Most of us are constantly looking for ways to save more. One way to accomplish this is by taking steps to save money on homeowners insurance.
For most individuals, their home is the biggest asset they own. As such, it makes sense to protect it by owning homeowners insurance. If there is a mortgage on your home, the bank will require it.
Homeowners insurance is usually reasonably priced for the value provided. However, that doesn’t mean you shouldn’t save a few dollars anyway. Savings can often amount to several hundred dollars each year.
Read on for some steps you may be able to take to reduce your premium.
Compare Quotes From Multiple Insurers
The price for the same homeowners policy can vary materially from one insurer to another. Choose at least three different insurers and go through the process of obtaining a quote from each.
The key to comparison shopping is to compare “apples to apples.” Make sure you obtain quotes for policies which have primarily the same terms and features.
Also remember to check each insurer’s financial strength and stability. You want to make sure the insurer will be able to pay if a claim is filed. Check with insurance rating companies such as A.M. Best for such information.
Besides strength and financial stability, you also want to see that an insurer has a good reputation for customer service in handling claims. The National Association of Insurance Commissioners (NAIC) has a consumer information source page where you can perform a company search. Here you can find some financial as well as complaint information.
You can obtain quotes online or over the phone from various insurance companies such as Liberty Mutual, State Farm, Allstate, and GEICO.
Bundle Home and Auto Insurance From The Same Insurer
Having multiple policies with the same insurer can save you money. So consider purchasing your home and auto insurance from the same insurance company. Discounts vary, but typically fall within the range of 5% to 20%.
Besides the money saving discounts, you also have the convenience of dealing with one company. You may also get a loyalty type of discount from some insurers if you stick with them for a certain number of years.
However, make sure to still shop for better deals maybe as often as every renewal period. At the very least if you happen to notice a material increase in premium. Despite any discounts, you may be able to find a better deal with another company. It is also possible to pay less overall by having the policies with two separate insurers.
The deductible is the amount of money you must pay out of pocket for a loss before the insurance company pays. So let’s say your home is partially damaged during a storm, and it will cost $2,500 to repair. If your deductible is $500, you will pay that amount, and the insurer will pay the rest ($2,000 in this example).
Like most other types of insurance, a higher deductible will reduce your premium. However, make sure that you can afford the deductible that you choose. Select an amount that you know you will comfortably have on hand and will be able to pay if needed.
Deductibles generally range from $500 to $1,000, but can be as high as $2,000 to $10,000, and sometimes more.
Studies show that homeowners file claims on average about once every ten years. So you can use this rough guideline to help in deciding if a certain deductible is worth it. If you think you will be able to recover the increase in the deductible within ten years, it may be worth the increase. However, keep in mind that this is just a rule of thumb. You can have a claim sooner than 10 years, much later, or maybe never.
For example, let’s say you can reduce your premium from $1,000 to $900 (10%) by increasing your deductible from $1000 to $2,000. In this case, it will take you ten years without a claim to save the extra deductible amount.
Don’t buy more coverage than you need
Be cognizant of the approximate replacement value of your home. This is the maximum coverage A for structures that you should own. Remember that you are not including the value of the land your home is built on in the replacement cost. Land is not susceptible to the typical perils covered by homeowners insurance.
For example, let’s say you recently purchased your home for $500,000. But this price includes the home plus the land on which it is built. So the replacement value of the structure will be much lower.
However, make sure you have enough coverage to meet any coinsurance clause contained in your policy. Such clauses often require you to insure at least 80% of the replacement cost of your home. Otherwise the insurance company may not fully cover the loss of a more common partial loss claim.
Keep An Eye On Your Contents Coverage
Also don’t purchase more coverage than you need (or can use) for personal contents of the home. Most policies offer a standard amount of coverage for contents. It is typically 50% to 70% of the coverage for structures. However, this may be more coverage than you need, depending on the types of personal property you own. Some insurers may let you reduce the personal contents coverage amount, which can result in a lower premium.
Certain categories of items such as jewelry and electronics are only covered up to certain limits. Extra coverage may be purchased separately for such items. As such, it pays to perform a periodic inventory and analysis of your personal contents. Estimate their values to make sure you are paying for the proper amount of coverage.
Most standard policies offer market value coverage for contents. Replacement value for contents must generally be added and will result in a higher premium. It may be worth it, however, to obtain replacement value coverage for contents.
Don’t File Claims for Small Amounts
You may pay less if you don’t have a claim on your record.
Filing claims for small amounts slightly higher than your deductible can cost you. The more claims you have, the more your premium will rise. Not to mention that your insurer may drop you by not renewing your policy.
But if you have a big loss that you cannot afford to fix, use your insurance. After all, that’s why you purchased it in the first place.
Even if you do file a claim, going without one for several years may eventually act to reduce your premium.
You can order a Comprehensive Loss Underwriting Exchange (CLUE) report to check the claims history for a home. Most insurance companies share information about claims which is compiled in the CLUE report. So a claim you file with one insurer will likely be known to other insurers as well.
The CLUE report is one of many factors considered by insurers in determining the risk of a policy. But you can also use it as an information source. Potential homebuyers can find it especially useful in uncovering claims on a home they may be looking to purchase.
Claims may not appear on the CLUE report if they are older than 7 years or if the company with which the claim was filed did not report it to the database.
Reduce the Risk of Damage or Theft
Smoke detectors, fire alarms, fire sprinklers, and newer electrical systems can all reduce the risk of damage from fire. Burglar alarms and dead-bolt locks can minimize the probability of theft.
Home improvements such as storm shutters or a newer or reinforced roof can reduce potential damage from a storm. Replacing old plumbing systems can make the home less prone to water leaks and related damage.
Trees near your property are more likely to cause damage if they fall. So cutting down tall nearby trees may lower your premium.
Many of these ideas such as having a smoke detector you will want to implement anyway for your own personal safety.
But step back for a minute before undertaking any major home improvement projects such as replacing a roof or electrical or plumbing system.
If your only reason for doing so is to reduce your homeowners insurance premium, make sure to check with the insurer first. This way you can determine if the expense will be worth any potential discount or benefit offered.
Additional Ways To Save Money On Homeowners Insurance
- A bad credit score can result in a higher insurance premium. So pay your bills on time and don’t take on too much debt relative to your income. Also, check your credit report periodically for any potential errors.
- Certain types of pets such as aggressive dogs can raise your premiums. Such animals can increase liability risk if they bite or attack someone, for example. So avoiding ownership of such pets can save you on premiums.
- Some companies allow you to pay your bill monthly. But there may be a discount if you pay it all at once up front. You may also get a discount if you set up automatic monthly payments.
- You may also pay less if there are no smokers living in your home. The reasoning is that the risk of fire will be diminished.
- If you live in a high risk area and have insurance sponsored by the government, you may wish to look at a private carrier. Premiums will generally be more competitive.
- Discounts may also apply if you are at least 55 years old and retired. Spending more time in the home makes it less likely to be burglarized or to sustain major damage from a fire or water leak. The home should be your main residence.
- You can also save via discounts which are sometimes available through a business, professional, or other type of organization of which you may be a member.
The specific savings you may obtain with a particular insurer can vary at least to some degree. Not to mention that the overall total of savings will usually be capped. But being informed as to the many different ways you can lower your premium will likely save you money. It will allow you to provide the appropriate information to your agent or insurer, and help you to ask useful questions.