Article by:
Elizabeth Rivelli
Finding the cheapest homeowners insurance can feel like a win — until you file a claim and find out that your policy doesn’t cover much. The lowest rates often come with reduced coverage, smaller payouts, or both, so the upfront savings could turn into a much bigger expense after a loss.
In this article, learn some of the main risks of buying the cheapest home insurance, how to safely reduce your premium, and how an independent agent can help you find the best affordable homeowners insurance without sacrificing coverage.
A low home insurance premium is rarely a stroke of luck. Insurers determine rates based on how much they expect to pay out for a claim, so the quickest way to a cheaper quote is to promise less. If you get a cheap home insurance quote, watch out for these five risks.
Cheap home insurance policies often pay claims based on actual cash value (ACV), which means your insurer subtracts depreciation from your settlement. For example, if a storm damages a 20-year-old roof, an ACV policy pays what that roof was worth after 20 years of wear, not what a new one costs. A policy that uses replacement cost value (RCV) typically costs more, but it doesn't subtract depreciation from what you get after a claim.
Cheap home insurance policies might have high deductibles. A deductible is the amount you pay out of pocket when you file a claim. Policies with high deductibles have lower premiums, and vice versa. You should also check whether the policy has storm deductibles, which are usually a percentage of your dwelling limit, rather than a flat dollar amount. Storm deductibles are separate from your standard deductible, and because they're percentage-based, they tend to be higher.
Home insurance prices are tied to your coverage limits, and the lower your coverage limits are, the lower your premium will be. Here’s what that really means: Your dwelling coverage may fall short of what it would actually cost to rebuild your home after a covered loss, like a fire or hurricane. If your dwelling limit is lower than the rebuilding cost, you would pay the difference out of pocket (plus your deductible), which could easily be thousands of dollars.
Cheap home insurance policies may not cover some common perils that could damage your house or personal belongings. That’s because insurers can charge less if they don’t have to cover as many losses — and that ultimately puts homeowners at risk financially. The cheapest home insurance policies are also more likely to skip add-ons that could be valuable for your situation, like sewer and water backup coverage or scheduled personal property coverage.
A very low home insurance premium could signal that the insurer is stretched thin. If your insurer can't pay its claims, you could face long delays, and your state's guaranty association can only pay covered claims within the limits of state law. Don’t be tempted to accept a cheap policy from an insurer that is insolvent or close to bankruptcy. Always check an insurer’s financial strength rating to get a better idea of its financial health before you buy.
|
Cheap coverage |
More expensive coverage |
|
|
Claim payout |
ACV (depreciation subtracted) |
RCV (no depreciation subtracted) |
|
Dwelling limit |
May not cover the full cost of rebuilding your home |
More likely to cover the full rebuilding cost after a claim |
|
Deductibles |
Usually higher |
Usually lower |
|
Coverages |
Fewer covered perils |
Broader protection |
|
Insurer financial strength |
Could indicate poor insurer financial health |
Insurance company might be financially stronger |
Here are some ways to get the cheapest home insurance without skimping on coverage:
Raise your deductible: Raising your deductible from $500 to $1,000 could save up to 25% on your premium, according to the Insurance Information Institute. Pick an amount you could afford to pay tomorrow if you had a claim.
Bundle your car and home insurance policies: Many insurers offer savings if you buy two or more policies. Bundling can be one way to find the cheapest insurance for home and auto coverage, but review it with your independent agent, who can make sure the bundle is actually cheaper than buying them separately.
Harden your home: To save money on home insurance, some insurers may lower your rate if you fortify your home against storms with impact-resistant roofing and storm shutters, or updates to your wiring or plumbing.
Ask about every discount: When comparing insurers, look for discounts you can qualify for. You can often find savings for paying your premium in full, having fire sprinklers or an alarm system, and insuring a newer home.
If you want to find the cheapest home insurance, consider working with an independent agent. An independent insurance agent works with multiple insurers, so they can compare quotes and policies side by side. This is different from a captive agent, who represents one company and can only offer its policies.
Here are some other ways a good independent insurance agent can help:
Home insurance companies look at lots of factors when setting premiums, like your location, age of the home, building materials used, roof age, and proximity to a fire station. They also look at personal factors, like your claims history.
Sometimes, but only if the policy provides the amount of coverage you need and the insurance company is financially stable. While a low premium alone isn't a red flag, it’s important to dig into the fine print to make sure the policy will actually provide what you need. You can’t predict when a storm or burst pipe will damage your home, and if disaster strikes, you’ll want a policy that actually covers the repairs.
You should have enough dwelling coverage to rebuild your home at today's local construction costs, not what you paid for it or what it would sell for. An agent can calculate rebuild costs in your area to make sure your dwelling limit is appropriate.
Probably. An independent agent can compare quotes from several insurers and look for discounts that you might not know about. Comparing quotes is often the best way to find the cheapest policy, and working with an agent saves you the time of doing that on your own.
Before you settle on the cheapest homeowners insurance, talk with someone who can make sure your policy is a good fit for your needs. Learn how to connect with an independent agent who can compare options from multiple insurers so you can find the right coverage at a price that works for your budget.
Plymouth Rock Assurance® and Plymouth Rock® are brand names and service marks used by separate underwriting, managed insurance, and management companies that offer property and casualty insurance in multiple states pursuant to licensing agreements. Each underwriting and managed insurance company is a separate legal entity that is financially responsible only for its own insurance products. A full list of underwriting companies by state can be found on our states licensed & disclaimers page. Actual coverage is subject to the language of the policy as issued. Some discounts, coverages, payment plans, features and benefits are not available in all states and companies, and premiums may vary by purchase method. PA Residents: we reserve the right to refuse to quote any individual a premium rate for the insurance advertised herein.