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.
Costly Deductible
As is to be expected with insurance of any form, lower premiums are always a trade off with higher deductibles. Basically you risk a more manageable monthly bill for more out of pocket expense if your insurance actually becomes necessary. At first glance many people are willing to take this risk, assuming nothing will happen. However, this mentality can cause much more financial strife if disaster does strike and your deductible is so high that you cannot afford to pay it. If this happens you really have been throwing money away each month on a premium. It is always wiser to make sure to balance the cost of your premium, which of course must be affordable, with a deductible that is low enough to potentially afford if you absolutely need to.
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.
Market Value Insurance
In order to cut premiums down, many insurance policies only insure a home up to its market value, or how much it would be expected to sell for if put up for sale currently. Often this is much less than what it would actually cost to replace or reconstruct the house if something were to happen. In fact, depending on the current market this market value amount may even be less than you initially paid for the home. Cheap insurance policies will very rarely insure a house for more than this though. A more expensive policy will often insure a home for the estimated replacement cost, which is much better in the event of an actual disaster.
This is a basic guide to why it is important to know what to expect with cheap house insurance. You may still feel for a number of reasons that cheaper is better for you, but always check your facts and make an informed choice before jumping into an inexpensive policy which fails to deliver when you actually need it.
Not entirely sure what to expect with cheap house insurance cover? We’ve got the low down in our house insurance quote overview.
Tags: cheap home insurance, cheap house insurance, home insurance, house insurance