Save on Home Insurance
11 Ways to Save Money On Your Home Insurance
Now that you know the basics of your home insurance policy, here are 11 ways you can pay less. In many cases, you can get the same level of coverage for fewer dollars.
- One Insurer, Multiple Policies -- Do you have an automobile insurance policy? If so, is it with the same insurance company that provides your homeowners insurance? If the answer’s no, you’re paying too much -- for both policies. Almost every insurance company that sells home insurance wants its policyholders to also buy auto insurance from them. So, they offer “multi-policy discounts” to entice you. Usually, these discounts are at least 10% -- and some insurers apply the discounts to both the auto and the homeowners/renters policy.
- Raise Your Deductible -- The deductible is the amount you pay before insurance kicks in if you have a claim. For example, if you have a $500 deductible and you file a claim for $2,500 in damage to your home, you pay the first $500 and your insurer pays the balance, $2,000. The higher your deductible is the less you pay for your policy. Of course, you risk more out-of-pocket if you have a claim, but you save on your premium each and every year.
- New Is Better -- Insurers really like newer homes. That’s because it’s less likely something will go wrong with the electrical, heating and plumbing systems. In addition, the structure itself is in better shape. Insurers offer a variety of discounts based on the age of your home.
- Location, Location, Location -- Where do you live? If your home is near a fire station, you will pay less for your home insurance. If your neighborhood has fire hydrants you will pay less for your home insurance. Where you live will impact the cost of your home policy.
- Insure the House, Not the Land -- Nobody is going to steal your land. Fire and high winds won’t “destroy” it. And your home policy doesn’t cover your land anyway. So, don’t include the value of your land when deciding how much insurance you need. Have your broker run a replacement cost estimate to determine what it will cost to rebuild your home – and other structures – if they’re destroyed. The market value of your home doesn’t matter. It's the cost to rebuild your house that matters. But remember, in certain markets it can actually cost more to rebuild you home that what you would get if you sold it, land and all. It is also important to note that insurance companies don't have the cost efficiency of building multiple houses at the same time. They also don't get to start with a clean piece of land. They have to include the cost of cleaning up the damage and removing the debris. There is also the added cost of needing to build quickly so you can get back in your home as soon as possible. If a contractor has to pull employees from existing jobs or pay overtime to get the job done those added costs increase the amount an insurance company has to pay.
- Don’t Insure What You Don’t Have – Your home policy includes an automatic protection limit for your personal property. This amount IS adjustable. If you don’t need all that protection some insurance companies will allow you to lower it to save some money. But be careful. You may also need more. People tend to only visualize the big things when thinking about what it could cost to replace all of your personal property. Your broker can help you think about all the little things you may not be considering so you can do a quick personal property calculation. Also, pay particular attention to items subject to special limits (as described above), items such as jewelry and computer equipment.
- Being Safe Pays You Back -- Smoke detectors, and burglar alarms are usually worth discounts of at least 5% on your home policy. You may get even bigger discounts, 15% to 20%, if you install a sophisticated sprinkler system or an alarm system that rings at the police station or a security company. However, not all of these systems qualify for discounts with all insurers. Before you install one, check with your insurer to find out what type of system qualifies for a discount and how much you would save on your premium if you have the system installed.
- Where There’s Smoke . . . -- There’s fire. Smoking (unattended cigarette butts, etc.) is the leading cause of residential fires in this country each year. That’s why some insurers have discounts if all the residents in a home are nonsmokers.
- Don’t Jump Around -- If you’ve been with an insurer for a while and you like that insurer, stay put. Some insurance companies automatically have discounts for policyholders who have been with the companies for a certain number of years.
- Monitor Your Automatic Inflation Adjustment – Virtually every home policy includes an automatic inflation adjustment every year. This means the company automatically increases your Dwelling Limit every year. The idea is to keep up with the rising costs of rebuilding your home and make sure your insurance will completely rebuild your home. That’s a good thing! But over time this automatic inflation adjustment can get out of whack with reality. If you think your Dwelling Limit is too high, ask your agent to run a new replacement cost estimate. You may be able to lower your costs while still being fully protected.
- Good Credit = Lower Rates – Most companies these days use your credit history as part of their pricing structure. People with better credit will pay less for their insurance in most cases. So, not only is improving your credit rating a good idea by itself, it may also reduce the cost of your insurance.