8 Ways to Keep Homeowners Insurance Costs Down
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The average cost of homeowners insurance in the United States can vary significantly depending on factors such as location, the value of the home, the coverage limits, and the insurance company. As of 2024, the average annual premium for homeowners insurance was around $1,749 for a dwelling coverage of $250,000, as per Bankrate. However, getting quotes from multiple insurance companies is always best to find the most competitive rate for your specific needs. If you think homeowners insurance is very expensive, we share eight ways to decrease costs.
In this article
What is homeowners insurance?
Homeowners insurance is a form of property insurance that covers losses and damages to an individual's house and assets. It also provides liability coverage against accidents in the home or on the property. This insurance typically includes a combination of coverages for the home's structure, personal belongings inside the home, additional living expenses if the home is uninhabitable due to damage, and liability protection for accidents or injuries on the property.
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Ways to keep homeowners insurance cost down
1. Shop around
Different insurance companies may offer different rates for similar coverage. By obtaining quotes from different companies, you can compare prices and find the most competitive rate for the coverage you need. Insurance companies often offer various discounts that can help lower your premium. These discounts may include bundling multiple policies (such as homeowners insurance and auto insurance), installing safety features in your home, being claim-free for a certain period, or having a good credit score. By shopping around and exploring different insurers, you can find out which discounts you qualify for and potentially save money on your premium.
You may find that certain insurers offer more comprehensive coverage at a lower price or that you can adjust your coverage levels to fit your budget better without sacrificing protection. Shopping around allows you to research and compare prices, customer reviews, and satisfaction ratings for different insurance companies. Choosing an insurer with a good reputation for customer service and claims handling can provide peace of mind and help ensure a positive experience if you ever need to file a claim. It's worth investing time to compare quotes from multiple insurers to ensure you're getting the most value for your money.
2. Bundling
Bundling policies, such as combining your homeowners' insurance with other types like car or umbrella insurance, can often lead to cost savings. Here's how bundling policies can help reduce your homeowners' insurance cost:
- Discounts. Many home insurance companies offer discounts to customers who purchase multiple policies. By bundling your homeowners' insurance with another policy, such as auto insurance, you may qualify for a multi-policy discount. This discount can result in significant savings on both policies compared to purchasing them separately.
- Simplified paperwork and billing. Bundling policies with the same insurance company can streamline administrative processes such as paperwork and billing. You'll only have to deal with one insurer for multiple policies, which can save you time and hassle.
- Increased loyalty rewards. Some insurance companies offer loyalty rewards or home insurance discounts to customers who bundle multiple policies and remain with the same insurer over time. These rewards may include decreasing deductibles, premium discounts, or other perks that can further reduce insurance costs.
- Improved coverage coordination. Bundling policies with the same insurer can also improve coverage coordination between policies. For example, if you experience a covered event that affects both your home and your car (such as a hailstorm damaging your property and vehicle), having both policies with the same insurer can simplify the claims process and ensure smoother coordination of coverage.
3. Raise your deductible
Raising your deductible can reduce your homeowners' insurance cost because it shifts more of the financial risk from the insurance company to you. When you file a claim with your insurance company, you typically pay a certain amount out of pocket before your insurance coverage kicks in. This amount is your deductible. For example, if you have a $1,000 deductible and file a claim for $5,000 in damages, you would pay the first $1,000 and your insurance company would cover the remaining $4,000.
By increasing your deductible, you agree to pay a higher out-of-pocket amount in case of a claim. Since you're assuming more risk, the insurance company is often willing to lower your premium in return. Essentially, you're taking on more responsibility for smaller claims in exchange for a lower premium. However, it's important to make sure you have enough savings to cover the higher deductible if you need to make a claim. Otherwise, you could find yourself in a financial bind if you ca unable afford the deductible when a claim arises.
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4. Improve home security
Installing security systems, smoke detectors, deadbolts, and other safety features can reduce the risk of theft, fire, and other damage, potentially lowering your insurance premiums. When considering security improvements to reduce your homeowners' insurance cost, it's essential to check with your insurance provider to see which security features qualify for discounts and how much you can save. Additionally, investing in home security helps lower insurance premiums and provides valuable protection for your home and belongings. It can reduce your cost in several ways:
- Decreased risk of theft. Installing security features such as deadbolts, burglar alarms, security cameras, and motion-sensor lights can deter burglars and decrease the theft risk. Insurance companies may offer discounts on your homeowners' insurance premium for these security measures.
