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 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 strong 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?
P.S. If you liked this idea, you’ll love my post on how to reduce property tax for free. Check it out. You should also look into how to save money on groceries.
Rachael Harper says
Sharing this brilliant idea helps homeowners to save money. You should be wise about getting a home insurance policy. Many things to consider, so it’s better to talk personally with your insurance agent.
Mark Murphy says
I never knew that having stronger roofing materials can actually make your insurance costs lower. My wife and I have been thinking of getting a new house, and we are concerned that we won’t be able to take care of it with all of the wind storms. I will be sure to tell my wife that we should get stronger roofing materials so we can afford homeowner’s insurance!
Neal Frankle, CFP ® says
Glad this was helpful!
Neal
Neal Frankle, CFP ® says
Glad this helped
Neal
Millie Hue says
It really helped when you said that it would help me save if I add features in my future house that will make it stronger such as storm shutters or good roofing materials. I will definitely follow this advice so that I will have lesser premiums when I start looking for a policy that I need to buy. As of now, I am still in the planning stage of the house, and it will be constructed by next year. But these tips will help me a lot in the future. Thanks!
Neal Frankle, CFP ® says
Glad to be helpful!~
Neal
Millie Hue says
I never knew that adding more security systems will make the home insurance premiums lower. But I also appreciate that you mentioned asking about it to the potential insurance company first before doing so to ensure that they also follow that kind of discounts. I will keep this in mind once my husband and I have found the house that we will buy this year. It’s our first time to be doing this since we’ve been renting ever since we got married. So thanks a lot for the tips!
Neal Frankle, CFP ® says
My pleasure
Neal
Aleshire Mueller says
It was nice that you explained that the reason why I can save money by getting the car and the home insurance from the same provider is that there is a possibility that one of them covers the same risk and that we can remove that. That is good to know because I am yet to have my new car insured. Since we are planning to buy a house real soon, I might as well buy from the same provider so as to save money. Thanks!
Earnest Watkins says
I’m looking at buying my first home, so I’ll be needing to get home insurance. I liked how you suggest raising my deductible to help me save some money on my homeowners insurance rate. I’ll definitely look into doing this to ensure I have a rate that I can afford.
Neal Frankle, CFP ® says
Have you consulted with your agent? That’s the first call I’d make.
David Bartlett says
Well, what do we do about a 1% deductible on a 99,000 home that is now up to 2,600? Sounds like a new way to screw us. What can I do to fight this?
Belmont Thornton says
Nice informative stuff.The amount save din home insurance can be channelized in some other investment avenues.Also it is recommended to take some professional consultations.
Spokane Al says
In addition, one does not need to wait to just before the renewal date to switch policies. A company I recently contacted would handle the application and acceptance of the new policy and would ramrod the cancellation of the old policy.
Neal@Wealth Pilgrim says
ONce again….an excellent addition.
Jeff @DeliverAwayDebt says
Great ideas Neal, I’m actually just starting to look for way to reduce my home insurance. I’ve got a month to do the work until it’s time to renew.
Thanks
Neal@Wealth Pilgrim says
Hey..I’d love to know what you find as you go thru this yourself. Good luck Jeff
Jason @ One Money Design says
Related to shopping around, I would suggest getting no less than three quotes to compare. Also make sure that you’ve provided the same information so quotes can be compared evenly with one another. Nice thorough post with great tips!
Mrs. Not Made of Money says
I would say that your tips are right on the money. We live in Florida, the state with the huge homeowner insurance debacle due to the hurricanes. Our insurance company dropped us last year because they were pulling out of the state of Florida. We shopped around quite a bit to compare rates. We found that by actually telling the agents that we were shopping around and comparing rates helped us because they competed for our business. We did have a wind mitigation study done and our house passed with flying colors so we were able to get a better rate. Our car insurance and homeowner’s insurance were both with the same company before and we were able to secure a much better deal with the new company. Funny thing is, we were with that old company for many many years (both car and home). Apparently we were not getting that good of a deal afterall. We’ve learned our lesson and will be comparison shopping each year from now on. One more thing, be sure to check the insurance company’s rating – not a good thing to pay for insurance and not have them be around if you need to file a claim.
Evan says
The only tip I would add – If you have a townhouse (like I do) figure out what you REALLY need to insure. Most Condos/Co-ops/Townhouses have a master insurance policy for common areas. For instance, I know I didn’t have to cover my roof.
Neal@WealthPilgrim says
Nice one Evan……good point.