This story was originally published by Outlier Media.
An estimated 26% of Detroiters forgo homeowners insurance — a major financial gamble, but one that’s often driven by necessity.
In a recent report from the University of Michigan’s Poverty Solutions initiative, the vast majority of uninsured Detroit homeowners said they simply couldn’t afford coverage.
It’s true that Detroit has some of the highest insurance premiums in the state — far above suburban rates — and that’s unlikely to change without regulatory action. But there are still strategies Detroiters can use to lower coverage costs.
We spoke with Sheila Hughes, principal agent at Sheila Hughes Agency Inc., for tips on how to shop for homeowners insurance.
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How do I get started?
First, anybody shopping for home insurance should gather all the relevant documentation. This will mostly be information about the home itself: the year it was built, type of construction, square footage, number of rooms and whether you have a mortgage.
Next, you should compile a list of valuable items in the home and records for major work, like a roof replacement or kitchen renovation.
You’ll also need to provide some personal information: Social Security numbers and potentially employer and income information. Insurers will check credit scores, which will affect your premium costs.
How do I gather quotes?
Hughes is an independent broker and strongly recommends working with someone like her. Unlike an agent who works for a specific insurance company, a broker will take down the essential information, then get quotes from all the insurance companies that offer plans. The broker will then present the best quote. Insurance companies typically pay brokers’ commissions.
“If you develop a solid relationship ... and have access to their knowledge, expertise and experience, that’s only going to help you always get the best rate,” Hughes said.
Some people may still prefer to gather quotes themselves if they want more direct control or suspect that brokers have preferred partners that could lead to biased advice. The Department of Insurance and Financial Services lists every company that offers plans in Michigan, but prospective buyers may just want to go to the websites of the biggest companies, like Allstate, State Farm, Auto-Owners or Farmers.
The benefits of bundling (and other discounts)
The biggest insurance savings come from bundling, Hughes said. Getting home and auto insurance from the same company can get you as much as a 30% discount.
“Detroiters tend to have their home over here, their car over there, so they’re not maximizing the discounts,” Hughes said.
She added that many carriers offer savings for certain employers, alumni associations, Greek organizations, older homeowners and homeowners with security systems.
Choosing a higher deductible can also lower your premium.
What if I still can’t afford it?
Michigan offers a plan called Michigan Basic that can be a more affordable alternative to traditional policies. It offers coverage in a few areas, like fire or windstorm, that are not as expensive as broader coverage. You can also get riders for personal liability or vandalism.
But Michigan Basic only offers homeowners insurance, so you can’t benefit from bundling policies.
Other things to consider
Hughes said insurers value loyalty and often provide lower premiums to longtime customers, but it’s still worthwhile to reevaluate your policy as frequently as possible: Brokers can offer new quotes and even find new discounts.
Hughes recommends making as few claims as possible, so long as you can afford it. Making claims will raise your premium, and insurers share information with one another, so claims can even raise potential premiums elsewhere.
“You need to avoid reporting small claims because that works against you,” Hughes said.
She also said most people don’t have enough personal liability coverage. That’s triggered when someone gets injured on your property and decides to sue. Upping that amount costs very little on your total premium, Hughes said, but provides a lot of protection.
Lastly, you may already have insurance and not realize it. All mortgage companies require homeowners insurance. If you didn’t buy it, your lender did. That means not only are you already paying for the coverage, it’s almost certainly not the best deal.
This article first appeared on Outlier Media and is republished here under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
