Homeowners insurance is a substantial expense. If you’re smart about it, though, there are plenty of ways to reduce your insurance costs:
1. Factor in the price of homeowners insurance when valuing a home.
When people have a house in mind on which to make an offer, and they’re thinking through how much they’d be willing to pay for it, one thing they often neglect to consider is the cost of homeowners insurance.
For example, say there are two houses that are identical, except one has a fire hydrant a few feet away, whereas the closest hydrant to the other is considerably farther. You’ll pay less in homeowners insurance over the years if you buy the first house than the second.
2. Shop different insurance companies.
Just like anything else, the more you shop around, the better a deal you can find. The National Association of Insurance Commissioners (NAIC) is a good place to find information on the insurers in your area.
3. Look into discounts with companies where you have other policies.
If you already have, say, an auto insurance policy with a certain company, they may offer you better rates to add a homeowners policy than if you went with two different companies.
4. Look into senior or other discounts.
If you go through the insurance company’s website thoroughly, speak to an insurance agent, etc., you may come across various discounts you might not have expected. A common one, for instance, is a senior discount. Insurance companies are willing to charge less to an older homeowner, on the theory that older people are likely to be home more often than younger people, and thus dissuade burglars or spot fires before they get out of hand.
5. Insure for what your house is worth, not what you paid for it.
If you paid $800,000 for your house, really that’s for the house and land combined. Maybe it would only cost $500,000 to rebuild your house from scratch even if it is utterly destroyed by something that you’re insured against. But that’s unlikely to also destroy the land itself, so there’s no reason to have that extra $300,000 worth of homeowners insurance.
6. Improve your house to make it less prone to disasters.
If you consult with your homeowners insurance agent, you can find out how much various improvements could cut your rates and see if it would save you more than it would cost to make the improvements. A fire sprinkler system, burglar alarms, storm shutters, a reinforced roof, etc. can all make your house less of a risk for the insurance company.
7. Monitor your credit score.
Your credit rating is one of the factors that insurance companies use in calculating the rates to charge you.
8. Inquire about a loyalty discount.
Some insurance companies will offer you a reduced rate if you’ll stick with them long term rather than switching companies.
9. Choose a higher deductible.
If you’re willing to accept a higher deductible, you can often lower your rates considerably. You’ll almost always come out ahead by doing so. Typically the only reason for the lower deductible would be if things are so tight for you financially that you would struggle to pay any more than that in the event of a disaster.
10. Review your policy regularly to make sure it still fits your circumstances.
It may be that your home and possessions had a certain value last year, or five years ago, or ten years ago, but a drastically different value today. You need to make sure your insurance always fits that present value so you won’t be under or overinsured.
Insurance Information Institute, “12 Ways to Lower Your Homeowners Insurance Costs.” Federal Citizen Information Center.
Scott Purves, “Homeowner Insurance-Tips to Buying Homeowner Insurance.” About.com.