Having the right insurance coverage on your home is smart. Paying too much for it is not. The price you pay for your homeowners insurance can vary by hundreds of dollars, depending on the insurance company you buy your policy from. Using the following tips may reduce the cost of your homeowners insurance.
1. Maximize your discounts.
Most insurers offer discounts to homeowners who have taken steps to reduce the risk of a claim. You may qualify for significant discounts if your home is:
• equipped with a monitored security system (fire/burglar alarm)
• equipped with a fire sprinkler system
• outfitted with wind protective devices such as hurricane shutters.
• Wind mitigation inspection for areas that apply, check with your state/area if this applies
2. Increase your deductibles.
Higher deductibles will reduce your premiums. Keep in mind that hurricane insurance deductibles are not the same as basic all other perils deductibles, so consider both. You may also have different deductibles on riders for special items such as jewelry and artwork. 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.
One caveat: A higher deductible means you pay more out of pocket if you suffer a covered loss. Be sure you are prepared to pay the amount of your deductible if you have a claim.
3. Review your coverage’s.
If you’ve had your policy for a while, be sure the amount and type of coverage you have matches your current needs. The replacement cost of your home and/or contents may have changed.
If you have added or upgraded protective devices such as security and fire sprinkler systems or hurricane shutters since your last policy review, tell your agent so the appropriate discounts can be applied to your homeowners insurance premium.
4. Don’t buy coverage based exclusively on market value.
Insurance will only pay for the actual cost to repair or rebuild your home less your deductible of a qualifying claim. The cost to rebuild or repair your home is calculated on necessary materials and labor, not market value (which can fluctuate based on market conditions and includes land you don’t need to insure).
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.
5. Compare companies, policies and pricing.
Insurance carriers, policies and rate structures are not created equal. The low-priced provider may not be the best if the policy leaves out coverage that’s important to you, if the carrier is not financially sound, or if the carrier doesn’t deliver a high level of customer service. Ask friends and neighbors for referrals and check out the financial stability and service reputation of the companies you are considering.
It’ll take some time, but it could save you a good sum of money. Ask your friends, check the Internet or Yellow Pages if you still get a phone book or contact your state insurance department. (Phone numbers and Web sites are at the bottom of this page.) 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, now get price quotes.
6. 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.
7. 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.
8. 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.
9. 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.
10. Stay with the same insurer if possible
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.
11. 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.
12. 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.
13. When you’re buying a home, consider the cost of homewowners 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.
14. Check the reports for the home from CLUE
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.
Most importantly have these discussions with reputable licensed insurance agents/brokers to help determine what can be done in the area you are purchasing your home. 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.
STATE INSURANCE DEPARTMENTS
AK: 907-269-7900 www.dced.state.ak.us/insurance/
AL: 334-269-3550 www.aldoi.gov
AR: 501-371-2640 www.accessarkansas.org/insurance/
AZ: 602-912-8444 www.id.state.az.us
CA: 800-927-4357 www.insurance.ca.gov
CO: 303-894-7499 www.dora.state.co.us/insurance
CT: 860-297-3800 www.ct.gov/cid
DC: 202-727-8000 www.disr.washingtondc.gov
DE: 302-739-4251 www.state.de.us/inscom
FL: 850-413-3100 www.fldfs.com
GA: 404-656-2070 www.gainsurance.org
HI: 808-586-2790 www.state.hi.us/dcca/ins
IA: 515-281-5705 www.iid.state.ia.us
ID: 208-334-4250 www.doi.state.id.us
IL: 217-782-4515 www.ins.state.il.us
IN: 317-232-2385 www.in.gov/idoi/
KS: 785-296-3071 www.ksinsurance.org
KY: 502-564-7760 http://ppr.ky.gov
LA: 225-342-5900 www.ldi.la.gov
MA: 617-521-7794 www.state.ma.us/doi
MD: 419-624-2000 www.mdinsurance.state.md.us
ME: 207-624-8475 www.maineinsurancereg.org
MI: 517-373-0220 www.michigan.gov/ofis
MN: 651-296-4026 www.commerce.state.mn.us
MO: 573-751-4126 www.insurance.state.mo.us/
MS: 601-359-3569 www.doi.state.ms.us/
MT: 406-444-2040 http://sao.state.mt.us/sao/insurance/index.html
NC: 919-733-3058 www.ncdoi.com/
ND: 701-328-2440 www.state.nd.us/ndins/
NE: 402-471-2201 www.nol.org/home/NDOI
NH: 603-271-2261 www.state.nh.us/insurance
NJ: 609-292-5360 www.njdobi.org
NM: 505-827-4601 www.nmprc.state.nm.us/insurance/inshm.htm
NV: 775-687-4270 http://doi.state.nv.us/
NY: 212-480-6400 www.ins.state.ny.us
OH: 614-644-2658 www.ohioinsurance.gov/
OK: 405-521-2828 www.oid.state.ok.us/
OR: 503-947-7980 www.cbs.state.or.us/external/ins
PA: 717-783-0442 www.ins.state.pa.us/ins/site/default.asp
PR: 787-722-8686 www.ocs.gobierno.pr/
RI: 401-222-2223 www.dbr.state.ri.us
SC: 803-737-6160 www.doi.state.sc.us/
SD: 605-773-3536 www.state.sd.us/dcr/insurance/
TN: 615-741-2241 www.state.tn.us/commerce/insurance/index.html
TX: 512-463-6169 www.tdi.state.tx.us/
UT: 801-538-3800 www.insurance.state.ut.us/
VA: 804-371-9741 www.state.va.us/scc/division/boi/index.htm
VI: 340-774-7166 none at time of podcast
VT: 802-828-3301 www.bishca.state.vt.us
WA: 800-562-6900 www.insurance.wa.gov/
WI: 608-266-3586 http://badger.state.wi.us/agencies/oci/oci_home.htm
WV: 304-558-3354 www.wvinsurance.gov/WVICOline/default.htm
WY: 307-777-7401 http://insurance.state.wy.us
For additional information check with the Insurance Information Institute at http://www.iii.org/insurance-topics