Homeowners Insurance: Strategies to Reduce Your Costs
In recent years, the cost of home insurance has increased significantly due to inflation and the growing impact of natural disasters. Fortunately, insurance companies offer various discounts and incentives that can help homeowners lower their premiums. