6 Easy Ways to Lower Your Homeowner’s Insurance
March 14, 2012I used to think the cost of homeowner’s insurance was a fixed, non-negotiable expense. I bought my homeowner’s insurance 10 years ago and rarely thought about it thereafter. Since the bills were paid out of an escrow account, I didn’t have to specifically budget for it, which may be why I didn’t notice the “pinch.”
However, I recently discovered multiple ways to reduce this expense and most methods don’t reduce your coverage or level of service. In fact, insurance in many ways is a negotiable expense that primarily depends on what you bring to the table and how flexible you’re willing to be in order to bring your rate down.
Here are some of the best ways to save on your homeowner’s insurance premium:
1. Raise Your Deductible
Your deductible is what you have to pay out-of-pocket before your insurance kicks in. Deductibles typically start at $250 but can range up to $5,000 or more. Find out what your deductible is and determine whether you have the cash on hand to afford a higher one.
Raising your deductible by a mere $500 could save you as much as 15%. Bumping it up to $5,000 (a substantial risk if you don’t have a comparable emergency fund) could net you almost 40% off your premium. Going that high is a risk, however, as it means that all but the worst of damage will have to be covered out of your own pocket.
Consider how often you’re likely to use your insurance and how much of a deductible you can afford. Then, find out how much you’ll actually save by increasing it.
2. Bundle Your Policies
If you use the same company to insure your car, home, boat, life, jewelry, computer, or virtually any other type of insurance you need, you’ll often receive a discount. Plus, the more policies you have with one company, the greater that discount will be.
For example, I saved 10% by having both my auto insurance and home insurance with the same company. However, people with additional policies could save up to 25% or more.
3. Improve Your Home’s Security and Safety
Install deadbolt locks, burglar alarms, sprinkler systems, shatter-proof windows, and smoke detectors to prevent home burglary and to qualify for a discount on your homeowner’s insurance premium. Also, talk to your provider to find out what other improvements will further discount your premium. Not only are most of these inexpensive and easy, but they’ll save you money and will protect your most valuable asset.
Furthermore, if you install a high-end home security system, you should see a reduction in your premium. However, this improvement warrants a cost-benefit analysis as the out-of-pocket expense can be substantial.
4. Stop Smoking
You already know this is a good idea – smoking is an expensive habit. But if you haven’t been motivated thus far, know that eliminating the smoking habit will significantly save you on not only your home insurance premium, but also on your life and health insurance premiums.
To get the discount, your entire household will have to be smoke-free, which means that any roommates or family members will have to quit smoking as well.
5. First Shop Around, Then Stick With What You Get
Shopping around for your homeowner’s insurance is first and foremost when it comes to saving money. I am a fan of utilizing an independent agent, someone who has no affiliation with any one company. That way, I feel confident I’m getting unbiased advice.
You could, however, call individual insurers yourself. Let them know you’re shopping around and ask for a quote. Then, once you’ve decided on a provider, stick with them. The reason for this is because most insurers offer a small discount after you’ve been with them for a short period and once you’re considered a loyal customer, the discount may increase to 10%.
6. Review Your Coverages Regularly
Life changes, such as marriage, divorce, or even a new puppy, can affect your insurance premium. For example, if your smoking ex-wife moves out (that is, “smoking” in the cigarette sense), you can be grateful for a number of reasons, including a lower premium on your home insurance.
Moreover, you may not need the same amount of personal property coverage contained within the policy. Perhaps she took all the smoky furniture with her and your replacement costs are now virtually nil.
Regarding replacement costs, be aware that within your homeowner’s policy, you can choose to be insured for either the replacement cost of your personal property or its actual cash value. The latter will typically provide a lower reimbursement amount and therefore is less expensive.
Also, look at your endorsements or any additional insurance coverages you may have originally purchased. Do you still need them? Are they worth it? Do you have similar coverages via other insurance policies you own? By reviewing your policy and included coverages on a regular basis, you can adjust for any necessary changes.
However, a thorough review may also reveal that you need to increase your coverage. For example, as construction costs rise, your original coverage amount may no longer be sufficient to replace your home. This won’t discount your premium, obviously, but can save you thousands if disaster strikes and you need to rebuild. In fact, even if the market value of your home has recently declined, the value to rebuild it may have actually increased.
Final Thoughts
If you haven’t looked at your homeowner’s insurance policy in a while, there’s an excellent chance you can reduce your premium. Like most insurance policies you carry, homeowner’s insurance can and should be molded to fit your needs: protection balanced with affordability. A pro-active approach to insurance will make you more financially savvy and better prepare you for whatever the future may bring.
Can you suggest other ways to save on homeowner’s insurance?