8 Ways to Keep Homeowners Insurance Costs Down
Homeowners insurance is required when you have a home loan. The lender wants you to have it in case a disaster strikes so that the collateral for the loan it’s providing is protected.
It not only protects your mortgage company, but insures you against losing your home and the valuables in it. Without insurance, it could cost you hundreds of thousands of dollars to rebuild your home.
This safeguard isn’t cheap, however.
Homeowners insurance costs an average of $1,211 per year in the United States, according to the National Association of Insurance Commissioners.
Rates vary by location, home value and coverage level, among other things. Homeowners have control over some of these things, such as coverage levels, but there are other ways to drop insurance rates.
Here are eight factors that can keep homeowners insurance costs down:
Some types of insurance coverage can be cheaper than others. Cash value coverage is usually the most affordable.
With cash value coverage, your insurer pays only what your property is worth, minus depreciation. It doesn’t cover what it would cost to actually replace your home and belongings.
For more coverage, buy replacement cost coverage. This pays out what it would cost to repair or rebuild your home in today’s dollars. This makes replacing old items more likely.
For example, if a tree falls into your bedroom and destroys your bed, a replacement cost policy would pay for a new cash. A cash value policy would only pay what your old bed is worth today, which is probably much less than a new one.
The deductible is the amount you pay before the insurance company starts paying its share. Raising your deductible can lower the monthly premiums.
Raising the deductible from $500 to $1,000 can save as much as 25% on the premium, according to the Insurance Information Institute. Prepare for that day now by putting $1,000 in a savings account.
3. Roof Condition
A new roof in good condition will lower a homeowners insurance policy cost, and a roof in poor condition will likely raise it.
Keep your roof in good shape by replacing shingles when needed and inspecting it every year, and you’ll likely get a lower insurance rate.
4. Safety Discounts
Many insurance providers offer discounts for safety features in a home. These can include:
- Alarm system
- Surveillance cameras
- Water shut-off valves
- Smoke detectors
- Fire extinguishers
- Deadbolt locks
- Storm shutters
- Sprinkler system
- New roof
Discounts are also often given for bundling homeowners and auto insurance with the same company.
Having at least two policies with the same insurance provider could save you 5% to 15%, according to the Insurance Information Institute.
6. Shop Around
Like many other things you buy, shopping for home insurance can also save you money.
Compare insurance companies with the same coverage levels, and check if you qualify for any discounts. This can often be done easily online, though you can also call insurance agents or an independent agent who can shop insurers for you.
One online company to compare home insurance quotes at is SmartFinancial. Enter your Zip code to start getting online quotes in three minutes.
After getting some price quotes, it can be worthwhile to contact your current insurer to see if it will match the prices you’ve found at the same coverage levels.
7. Past Claims
Be careful when you file insurance claims. Making several claims in the past or living in an area with a high claims rate can cause your homeowners insurance rate to go up.
Before making a claim, check if the cost of the repair is more than your deductible. If it’s significantly more, then getting help from your insurer is probably best. That’s what insurance is for.
But don’t make a bunch of small claims if you don’t have to. It isn’t a good sign to your insurance company, which could eventually raise your rates if it sees your home as too much of a risk.
8. Raise Your Credit Score
Some states allow insurers to factor customers’ credit scores into the premium price. A low credit score can increase the premium, while a high score can lower it.
California, Maryland and Massachusetts, however, prohibit insurance companies from using a credit score to determine the premium price.
For the states that allow it, home insurers may view you as less risky if you have good credit. Banks, credit card companies and lenders do the same thing.
If your credit score has improved, call your insurer to see if it will lower your premium. The best way to raise your score is to pay your bills on time.