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How to get a deal on homeowner’s insurance

No need to buy insurance from the first agent who comes along. Jean Chatzky tells how to get the best coverage for the best price.

Q: We have just bought a house. The agent who sold it to us is trying to push us toward a particular insurance agent for homeowner’s coverage, and I’m a bit suspicious of this. What is your advice?

A: As with all insurance coverage — and for that matter, pretty much any good or service — you need to shop around for the best deal.

If you already have an auto insurance policy, start by calling that agent or insurer — often you'll get a discount by purchasing both coverages through one company.

Then make at least three more calls for quotes, including one to a direct writer — an insurance company that uses an 800-number-based sales force, like Amica (800-242-6422). Or, if you have a military connection, call USAA (800-531-8100).

You should also call at least one insurer with its own sales force, like State Farm or Allstate, and one independent agent, who can quote you a variety of prices. (It could be the one recommended by your real-estate agent; who knows, he or she may be a fine resource.)

Having done that, you'll want to check the ratings of the insurance companies whose quotes you like with a firm like A.M. Best or Standard & Poor's.

As you do your search, here are some other things to take into account that could save significant money:

Boost your deductible. Increasing your deductible from $250 to $500 or $1,000 can save you as much as 25 percent, according to the Insurance Information Institute.

Invest in safety. Get a burglar alarm and you could save at least 5 percent on your annual premiums. Other safety devices, like smoke alarms and state-of-the-art deadbolts, can also net you discounts.

Membership pays. Belonging to certain alumni or automobile associations may result in a discount.

The benefits of being home. If you're home more often than not, you ought to be able to save 5 percent to 10 percent on your homeowner’s policy. The logic: You're less likely to be burgled and more likely to notice small fires or other problems. Note: The same is true if someone else is typically home (if you have a live-in housekeeper, for example).

Buy smart in the first place. Homes made of materials that aren't likely to burst into flames can net you a discount, as can brick homes in some parts of the country (because they're less likely to suffer damage from hurricanes) and frame houses in other parts (because they're less likely to succumb to earthquakes).

Jean Chatzky’s Bottom LineThis week: Homemaker life insurance
If you're a stay-at-home mom, don't assume that just because you don't "earn an income," you don't need life insurance. You do. But how much do you need?

Figure out what it would cost to replace the services you provide for your family. If you weren't around, how much would it cost to hire a person (or more likely, people) to care for the kids, transport them, do the grocery shopping, act as the family bookkeeper (if that's something you do), etc.?

After you figure out how much that would cost each year, increase that number each year by 3 or 4 percent for inflation, and determine how many years you'd need such services. Perhaps until your youngest child is in junior high? Perhaps longer?

Also, if your spouse thinks that he would reduce his working hours should something happen to you, you need to factor the need to replace that portion of his income into the equation, as well.

The main point is, of course, that not only are you of critical value emotionally to your family, but you're also of critical value financially — and you need insurance, too.

Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Her latest book, "Pay It Down: From Debt to Wealth on $10 a Day," is now in bookstores. Copyright ©2005. For more information, go to her Web site, .