Homeowners insurance is a necessity for those who own a home. It’s also required by mortgage companies. Here are some practical ways to save money on homeowners insurance.
We’ve written in the past about how to save money on health insurance, life insurance, and car insurance.
Today, I’m going to round things out with an article about saving money on your homeowner’s insurance. If you have a mortgage, this is likely a mandatory expense, as your lender will require it. If you own your home outright, it’s simply a smart one.
Just because you have to have homeowner’s insurance, though, doesn’t mean that you are stuck paying an arm and a leg for it. What follows is a list of eight tips for reducing your premiums. Combine them all, and you could be save a ton of money while protecting your home from damage or loss.
1. Focus on your rebuilding costs
When you think of homeowner’s insurance, what’s the first thing that comes to mind? For me, it’s the thought of my house burning down, and my family losing everything that we have. My second thought is of being burglarized (which actually happened in 2009), and all of my valuables taken. Those are my whys.
Now, how do you determine how much insurance you actually need? Is it dependent on your home’s current value, if you were to sell today? The added value of everything inside the walls?
While you absolutely need to insure your home and its contents against destruction, there’s usually no need to insure the land that it’s built on. Thus, it’s important to think of your actual rebuilding costs (as well as the cost to replace your stuff) when buying a policy.
This may be wildly different than the current market value of your home, depending on a number of circumstances. However, it’s important to do a bit of research before settling on a coverage amount. If you don’t, you might end up over-insuring and paying too much each month.
2. Increase your deductible
In this way, homeowner’s insurance isn’t any different than other types of insurance. If you’re willing to bear a greater portion of the risk, you can save a significant amount of money.
To save money this way, simply call your agent and ask them to increase your deductible. In turn, your monthly payments should go down, possibly significantly.
It’s important to note that homeowner’s policies are managed a bit differently than car insurance or personal property insurance. Those deductibles are typically much lower, and bumping yours from $250 to $500 or $1,000 might not be a budget breaker.
Resource: Does Raising Your Car Insurance Deductible Also Save You Money?
However, many homeowner’s policies are percentage-based. This means that your deductible is actually contingent on the amount of coverage you hold (the value of your home and its contents).
My own insurance works this way, and the deductible is 1% of the policy coverage ($190,000). This means that every time I make a claim, I’m stuck paying the first $1,900. Were I to bump this deductible to 1.5% or 2%, in order to save on premiums, we would be talking about an increase of either $950 or $1,900. And that would probably sting a bit.
Depending on your policy, raising your deductible can be a great way to save money, month over month. Before you do this, though, just be sure that your emergency fund is large enough to cover your out-of-pocket expenses in the event of a disaster. Raising your deductible from $500 to $1,500 may save you $20 a month, but that’s not worth it if you don’t have that cash lying around in case of an emergency.
3. Upgrade your security
Beef up the protection around your home, and your insurance company will probably rewards you.
Things like deadbolt locks, burglar alarms, fire extinguishers, and smoke detectors can earn you a nice discount. In some cases, these discounts can offset most (if not all) of the additional costs of adding these safeguards, too. So, it’s well worth checking with your insurer for details.
Some home security companies also offer discounts to customers of certain insurance companies, which means you can double up on the savings.
For instance, my policy is through USAA, and I get a safe home discount for having security monitoring services. I also get a discount through my home security company (ADT), for being a USAA customer/member. Wins all around!
4. Bundle multiple policy types together
You will usually get a nice discount for carrying multiple policies with a single company, and it’s rare to find an insurance company that doesn’t offer at least one other insurance product.
Related: The Hidden Savings In a Rent Payment
I actually have two car policies, our homeowner’s policy, a personal articles policy (for jewelry and other valuables), and a life insurance policy all with the same company. The bundle discounts I receive, compounded with the already-lower rates, mean that I pay substantially less that I would if I had these policies spread around amongst multiple companies.
5. Location, location, location
This one is tough to implement if you already own your home. However, if you’re shopping around or plan to buy/build in the near future, it may be worth keeping in mind during your home search.
Your home’s proximity to fire hydrants, fire stations, and the like can (surprisingly) influence your premiums. Not surprisingly: closer is better.
No, it doesn’t make sense to move to reduce your premiums, but it’s worth keeping in mind when buying that new home.
6. Keep your credit report clean
Credit really is at the center of everything financial. It impacts your interest rates; potential employers can pull it when you apply for a job, and it can even mean higher premiums on your insurance policies.
Yes, like it or not, your credit report can influence your insurance rates. Insurance companies have no shame in considering clean credit to be an indicator of reduced risk.
