You’re not the only one who gets a rash when they think about homeowners insurance. You’re already figuring out a mortgage, and dealing with a stack of contractual paperwork—so you’re probably feeling all kinds of stress.
Yet getting home insurance doesn’t have to be difficult. You need it to secure your new home. And if you have a mortgage, it’s actually necessary.
Consider it like this: Your mortgage lender is essentially a co-owner of your home. It’s in their best interest to keep your new home in shape. If the worst occurs and you have insurance, you will have the money to handle it. If not, your mortgage will have little to no value, and both you and your lender will lose your asset.
One of the most valuable possessions you will ever own is your home, and home owners insurance ensures that it is secure. Here are the topics we’ll discuss to get things started:
- Is a cheaper home insurance policy genuinely better?
- What distinguishes a homeowners policy?
- Does coverage impact price?
- Can I get a discount on my policy?
- How do claims work?
- Is a cheaper home insurance policy actually… better?
Should you choose the business that provides the lowest home insurance quote when it comes time to actually buy homeowners insurance?
When we go out clothes shopping, it’s easy to compare a cashmere sweater versus a polyester one, but how do we compare high-quality home insurance policies—especially when there are so many home insurance companies to choose from?
The average cost of homeowners insurance in the US is $1,445 per year, or $120 a month, according to Value Penguin. But to really understand how to pick a high-quality but well-priced insurance policy, let’s back up a little, and actually explain how home insurance companies work—and what you’re getting for your money.
Old insurance against new insurance
A homeowners insurance policy, if you need a refresher, is an agreement between you and your insurance provider that protects you from a variety of risks. It covers you and your home if bad luck leaves you recovering or repairing damages.
There are many different homeowners insurance companies to pick from, and the majority of them offer coverage options that are fairly comparable. (FYI, there are six primary coverage areas for homeowners insurance. Find out exactly what your home insurance policy covers.)
Understanding that traditional and insurtech insurers are the two main categories is useful. And then there’s lemonade.
The process of buying insurance from a traditional insurance company will be more antiquated, probably more expensive, and probably less effective. You’ll need to get in touch with an agent, who will help you determine what type of insurance coverage you need. They’ll eventually provide you with a home insurance quote, either over the phone or in their office. If this sensation is ingrained, well-known, and hasn’t changed significantly in decades, some people could find it comforting.
What about “insurtech” brands? These are businesses that, as their name suggests, use cutting-edge technology to advance their sector. Yet, the great majority of insurtech businesses issue policies that have been produced by other businesses rather than being legitimate insurance carriers.
And then there’s lemonade. What makes Lemonade different? To begin with, we write our own insurance policies and are reinsured. The majority of customers may obtain insurance immediately thanks to underwriting algorithms built into Lemonade’s AI-powered bot Maya. When it comes to accuracy while formulating policies, these bots provide Lemonade a clear advantage.
Traditional insurance companies have large overheads because they need more employees, and therefore they end up charging customers higher premiums. Lemonade can offer homeowners insurance policies for as little as $25 per month thanks to lower operating costs brought on by AI and machine learning. Moreover, Maya is a bot and never receives a commission when she sells a policy. She’ll also ease you through the sign-up process and ensure you’re getting the coverage you need, lightning-fast.
App-based insurance like Lemonade also makes your post-purchase experience more convenient. Need to add your spouse’s name to your policy? Got a new credit card, or switched banks? No issue. Take care of everything from your smartphone in a matter of seconds. With Lemonade, you may even submit a claim using our app and receive payment right away.
Cheap versus pricey
On general, 21st-century businesses like Lemonade are less expensive than their more established rivals. Why? Consider this: While traditional insurance providers like State Farm or Allstate employ over 19,000 independent agents to serve their clients, AI Maya at Lemonade essentially onboards every single policy holder.
We have one employee for every 2,353 policies, compared to State Farm’s 1 person for every 1,095 policies. In other words, State Farm must employ more than twice as many people to manage each policy, and that expense is likely to be passed on to you. Less overhead for Lemonade means greater savings for you and a quicker sign-up process.
Customer satisfaction
With typical insurance providers, you might receive some individualized attention from an insurance agent, either in person or over the phone, but it’s unlikely they’ll provide you with a price right away. There will be a ton of papers for you to sign.
Even though Lemonade depends on technology and artificial intelligence to change the industry, we haven’t lost sight of the value of a human touch. While AI Maya expertly handles more than 25% of all basic customer inquiries, we understand the importance of personalized interactions. Because Maya takes care of the simple duties, it frees up our (human) support team to help with extremely intricate insurance problems, like how to replace a lost engagement ring.
What distinguishes a homeowners policy?
Your brother, who owns a mansion in Georgia, won’t have the same insurance premium as your Boston townhouse under your customizable policy. Why? Well, the price of homeowners insurance can vary significantly, depending on factors like a home’s condition and location, as well as a policy’s deductible, and the amount of coverage you need.
