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 for most of us, our home is the most valuable thing we will ever own — and it is typically filled with valuable possessions. Insurance coverage must address the value of the building — including upgrades — and the value of our belongings, especially high-value items like jewelry, antiques and other collectibles.
So taking the time to review your homeowners insurance — what it covers and how much you’re paying for it — is time well spent. Sure, it sounds mundane compared with planning a barbecue, but it can save you a substantial amount of money — and go a long way toward 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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Most of us spend more time shopping around for milk or gas than we do for insurance. But the internet makes it easy to shop around for insurance.
As with anything else, though, you should not necessarily jump at the lowest rate. Do your homework on an insurance company before buying a policy. Start by visiting the website of the National Association of Insurance Commissioners. On its Consumer Information Source webpage, you can access key information about insurers, including closed insurance complaints, licensing information and financial data.
2. Raise your deductible
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Sure, raising your deductible 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. For example, raising your deductible from $250 to $1,000 could slash your premium by 10 to 30 percent. That’s a lot of savings, without taking on a lot of extra risk.
Afraid that you may not be able to afford the higher amount you’d pay out of pocket in the event of an emergency? Beef up your emergency fund. 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 insure anything besides your home, such as a car, look into a multi-line discount. That’s a break that some insurance companies will give you if you buy multiple policies, such as homeowners and auto insurance, from the same company.
4. Know what you’ll cover
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This is often confusing to people: You don’t necessarily need to insure a house for as much money as you paid for the property. So if you paid $200,000 for your property, you don’t necessarily need to insure it for that much. That’s because the price you paid for your property includes the price of the land, not just your home.
In other words, you want sufficient insurance to cover the cost of rebuilding your home from scratch if, say, it burns down or is blown off its foundation. But your land can’t be incinerated into ashes or blown away, so you need not factor the cost of your land into the cost of your homeowners insurance.
Just be careful: It is not unusual for homeowners to under-insure, and this isn’t a place to cut corners.
5. Inquire about discounts
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Although discounts vary by insurance company, you may qualify for discounts if:
- Your home is equipped with a smoke detector or sprinkler system.
- Your home is protected by a burglar alarm system or dead-bolt locks.
- You have not filed a claim in a certain number of years.
- You don’t allow smoking inside your home.
- You are over a certain age.
Call your insurer to see what discounts may be available to you.
6. Get to know your agent
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You know how local mechanics give you extra tips and service because they’ve gotten to know you through the years? Insurance agents are similar.
Plus, according to the Insurance Information Institute, your insurer may provide a 5 percent discount on premiums if you have been with the same company for 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.
7. Value your possessions
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Be sure that your insurance is sufficient to cover the replacement cost of everything in your house, including items that increase in value over time. On the other hand, if you no longer own valuable diamond jewelry or an extensive collection of art or antiques, you no longer want to be paying for the extra coverage.
An annual review of your policy is a good time to make sure your home inventory, including photos or a video of your possessions, is up to date and saved somewhere outside your home — in the cloud, for instance. Don’t have an inventory of your possessions? Check out “6 Tips for Making a Home Inventory Right Now.”
8. Keep your credit score solid
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If you have a poor credit score, you could be charged higher premiums or have a tougher time getting insurance coverage. So if your credit has any room for improvement, check out “Boost Your Credit Score Fast With These 7 Moves.”
Do you have any additional tips for reducing homeowners insurance costs? Share them in the comments below or on our Facebook page.
Nancy Dunham contributed to this post.