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12 Ways to Lower Your Homeowners Insurance Costs
| 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/ratings)
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 coverages
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
www.fema.gov/nfip. 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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