The top 3 elements that have the biggest impact on the price of your homeowners insurance premiums are listed below.
• Weather conditions in your state. Premiums are typically higher in states with a higher likelihood of natural disasters than in states without. The most expensive homeowners insurance, for instance, is in Louisiana, Texas, Florida, Oklahoma, and Kansas. It’s no accident that coastal states like Florida, Texas, and Louisiana may experience some fairly severe storms, and that Oklahoma and Kansas lie smack in the midst of Tornado Alley.
•Your home’s construction materials. Your home owners insurance will be more expensive the more likely it is that your home may collapse as a result of a natural disaster. This considers everything, including the shape of your roof and the materials that were utilized to construct it.
• Loss history in your neighborhood. The likelihood that your possessions will be stolen will also determine your risk because homeowners insurance covers your possessions.
Does coverage impact price?
Definitely. Insurance coverage is like a really nice umbrella. It safeguards you from a variety of negative events that could harm you, your possessions (also known as personal property), or your home (this falls under dwelling coverage, in coverage lingo).
Let’s imagine that you have $10,000 in entire possession, including your dependable bicycle and numerous boxes of vinyl that your Uncle Bob gave you. Your friend Gigi, whose father was the former leader of the heavy metal band Called Perils, has a collection of vintage guitars that would make anyone drool. Will Gigi’s premium be affected by the additional coverage she needs for those expensive instruments?
It undoubtedly will. Gigi will have to pay a higher premium. Because Gigi can utilize her policy to recover the value of those classic guitars in the worst-case scenario—suppose let’s someone broke into her home while she was on vacation.
And it’s not simply the things you own. Of course, the cost of your policy is also influenced by the worth of your home. If you live in a $2 million mansion, you will need to pay a larger monthly premium to cover the expense of rebuilding your home in the case of a calamity.
Liability coverage is one of six major types of coverage for homeowners insurance. It can get complicated, but we want to make sure you understand everything. Do you want to calculate how much you will require for each category? Check out our helpful guide here.
Can I receive a discount on my policy?
It depends! There aren’t many options for reducing the cost of your home insurance policy.
Here’s a simple one: You may be eligible for a discount if you have a smoke detector, fire alarm, or burglar alarm. That’s because we appreciate Lemonaders who maintain their home secure (and hey, that means less risk for us, too).
Here are a few additional variables that may affect the cost of your policy (in most cases, they will increase the cost, not decrease it), but stick with us for a moment.
• Added Protection. You’ll pay a little more for those specific, valuable objects if you arrange personal property coverage on your expensive items.
• A history of claims. If you have previously filed claims, your premium will typically only go up if the accepted claim is at least $500 more than your deductible or the occurrence was within your direct responsibility. For instance, suppose you submit a claim for your $500 headphones with a $250 deductible on your policy (in which case Lemonade pays out $250) or for a wildfire that ravaged your home (which is outside of your control). Such claim shouldn’t result in an increase in your fee.
Just so you know, it’s not only your past actions. Since your home is more likely to be broken into, your policy may be affected if the prior tenant of your unit made 300 theft claims.
Well, so those are all elements that will make the price of your homeowners insurance climb. But we’re not saying you should forego Additional Coverage, or avoid submitting a claim if you need to. In case the worst happens to you, your possessions, or the people who live with you, insurance serves as a safety net. It probably isn’t worth it to cut a hole in that net in order to save a few dollars each month. But, the final decision is yours.
How do claims work?
This is when things start to get interesting. In the past, if you had homeowners insurance and wished to submit a claim, you would need to contact your insurance provider, sit through around 20 minutes of hold music, and provide a plethora of information. Then, your insurance provider can work hard to come up with excuses to reject your claim. After all, they could have simply pocketed the cash.
Lemonade stands out in this regard. We deduct a set amount from your insurance premium, pay claims with the remaining funds, and donate the remaining funds to charities close to your heart. This affects the price of a loss as well. AI Jim handles, investigates, and settles claims, while AI Maya is the helpful bot that gets your policy off the ground. By utilizing anti-fraud algorithms, claim data aggregation, and fast claims, he saves our Claims Experience Team 58,246 hours annually.
Are you prepared to make a purchase?
Compare all policy aspects, including deductibles, add-ons, and coverage limits, when comparing homeowners insurance quotes. There’s no point in buying a cheap policy that doesn’t give you peace of mind, even though price is important. Don’t just take our word for it; we are completely objective and believe that Lemonade would be a perfect fit. Play the field, acquire quotations from a few different businesses, and you’ll be prepared to decide with confidence. We admit that we have some prejudice, but ultimately, finding the best homeowners insurance for you is what counts (not your fancy friend Gigi). Why not try Lemonade?