Homeowner’s insurance is a property insurance which covers one’s private residence. Just imagine what would happen if your house was damaged due to fire, or if your dog bit your friend on your property. You will have to pay to restore your house and expend the compensation to your friend. This is where your insurance comes in handy. Damage due to natural perils like earthquakes, storms, floods, etc., and theft are also covered under this insurance. However, if you are not careful about the calculations, you may end up paying more than required. You would rather use this extra money to add up to your savings. One of the ways to save insurance cost is to pay your mortgage as quickly as possible, because this will lead the insurance company to believe that as you are the owner of the house, you will take proper care of it. Here are a few more tips to help you out.
Value of Your Belongings
It is important that you know the price of all your belongings. The last thing you would want is to underrate or overrate some of the items. Hence, make an inventory list of all your possessions and their value. Now, compare it with the amount of policy coverage. In most cases, you will find that the coverage which is often based on a guesstimate value of the item has been provided for a higher amount. Inform the insurance company about the actual value of your belongings, and ask them to reduce the policy fee accordingly. If you feel the need to get a rider for a few expensive items, you may get them separately. It is advisable that you keep a tab on the value of your belongings by ascertaining their value every year.
Increase the Amount of Your Deductibles
Deductibles are out-of-pocket expenses which you promptly pay for a loss even before the insurance company actually starts to process the claim. It is interesting to note that the amount of deductibles is inversely proportional to the insurance premium payments and vice versa. This means that higher the amount of deductibles, the lower will be your annual premium. You can ask your insurance company to provide you a table giving you a list of deductible amounts with their annual premiums. Based on what is convenient, you can promptly go for a higher deductible risk and save on the annual premiums. However, beware that there may be no point in getting a higher deductible of $2,000 for a minor issue like a broken window.
Watch Your Credit Score
So, you thought that the credit score didn’t matter when it came to your insurance premiums? Wrong. According to the Fair Credit Reporting Act (FCRA), insurance companies can go through your credit report without your permission as they have a ‘permissible purpose’ to look for your credit information. Just like a bank will decide the interest rates it will offer to you for a loan you avail based on your creditworthiness, the insurance companies too will have a good look at your credit score before they decide the cost of the insurance policy for you. Hence, it becomes all the more important that you take your credit score seriously and try to make it better at least 6 months before you plan to avail the homeowner’s insurance in order to get insurance at a lower cost. You can do this by not opening any new credit accounts with banks, paying away all your debts and bills before the due date, applying for new credit cards, spending less on your existing credit card, etc. Also, ask for a copy of your credit score, review it, and correct mistakes if any. All this will enable you to get a better bargain with the homeowner’s insurance.
Customer loyalty can help you save a good amount of money. If your homeowner’s insurance company also provides a liability umbrella coverage and an auto insurance, you may want to go for a consolidated coverage for all three types of insurance. Getting all three or any two insurances from a single company will mean that they will provide you with a whopping discount on the insurance premium which may range anywhere between 5 to 15%. This can be a lot of amount, if you have opted for a higher coverage for your insurance. Who knows, you may save an amount which is equivalent to two annual insurance premiums. However, it is highly advisable that you do not just go for these three insurances without conducting market research. You may find that this arrangement is actually turning out very costly for you. Then, you can opt for separate coverages from different companies.
Only Buy What You Need
Just look at your insurance policy carefully and question yourself if you are paying for certain coverages unnecessarily. For example, you may have special insurance ‘floaters’ for things which are not usually covered by your regular homeowner’s policy, like an antique statue, expensive jewelery, vintage clothing like fur coat, high-end electronic gadgets, etc. It is advisable that once every year, review if you have sold certain items, their cost has depreciated, or you have given them away. In this case, you will have to either cancel the insurance cost for items you no longer own, or reduce the amount of insurance coverage for those which have reduced in cost. This way, you can save a lot of your hard-earned money from going to waste. Also, review if you need an earthquake or flood insurance, if you do not live in areas where these risks are likely to take place.
Protect Your House
Most people are not aware that you can reduce your insurance cost by lowering the risk factors in your home. Want to know how? Well, all you have to do is make your home a safer place to live. Many insurance companies will give you a discount that ranges between 5 to 20% if you have taken good precautions to protect your house. You can put up storm shutters, reinforce your roof, hip roofs, and wooden frames, install a sprinkler system or smoke detector, get a backup generator, ensure that your house is retrofitted to protect it against natural disasters like earthquake, etc. You can also install a high-end security system with burglar alarm or a new range of deadbolts to protect against thefts. Undertaking proper ventilation, heating, plumbing, and electrical equipment will also prove beneficial. However, all this will not come free, so calculate if all these changes will actually bring down your premium cost.
Cover Your House, Not the Land
Remember that there is no point in covering the land on which your house is standing for homeowner’s insurance as it is not at a risk of windstorm, fire, theft, damage, etc. Hence, there is no point in calculating the value of your property together with the land. Exclude its value when trying to calculate how much insurance you will have to pay. This will definitely bring the cost down drastically and help you save on the insurance.
Shop around for the right homeowner’s insurance; however, you may enjoy discounts in cost for sticking to an insurance company for a longer period. If you have a government plan, you should explore the option of going with a private one as it can get you an insurance at a lower cost. Additionally, if your age is 55 or above and you have retired, your insurance agency may give you an additional discount of 10%. If your employer has opted for a group insurance program, you may benefit from it. Also, even while looking for houses, get your Comprehensive Loss Underwriting Exchange (C.L.U.E.) report to know about the history of claims on your new home. If you live in a high-risk area, your insurance cost will be higher. Have your house professionally inspected to ensure that it will not cost you too much in repairs and insurance.