- Lower risk of vandalism. Visible security measures can also deter vandals from targeting your home. Insurance companies may consider homes with security systems or other protective measures at lower risk of vandalism, potentially leading to lower insurance premiums.
- Reduced risk of property damage. Some security features, such as smoke detectors, fire alarms, and fire-resistant materials, can help mitigate the risk of property damage from fire or other hazards.
- Remote monitoring. Many modern security systems allow remote monitoring and control of your home's security features via smartphone apps or other devices. Insurance companies may offer discounts for homes with remote monitoring capabilities, as these systems can provide additional peace of mind and help homeowners respond quickly to potential threats or emergencies.
Related: Best Homeowners Insurance
5. Maintain a good credit score
Maintaining a good credit score can reduce homeowners' insurance costs because insurance companies often use credit-based insurance scores to assess risk. Insurers use various factors to determine the likelihood of a policyholder filing a claim and the potential cost of those claims. Research has shown a correlation between credit history and insurance risk – individuals with higher credit scores tend to file fewer claims and have lower insurance losses.
Insurance companies use credit-based insurance scores, similar to traditional ones, specifically designed for insurance purposes. Policyholders with higher credit-based insurance scores are often viewed as less risky and may be eligible for lower insurance premiums.
Conversely, individuals with lower scores may face higher premiums or have difficulty obtaining coverage. The impact of credit on insurance premiums can vary depending on other factors such as your location, claims history, and the insurance company's underwriting practices. By managing your credit responsibly, you may improve your credit-based insurance score and qualify for lower homeowners insurance premiums.
6. Stay claims-free
Insurance companies may offer discounts for homeowners who haven't filed any claims in a certain period, typically three to five years. Staying claims-free can potentially reduce your homeowners' insurance cost in several ways:
- Discounts. Many insurance companies offer discounts to policyholders who have not filed any claims within a certain period, typically three to five years. This is because claims-free customers are considered lower risk, as they have not experienced any losses that would require the insurance company to pay out a claim.
- Lower risk assessment. Insurance companies use claims history to assess the risk of insuring a particular property and set premiums accordingly. A claims-free history signals to the insurance company that you are less likely to file a claim in the future, which may result in lower premiums or more favorable terms for your insurance policy.
- Retention incentives. Insurance companies may offer incentives to encourage customers to remain claims-free. These incentives could include discounts, premium reductions, or other perks for policyholders who maintain a claims-free status over an extended period.
- Long-term savings. Even if your insurance company does not offer specific discounts for staying claims-free, avoiding claims can help you avoid potential premium increases that may occur after filing a claim. Claims history is one of the factors that insurance companies consider when determining premiums, so a claims-free record can help keep your premiums stable or even decrease over time.
7. Update your home
Renovations or upgrades that make your home safer or more resistant to damage, such as replacing an old roof or updating electrical and plumbing systems, may qualify you for discounts. Other upgrades include:
- Improved safety and security. Updating your home with modern features such as a new roof, electrical system, plumbing, or heating and cooling system can enhance safety and reduce the risk of accidents or damage. Insurance companies may offer discounts for homes with updated systems and features that lower the likelihood of claims related to fire, water damage, or other hazards. Additionally, investing in home updates helps lower insurance premiums and improves the safety, comfort, and value of your home.
- Enhanced structural integrity. Renovations or upgrades that improve the structural integrity of your home, such as reinforcing the foundation, installing hurricane-resistant windows, or upgrading to impact-resistant roofing materials, can make your home more resilient to severe weather events and natural disasters. Insurance companies may offer home discounts with these improvements since they reduce the risk of significant damage during storms or other catastrophes.
- Decreased risk of property damage. Upgrading to features such as fire-resistant siding, installing a sprinkler system, or adding a sump pump can help mitigate the risk of property damage from fire, water, or other hazards.
