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12 Ways To Lower Your Homeowners Insurance
Cost
From the Insurance Information Institute
The price you pay for your homeowners insurance
can vary by hundreds of dollars, depending on
the insurance company you buy your policy from.
Here are some things to consider when buying
homeowners insurance.
1. Shop Around
It'll take some time, but could save you a good
sum of money. Ask your friends, check the Yellow
Pages or contact your state insurance
department. (Phone numbers and Web sites are
listed here.) National Association of Insurance
Commissioners (www.naic.org)
has information to help you choose an insurer in
your state, including complaints. States often
make information available on typical rates
charged by major insurers and many states
provide the frequency of consumer complaints by
company.
Also check consumer guides, insurance agents,
companies and online insurance quote services.
This will give you an idea of price ranges and
tell you which companies have the lowest prices.
But don't consider price alone. The insurer you
select should offer a fair price and deliver the
quality service you would expect if you needed
assistance in filing a claim. So in assessing
service quality, use the complaint information
cited above and talk to a number of insurers to
get a feeling for the type of service they give.
Ask them what they would do to lower your costs.
Check the financial stability of the companies
you are considering with rating companies such
as A.M. Best (www.ambest.com) and Standard &
Poor’s (www.standardandpoors.com) and consult
consumer magazines. When you've narrowed the
field to three insurers, get price quotes.
2. Raise Your Deductible
Deductibles are the amount of money you have to
pay toward a loss before your insurance company
starts to pay a claim, according to the terms of
your policy. The higher your deductible, the
more money you can save on your premiums.
Nowadays, most insurance companies recommend a
deductible of at least $500. If you can afford
to raise your deductible to $1,000, you may save
as much as 25 percent. Remember, if you live in
a disaster-prone area, your insurance policy may
have a separate deductible for certain kinds of
damage. If you live near the coast in the East,
you may have a separate windstorm deductible; if
you live in a state vulnerable to hail storms,
you may have a separate deductible for hail; and
if you live in an earthquake-prone area, your
earthquake policy has a deductible.
3. Don’t confuse what you paid for your house
with rebuilding costs
The land under your house isn't at risk from
theft, windstorm, fire and the other perils
covered in your homeowners policy. So don't
include its value in deciding how much
homeowners insurance to buy. If you do, you will
pay a higher premium than you should.
4. Buy your home and auto policies from the same
insurer
Some companies that sell homeowners, auto and
liability coverage will take 5 to 15 percent off
your premium if you buy two or more policies
from them. But make certain this combined price
is lower than buying the different coverage
from different companies.
5. Make your home more disaster resistant
Find out from your insurance agent or company
representative what steps you can take to make
your home more resistant to windstorms and other
natural disasters. You may be able to save on
your premiums by adding storm shutters,
reinforcing your roof or buying stronger roofing
materials. Older homes can be retrofitted to
make them better able to withstand earthquakes.
In addition, consider modernizing your heating,
plumbing and electrical systems to reduce the
risk of fire and water damage.
6. Improve your home security
You can usually get discounts of at least 5
percent for a smoke detector, burglar alarm or
dead-bolt locks. Some companies offer to cut
your premium by as much as 15 or 20 percent if
you install a sophisticated sprinkler system and
a fire and burglar alarm that rings at the
police, fire or other monitoring stations. These
systems aren't cheap and not every system
qualifies for a discount. Before you buy such a
system, find out what kind your insurer
recommends, how much the device would cost and
how much you'd save on premiums.
7. Seek out other discounts
Companies offer several types of discounts, but
they don't all offer the same discount or the
same amount of discount in all states. For
example, since retired people stay at home more
than working people they are less likely to be
burglarized and may spot fires sooner, too.
Retired people also have more time for
maintaining their homes. If you're at least 55
years old and retired, you may qualify for a
discount of up to 10 percent at some companies.
Some employers and professional associations
administer group insurance programs that may
offer a better deal than you can get elsewhere.
8. Maintain a good credit record
Establishing a solid credit history can cut your
insurance costs. Insurers are increasingly using
credit information to price homeowners insurance
policies. In most states, your insurer must
advise you of any adverse action, such as a
higher rate, at which time you should verify the
accuracy of the information on which the insurer
relied. To protect your credit standing, pay
your bills on time, don't obtain more credit
than you need and keep your credit balances as
low as possible. Check your credit record on a
regular basis and have any errors corrected
promptly so that your record remains accurate.
9. Stay with the same insurer
If you've kept your coverage with a company for
several years, you may receive a special
discount for being a long-term policyholder.
Some insurers will reduce their premiums by 5
percent if you stay with them for three to five
years and by 10 percent if you remain a
policyholder for six years or more. But make
certain to periodically compare this price with
that of other policies.
10. Review the limits in your policy and the
value of your possessions at least once a year
You want your policy to cover any major
purchases or additions to your home. But you
don't want to spend money for coverage you don't
need. If your five-year-old fur coat is no
longer worth the $5,000 you paid for it, you'll
want to reduce or cancel your floater (extra
insurance for items whose full value is not
covered by standard homeowners policies such as
expensive jewelry, high-end computers and
valuable art work) and pocket the difference.
11. Look for private insurance if you are in a
government plan
If you live in a high-risk area -- say, one that
is especially vulnerable to coastal storms,
fires, or crime -- and have been buying your
homeowners insurance through a government plan,
you should check with an insurance agent or
company representative or contact your state
department of insurance for the names of
companies that might be interested in your
business. You may find that there are steps you
can take that would allow you to buy insurance
at a lower price in the private market.
12. When you’re buying a home, consider the cost
of homeowners insurance
You may pay less for insurance if you buy a
house close to a fire hydrant or in a community
that has a professional rather than a volunteer
fire department. It may also be cheaper if your
home’s electrical, heating and plumbing systems
are less than 10 years old. If you live in the
East, consider a brick home because it's more
wind resistant. If you live in an
earthquake-prone area, look for a wooden frame
house because it is more likely to withstand
this type of disaster. Choosing wisely could cut
your premiums by 5 to 15 percent.
Check the CLUE (Comprehensive Loss Underwriting
Exchange) report of the home you are thinking of
buying. These reports contain the insurance
claim history of the property and can help you
judge some of the problems the house may have.
Remember that flood insurance and earthquake
damage are not covered by a standard homeowners
policy. If you buy a house in a flood-prone
area, you'll have to pay for a flood insurance
policy that costs an average of $400 a year. The
Federal Emergency Management Agency provides
useful information on flood insurance on its Web
site at FloodSmart.gov. A separate earthquake
policy is available from most insurance
companies. The cost of the coverage will depend
on the likelihood of earthquakes in your area.
In California the California Earthquake
Authority (www.earthquakeauthority.com) provides
this coverage.
If you have questions about insurance for any of
your possessions, be sure to ask your agent or
company representative when you're shopping
around for a policy. For example, if you run a
business out of your home, be sure to discuss
coverage for that business. Most homeowners
policies cover business equipment in the home,
but only up to $2,500 and they offer no business
liability insurance. Although you want to lower
your homeowners insurance cost, you also want to
make certain you have all the coverage you need.
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