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Top 5 Ways to Reduce Your Homeowners Insurance Costs

A home is most likely the biggest purchase you’ll make in your lifetime and you want to make sure it’s protected. However, the money you shell out for homeowners insurance can vary widely by company and depends on a variety of factors.

Here are 5 steps recommended by the Insurance Information Institute (III) that you can take now to make sure you’re getting the best coverage—at the best price—for your home.

1) Shop around
Just as you usually wouldn’t buy the first house you see, think of homeowners insurance the same way. Even if you already have insurance, it’s worth your time to shop around. Ask friends (real or on Facebook) for recommendations. The National Association of Insurance Commissioners offers information about insurance companies by state, including any complaints.

And while price is important, you also want an insurer who will deliver quality service and stand behind its word in your time of need. Check the financial stability of any insurance agencies you are considering with rating companies such as the Better Business Bureau and Standard & Poors. Consumer watchdogs like Consumer Reports and Consumers’ Checkbook are also helpful.

Once you’ve narrowed it down to three insurers, contact each directly to get price quotes and ask what each can do to lower your current costs.

2) Raise your deductible
Basically speaking, the higher your deductible—the amount of money you have to pay out of pocket before the insurance company pays a claim—the lower your premium. Most insurance companies recommend a deductible of at least $500. However, if you can afford to raise your deductible to $1,000, you may save as much as 25 percent on your annual/monthly premium.

It’s important to note that, if you live in a disaster-prone area, like a flood zone, your insurance policy may not cover certain claims, or may require a separate deductible or special policy. So be sure to ask questions first before signing anything and read the fine print.

3) Bundle your insurance & look for discounts
You can save 5 to 15 percent off your premium by bundling your homeowners, auto and liability or personal property insurance together. You can also usually get discounts for having smoke detectors, a burglar alarm or dead-bolt locks. Some companies offer a substantial discount if you install a sprinkler system and a fire and burglar alarm that contacts the police or fire departments.

Ask for less common discounts as well. For example, if you’re at least 55 years old and retired, you may qualify for reduced rate. The logic behind this is since retired people are at home more, they are less likely to get burglarized, can spot fires sooner, and have more time to maintain their homes. Some employers and professional associations offer group insurance programs that may be a better deal than what you can find as an individual.

4) Review your coverages
It’s good to review your coverages annually to make sure you aren’t paying for unnecessary coverage. For instance, that high-tech computer or new fur coat you got five years ago isn’t likely worth anywhere near what you originally paid for it. Either reduce the extra coverage of the items or cancel it. Typical items include jewelry, cameras, electronics, paintings, etc.

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.

5) Disaster-proof your home
Research or ask your insurance agent what modifications you can make to your home to make it more resistant to hurricanes, floods and other disasters. Some may include adding storm shutters or reinforcing your roof, or retrofitting older homes so they are better able to withstand an earthquake. Updating your heating, plumbing and electrical systems can reduce the risk of fire and water damage.

Also keep in mind that the land under your house is not at risk of theft, fire etc.— just the house and the possessions inside/outside. Don’t include the value of the land when deciding how much insurance to buy or you’ll end up paying too much.

Bonus Tip: If you’re planning to move, think like an insurance agent before deciding on your new home. For example, according to the III, you may pay less for insurance if you buy a house close to a fire hydrant or if the house’s electrical, heating and plumbing systems are less than ten years old. Brick homes tend to be more wind-resistant; helpful if you live on the East Coast. Wood-frame homes are more likely to withstand an earthquake.

References: MoneyTalksNews, Insurance Information Institute

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