Thus, it’s important that you check your credit report regularly, and fix any errors that you find. Of course, this is something you should be doing anyway – at least, if you ever want to lock in a lower interest rate on your mortgage refi or snag that exciting new rewards credit card.
Learn More: Get a Better Mortgage Rate Without Refinancing
Now, you just have more of a reason to stay on top of it all.
7. Ask about other discounts
The easiest way to get a lower price? Simply ask for one.
You can often get a group discount (e.g., alumni association, senior discount, etc.) just for asking. There are also discounts for home improvements that you might want to make anyway, or you can also let your insurance company know about certain neighborhood features of which they might not be aware (for instance, whether you’re in a gated community).
In the same thread as replacing smoke detectors and adding fire extinguishers, you may want to consider some “big ticket” repairs. Are you looking at replacing that old roof anyway? Ask your insurance company if there’s a discount if you opt for an impact-resistant material. Want to remodel the kitchen? Let your insurance company know you replaced that old electrical wiring, and it might snag you a few extra dollars off.
Related: Renovations That Can Hurt the Value of Your Home
Give your agent a call today and find out if there are any discounts they can apply to reduce your premiums. If you don’t currently qualify, perhaps there is a group that you can join or a home upgrade you can complete to get an additional discount.
The worst they can say is no, so it’s worth asking.
8. Shop around
Assuming you’re doing everything else right, another great way to save money on homeowners insurance is to comparison shop.
You can either call around to local agents or check a homeowners insurance comparison tool. Also ask friends, neighbors, and your credit union (if you’re a member). You may learn about big incentives, discounts, or at the very least, will likely hear a number of pros/cons for certain companies.
Whatever you do, be sure to buy your policy from a reputable company. That way, you won’t run into any problems if and when you file a claim.
Learn More: 10 tips most first-time home buyers don’t consider
So, there you have it. These eight simple tips for saving money on homeowner’s insurance can help you save quite a bit of cash each month.
Implement a few of them over time, and you’ll save even more. Be sure to ask each time you renew your policy whether there are additional discounts you could be getting, and shop around regularly to find the best price.
If you have any further suggestions, please be sure to share them in the comments.
11 Responses to “How to Save Money on Homeowners Insurance”
I own my home outright and have no desire to rebuild should the home be destroyed. Are there homeowner policies that will merely ‘total’ the home and pay you off?
I always shop around to find the best deal, I find loyalty never pays. I also use cash back sites to maximize my discounts, I know people who have taken full advantage of lowering premiums and using cashback to insure their homes for free. Great article, thanks for sharing.
Upgrading your security is definitely worth the trouble as insurance premiums can halve. I put in a state of the art security system which was on discount and my insurance premium fell significantly, the system is guaranteed to 25 years and should pay for itself from the savings I’m making by paying less insurance in 2 years. That’s a great deal.
Focusing on rebuilding costs as opposed to the real value of properties is a great way to lower your insurance premiums. I was paying 30% more until I readjusted the insurance. Thanks for sharing these ideas.
i tried this company ratekick’s website to compare insurance and what con artists…your going to show me fake rates based off of perfect credit scores and not based on mvr at all? what are these people thinking..anyone else have this terrible experience?
I found that calling competitors for quotes and then taking these (hopefully lower) quotes back to your current providers is a good way to get a lower premium.
Should you have a claim, you can save huge hassles and much time if you also prepared a comprehensive home inventory. You can do it yourself with a camera and a careful rundown of information about the major items–such as serial numbers, brand and model numbers. Once you have a loss, it’s hard to remember everything to include in a claim. You may be able to have a copy of this inventory put in the file with your insurance agent, but for sure keep a copy off site somewhere–a safe deposit box or even the home of a friend or relative would work. That way, in the case of a disaster, the inventory is more likely to survive it.
This was a great review of the common things homeowners can do to get cheaper rates on their home insurance. The only thing I’d like to add is that there are HO-3 and HO-5 policies. Generally the HO-5 insurance policies are much more comprehensive with their coverage. Some companies that offer HO-5 policies even go so far as to insure replacing the contents of your refrigerator! The HO-3 policy is basic and often considered a “fire” only policy. If you want a luxury home insurance provider, you’ll pay even more than you would with a normal HO-5.
I’ve noticed some nice discounts come out of haing a security system. The more advanced the system the better the discount for example one that contacts a monitoring company will reduce the rates more than one that doesn’t.
Great tips, thanks!Here’s one to the list — Quit smoking. A smoking household pay more since there’s an increased risk for a potential household fire.
Some good advice here!
I added a security system to our home last year and the insurance savings is the same as the monthly alarm service charge.
So we are breaking even and adding some extra peace of mind – not a bad deal if you ask me!