There are many ideas on how to reduce costs and save on homeowner’s insurance. Let me run through a few of my favorite tips:
1. Don’t (just) shop around on the Internet.
Yes, you have to shop, but call agents on the phone too. And don’t jump on the lowest quote. You have to remember to compare apples to apples and look at the quality of the provider. It’s great to stop spending money you don’t have to spend. But it’s silly to be shortsighted here.
Why call? Because I want you to ask lots of questions.
Often companies offer lower premiums – but provide less coverage. Shop around and talk to agents. They’ll educate you for free. Ask them what coverage they think you need – and ask what they think you don’t need too. Take notes and keep your mind and ears wide open. The same tip applies when you shop for cheap term life insurance. Get a free education before you sign the dotted line.
2. Raise your deductible.
Before your homeowner’s insurance company pays any claim, you have to pay a portion of the loss. That’s known as your deductible.
If your deductible is higher, that means you pay more of a claim and (more important) your insurer pays less. Insurance companies love that.
So the higher your deductible, the more money you save on your premiums. The average cost of homeowner’s insurance is built on a deductible of $500. If you think the odds of having a claim are very low, raise your deductible to $1,000 or more. You might save as much as 25 percent.
3. Don’t confuse the price of your house with rebuilding costs.
If you paid $400,000 for your home, that includes the cost of the land. You don’t need to insure the land from most perils covered by your homeowner’s policy. Don’t get excited when your coverage is for far less than what you think your house would be worth if you were to sell it.
4. Buy your home and auto policies from the same insurer.
There are huge benefits to doing this.
First, some insurers will knock five to 15 percent off your premium if you buy two or more policies from them. Second, sometimes two policies cover the same risk. For example, you might get some coverage from your homeowner’s policy that is also offered by your automobile insurance. If you speak to one agent about both policies, that person can point it out and save you a few shekels.
5. Make yourself attractive to the insurance companies.
Ask what steps you can take to lower your insurance costs.
You might save money by adding storm shutters, reinforcing your roof or buying stronger roofing materials. If you live in Southern California, maybe you can retrofit your home to withstand earthquakes and reduce your premiums that way. Ask what other steps you can take to reduce risk and costs.
6. Improve your home security.
If you put in a detector, burglar alarm or deadbolt locks you’ll usually save a pretty penny. Also, think about installing a sprinkler system and burglar alarm that rings at the police, fire or other monitoring stations. Before you do, make sure your insurance company makes it worth your while.
7. Look for other discounts.
Insurance companies love homebodies. They maintain their homes and are quick to spot problems.
If you’re at least 55 years old and retired, you may qualify for a discount of up to 10 percent at some companies. (This could be a nice little inducement to encourage you to retire now!) And don’t forget about employers and professional associations either. Sometimes group insurance programs offer a better deal.
8. Maintain a good credit record.
For whatever reason, insurance companies love people with good credit. Pay your bills on time – and not just your homeowner’s insurance bills. If you do maintain a good credit score, you can demand a better price. In fact, make sure you tell your insurance company about your high credit rating and make sure you claim your discount.
9. Stay with the same insurer.
Your dog gets rewarded for loyalty…why shouldn’t you? Some companies give policy holders a discount for staying with them for more than three years. Make sure to ask.
10. Review your policy and coverage every year.
This is critical. Do it over the phone or in person, not via e-mail or over the Internet. There are a few good reasons for this. First, you could have made some major purchases, done some serious remodeling or added a pool. You want coverage for your current situation – not your your historical situation.
Also, your possessions aren’t worth what they used to be. If you bought a plasma TV for $3,000 it might only cost $1,000 to replace today. Reduce coverage and save a few bucks.
You might no longer need certain coverage that you needed before. Maybe you need additional coverage that you didn’t need before.
Also, this gives your agent another opportunity to review your policy to look for ways to save you money.
11. Don’t assume that the government plan is the best deal.
You might live in a high-risk area and might think the government is the only game in plan, but don’t fall for it. Find out if private companies have entered the insurance market. They might offer you better coverage for a lower premium.
(Another way to reduce a portion of your homeowner’s costs is to buy a home repair policy. I have one and I’m glad I do…but when I need a 24-hour plumber, this policy doesn’t deliver. I have to strap on the tool belt when that comes up!)
What other tips do you have for saving on homeowner’s insurance?