Most consumers pay their home insurance in their monthly mortgage payment, so finding the cheapest coverage can lower your housing costs and avoid the problem of being house poor. Most homeowners do not realize there are easy steps they can take to get their insurance company to lower their costs, such as increasing your deductible, installing a security system, or even asking for qualified discounts. Those buying a new home can look for the features that will get them the cheapest rates or make sure the house they purchase has a price within their budget when including the additional costs of homeownership, such as property taxes, insurance, maintenance, PMI, utilities, etc.
Many insurers give discounts to homeowners who live within 5 miles of a fire station or 1,000 feet of a fire hydrant. Rates are also affected by emergency response times in an area and most insurance providers offer the cheapest prices in areas where there is a professional rather than a volunteer fire department and quick emergency response times.
Do Not Include The Value of Land in Your Policy
When someone buys a home, part of the value of the property is the land that it occupies. The market value of the house is based, in part, on the value of the lot, and in some states like California, New York and Florida, the price of land can be a significant portion of the total purchase. When homeowners are picking how much insurance to buy, do not include the price of the land in your coverage limit. The limit of the policy should be equal to rebuilding costs of a house with the same square footage and amenities as that of the house being insured – do not include the cost of the land.
For example, if you purchase your home for $300,000, the county appraiser will usually assign some value to the land and a value for the property. In this instance, let’s say the value of the land is $100,000 and the home is worth $200,000. In case of emergency, natural disaster or fire, if your property is destroyed, you will not need to rebuild the land beneath your home. You will simply need to finance the reconstruction of your home. Only in certain cases, such as a ground-opening earthquake or a sinkhole, will you ever need to cover the cost of fixing the land beneath your home. Homeowners who include the value of their land in the policy limit will surely overpay because they are paying for more coverage than they actually need.
You can learn more about available policies by reading “Best Home Insurance Coverage, Companies, Quotes and Rates“.
Raise Your Deductible
The deductible is the amount of damages that the policyholder, usually the homeowner, must pay before the insurance company pays out his claim. Higher deductibles mean A) the policyholder will likely make less claims, especially with small cases, B) the insurance company pays less if a claim is made, and C) between claims, policyholders save money with lower rates. Consumers who can pay a higher cost out of pocket if the home is damaged by a covered risk can get the cheapest home insurance by raising their deductible from $1,000 to $2,000 or even $5,000. Mortgage lenders may not approve higher deductible coverage unless the homeowner has enough equity in the house to cover the increased deductible.
Improve Home Security
Although some security improvements may be expensive, many insurance companies give a 5% discount for smoke detectors, security alarms or dead-bolts. Electronic security systems with automatic sprinklers or those that notify security companies or emergency services of break-ins can save as much as 15% to 20%. This is because insurance carriers know that smoking causes 23,000 fires each year and, in 2009, burglary and theft resulted in losses of $4.6 billion. Individuals who are improving home security should check with their insurer since not all security systems are eligible for the discounts.
Make Structural Improvements
Another way to get lower insurance rates is to make structural improvements to the home so it is less likely to suffer severe damage during disasters. If you live in an area susceptible to hurricanes, flooding, or high winds, stronger roofing materials (i.e. shingles), reinforcing the structure of the roof, and storm shutters may lower premiums. Updating electrical systems, HVAC and plumbing systems can make the home less likely to have a fire or water leak. Those looking for the cheapest home insurance should consult their carrier to find out which improvements will save them money.
High Credit Scores
While most people are aware that high credit scores can save them money with lower interest rates on their mortgage or car loan, they don’t know that good credit scores also means getting the most affordable pricing for all types of coverage – car, life and home insurance. To maintain the best credit history, consumers should pay bills on time, maintain a long and positive credit history, not apply for more unsecured credit than they need and keep credit card balances low. The logic behind correlating credit scores and insurance premiums is that statisticians have uncovered a relationship between high credit scores and general responsible, low-risk, and safe behavior. The assumption carriers make is that, if you care enough to manage your personal finances, then you will likely consistently make payments and avoid filing claims unless necessary.
Check For Discounts
Americans who are retired or disabled spend most of their time at home and are more likely to spot fires sooner and less likely to be burglarized than working families. Many insurers offer special discounts to retirees and the disabled. The best rates may be group deals offered to members through labor unions, fraternal organizations, professional associations, or university alumni. Other common discounts include the following:
- Multi-Policy Discounts – consumers can get sizable customer loyalty discounts by buying all their insurance needs from one provider. Not only can this get the cheapest home insurance, it can save money on auto, life, health, RV and boat insurance. Discounts can be as much as 25% per policy, depending on the insurance company and the number of policies an individual buys. When the savings are added up, the multi-policy bundling discount can really provide the biggest savings.
- Non-Smoker Discounts – for the obvious reasons, non-smokers are less statistically less likely to start fires.
- Claim-Free Discounts – providers may lower your rates if you do not file a claim for a certain number of years, making you a low-risk customer.
- Marital Status Discounts – whether you agree or not, statistics show married couples are more stable in terms of behavior and finances.
Review Insurance Needs and Inventory List
Over time, financial needs can change and consumers need to make certain they are not paying for more insurance than they really need, including the inventory of possessions covered in your contract. For instance, a 5 year old fur coat that is listed on the policy does not have as much value as it did when it was purchased. Insuring your material possessions for their actual value can lower your monthly premiums. Individuals should check their homeowners and any other insurance policies to make sure they are not paying for more coverage than they require.
Additionally, remember to regularly update your list. Items you cannot prove you owned, either by receipt or a photo, may not be replaced by the company. You can easily fix this problem by walking around your house and into every room, closet, and drawer with a camera or smartphone and video everything you own in your home. Then store the video in a safe, in your safety deposit box at the bank, in your email account online, or even send it to a friend for safe keeping.
Compare Home Insurance Quotes
Many websites offer insurance quotes from multiple companies to help consumers find the best coverage. Comparing the top home insurance companies, their rates, policies, and terms and conditions is the only sure way to determine if you are getting the best deal in the marketplace. Homeowners can also tweak coverage options by checking premiums for different deductibles to see if increase your out-of-pocket expense results in any meaningful savings.
Getting the cheapest home insurance may take some time and effort, but since insurance is an ongoing expense, the effort is worthwhile if it helps you save a few thousand dollars in the long run. A home is a big investment and consumers need to protect themselves from life’s uncertainties with affordable, comprehensive coverage. Taking the time to find discounts and compare home insurance quotes can ensure your family’s financial stability and security.