- Increased property value. Updating your home can increase its overall value, which may result in lower insurance premiums relative to the home's value.
- Discounts for green features: Some insurance companies offer discounts for homes with energy-efficient or environmentally friendly features, such as solar panels, energy-efficient appliances, or green building materials. These features can reduce the risk of certain types of damage and may qualify you for additional discounts on your homeowners' insurance premium.
8. Review your coverage annually
Regularly review your coverage limits and make adjustments as needed. As your home's value changes or you make improvements, you may need to update your coverage to ensure adequate protection without overpaying for unnecessary coverage. Reviewing your homeowners' insurance coverage annually can potentially reduce your insurance costs in several ways:
- Adjust coverage limits. Over time, the value of your home and belongings may change due to inflation, home renovations, or personal circumstances. By reviewing your coverage annually, you can ensure that your coverage limits accurately reflect the current replacement cost of your home and the value of your belongings.
- Identify discounts and savings opportunities. Insurance companies may offer new discounts or incentives over time, or your eligibility for existing discounts may change based on factors such as home improvements, lifestyle changes, or insurance profile updates. By reviewing your coverage annually, you can stay informed about any discounts or savings opportunities that may be available to you.
- Compare quotes. Home Insurance rates can fluctuate over time due to changes in market conditions, competition among insurers, or adjustments to underwriting criteria. You can compare premiums and coverage options to ensure you get the best value for your money.
- Update policy features. Over time, your insurance needs and preferences may evolve, and new policy features or endorsements that better meet your requirements may become available. Updating your policy features as needed can help optimize your coverage and potentially reduce your insurance costs by eliminating unnecessary coverage or adding valuable protections.
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- 4.80% APY
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- $1 minimum to open
- For new customers
Pros and cons
Pros
- Protection against damage. It covers the cost of repairing or reconstructing your home if fire, storms, vandalism, and other covered events damage it.
- Personal property coverage. Homeowners insurance covers the loss of personal belongings inside the home, like furniture, electronics, and clothing, due to theft or damage.
- Liability protection. It provides liability coverage if someone is injured on your property, covering legal fees and medical expenses.
- Loss of use. If your home is uninhabitable due to covered damage, homeowners insurance can cover living expenses elsewhere during repairs.
- Peace of mind. Knowing you're protected against unforeseen losses and damages offers financial security and peace of mind.
Cons
- Cost. Premiums can be high, especially in areas prone to natural disasters. This is an ongoing expense that homeowners must budget for.
- Deductibles. Homeowners often have to pay a deductible before insurance coverage, which can be a significant out-of-pocket expense.
- Coverage limits and exclusions. Policies have limits and may not cover all damage or personal property. For example, floods and earthquakes often require additional coverage.
- Complexity. Policies can be complex and difficult to understand, leading to confusion about what is and isn't covered.
- Claim process. Filing a claim can be time-consuming and stressful, and there's no guarantee of a favorable outcome.
FAQs
What factors affect homeowners insurance premiums?
Homeowners insurance premiums can be influenced by factors such as the location of your home, its age and construction materials, the coverage limits and deductible you choose, your claims history, the presence of safety and security features, and even your credit score.
What should I consider when comparing homeowners insurance quotes?
When comparing homeowners insurance quotes, consider factors such as coverage limits, deductibles, policy features and endorsements, exclusions, discounts, customer service and claims handling reputation, and overall cost. It's essential to evaluate the value and adequacy of coverage, not just the price, to make an informed decision.
How often should I review my homeowners insurance coverage?
It's a good idea to review your homeowners insurance coverage annually to ensure it still meets your needs and budget. Changes in your home, belongings, lifestyle, or insurance company offerings may necessitate adjustments to your coverage or policy features to optimize protection and cost-effectiveness.
The bottom line
Homeowners can take proactive steps to keep their insurance costs down while ensuring adequate protection for their homes and belongings. This includes shopping around for the best rates, bundling policies for discounts, raising deductibles, maintaining a good credit score, staying claims-free, improving home security, updating the home, and reviewing coverage annually.
By understanding the factors influencing homeowners insurance premiums and exploring available discounts and savings opportunities, homeowners can optimize their coverage and achieve cost-effective insurance protection.
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