Common coverage limits range from $300K to $500K. However, you may need much more or a lot less, depending on your financial circumstances.
- Replacement cost: Aim for a coverage limit that is the same or higher than the cost of replacing or rebuilding your home and personal belongings. Notice the replacement cost is different from the market value of your property, which sometimes can be considerably lower due to depreciation.
- Net worth: If you are found negligent in a lawsuit, the claimant may try to go for your assets to compensate for their damages. Remember the larger your net worth, the more liability coverage you need. If you have substantial assets, you may want to go for the highest coverage limit, which is often around $1 million.
- Cash flow: A deductible is the amount of a claim the policyholder is responsible for paying. So, if you have a $100K claim and a $5K deductible, the insurance company will pay $95K. Typically, the higher the deductible, the lower the policy premium. However, if the deductible is too high, it can cause serious cash flow problems. Often, the default deductible is $500, but you can ask for deductibles of $1,000 to $5,000 or even higher.
Based on your assets, the value of your property, and your cash flow situation, calculate what coverage limits and deductibles you are comfortable with. Remember to use the same coverage limits and deductibles when requesting quotes from different specialty homeowners insurance companies.
Which insurance companies offer the best specialty homeowners insurance?
The best specialty homeowners insurance company for you is one that has a solid financial rating, great customer care, and offers the coverage you need at competitive rates. The thing to remember is insurance companies calculate rates based on their estimates of your risk level as a policyholder.
However, each company has its own way of determining risk. The best specialty homeowners insurance policy for you may be a terrible choice for someone else. The only way to know is to apply for coverage with multiple insurance companies.
Which are the cheapest specialty homeowners insurance companies?
Specialty homeowners insurance rates vary considerably based on the coverage limit you request, the size of your deductible, and the insurance discounts you qualify for. For example, specialty homeowners insurance policies may range from $1,200 to $2,700 depending on whether you choose a $250K or a $750K coverage amount.
You can also qualify for discounts if you bundle other insurance products or you invest in safety measures. For example, some insurance companies will offer discounts for having a smoke alarm, a central alarm system, or installing a deadbolt.
Of course, price is only one of the factors you should consider when finding the best option for you. Financial stability and customer satisfaction are just as important. That is where SuperMoney's free company ratings and customer reviews can help.
How can specialty homeowners insurance reviews and company ratings help you compare policies?
The best rates and terms are worthless if a specialty homeowners insurance company doesn't have the money to pay for a claim. So, it's important to check the financial health of an insurance company. That is where insurance company rating agencies come in.
There are five main insurance company rating agencies: A.M. Best, Fitch, Kroll Bond Rating Agency (KBRA), Moody’s, and Standard & Poor’s. Each one has its own methods and list of rated companies. SuperMoney's specialty homeowners insurance company reviews provide a financial strength rating that combines available ratings to help you determine the reliability of an insurance company.
Notice these ratings could change at any time, so it's a good idea to check the latest financial ratings of the insurance company you choose before making a final decision.
SuperMoney's specialty homeowners insurance reviews also provide free access to consumer reviews and ratings. This gives you valuable insight into how good an insurance company is at managing claims. User reviews also help you spot what complaints users have and if a company is known for its bad service.
If you don't qualify for a conventional home insurance policy, or if the coverage they provide is insufficient, you should consider seeking insurers that specialize in specialty homeowners insurance. Doing so maximizes your chances of being able to obtain the insurance coverage you need – rather than collecting application denials.
Here's what you should do next:
- Determine what insurance coverage you need.
- Calculate the coverage limits and deductibles you are comfortable with.
- Contact several specialty homeowners insurance and apply for a policy using the same coverage and limits.
- Consider the reputation, financial rating, user reviews, and complaints about a company. If something happens, you want to be well covered.
Use the comparison tools and free reviews below to find the best specialty insurance company for your needs