Homeowners insurance is one of those things most of us rarely think about. It’s easy to put a policy in place and then forget about it — until it’s too late.
But think about it. For most of us, our home is the most valuable thing we will ever own — and it is filled with things that typically take decades to accumulate. The coverage needs to address the value of the building — which changes with upgrades — and the value of our belongings, especially high-value items like jewelry, antiques and other collectibles.
As we head into the summer, as the pace of things slow down a bit, take the time to review your homeowners insurance — what it covers and how much you’re paying for it. Sure, it sounds mundane compared with planning a barbecue, but doing so can save you a substantial amount of money. And doing so can go a long way to making you whole again if that barbecue turns into a blaze.
Check out these top tips for getting the best deal:
1. Shop around
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It’s ironic that most of us spend more time shopping for milk or gas than we do for insurance. As it turns out, it’s easy to save money on insurance. The internet makes shopping simple.
But don’t stop there. Once you have the basics down, look at the various policies you can buy. But, like anything else, you should not jump at the lowest rate. Go to the National Association of Insurance Commissioners to review insurers in your state and check complaints. The site notes that states often make information available on typical rates charged by major insurers, and many states provide the frequency of consumer complaints by company.
2. Raise your deductible
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Sure, that can be scary. But the larger the loss you are willing to absorb before the insurance kicks in — in the event of damage — the less your insurance will cost month-to-month. Raising your deductible from $250 to $1,000 could slash your premium by 10 to 30 percent. That’s a lot of savings, without a lot of extra risk.
Don’t be surprised if you need extra insurance for certain risks specific to your area. Remember, if you live in a disaster-prone area — think earthquakes, hurricanes — your insurance policy may have a separate deductible for certain kinds of damage.
Afraid that you may not be able to afford the higher amount you’ll pay out-of-pocket in the event of an emergency? Beef up your emergency fund to cover the increase. That way, the money will be there when you need it, and in the meantime you’ll save a substantial amount of money on premiums.
3. Look into discounts on multiple policies
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If you do live in an area that is prone to earthquakes, floods or other disasters, don’t forget to ask for “multiline” discounts. According to the Insurance Information Institute, some companies will reduce the price of your policy by 5 to 15 percent if you purchase two or more policies with them. Just make sure that the end result is less expensive than the combined cost of policies from different companies.
4. Know what you’ll cover
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This is often confusing to people: You want sufficient insurance to cover the cost of replacing your home from scratch. But you won’t need to replace the land, so don’t factor that into your insurance. Verify the amount your insurance company says is the replacement cost of your home by multiplying the cost per square foot for a residential building in your area by the number of square feet you have. And don’t forget to insure to replace the contents of your home.
Be careful: It is not unusual for homeowners to underinsure, and this isn’t a place to cut corners.
5. Inquire about discounts
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Although they vary by insurance company, you may qualify for discounts if you:
- Reside in a home with certain upgrades.
- Have not filed a claim in a specified number of years. (See “When to File a Homeowners Insurance Claim.”)
- Don’t allow smoking inside your home
Senior citizens or people associated with certain professional organizations may also be eligible for discounts. Call your insurer to see what discounts may be available to you.
6. Don’t forget DIY protection
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A number of insurers offer discounts of at least 5 percent if your home is equipped with a smoke detector, burglar alarm or dead-bolt locks. This amount may increase to 15 percent or more if your alarm has active monitoring with dispatch capabilities and your home contains a modern sprinkler system, the Insurance Information Institute says. (On a tight budget? See “20 Tips to Harden Your Home Security for Next to Nothing.”)
7. Get to know your agent
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You know how the local mechanics give you extra tips and service because they’ve gotten to know you through the years? And how the barista at your local coffee bar always slips you a few extra coupons? Insurance agents are the same way. Plus, according to the Insurance Information Institute, your insurance company may provide a 5 percent discount if you have been with the company for at least three to five years, and 10 percent for six or more years. Although this incentive is enticing, it is still important to shop around annually to ensure you are getting the best price.
8. Know your policy
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Be sure that your insurance is sufficient to cover the replacement cost of everything in your house, including valuables that become worth more over time. On the other hand, if you no longer own valuable diamond jewelry or an extensive collection of art, you no longer want to be paying for the extra coverage.
This annual review is a good time to make sure your inventory of your possessions, including photos or a video, is up to date and saved somewhere outside your home — in the cloud, for instance. Don’t have an inventory of your possessions? Click here for some tips on how to do it.
9. Keep your credit score solid
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Premiums may be higher or applicants may not be eligible for homeowners coverage if they have poor credit scores. Check out these tips to improve your credit.
These are just a few ways to reduce your homeowners insurance premiums. If you have any additional tips, share them in the comments below or on our Facebook page.
Nancy Dunham contributed to this post.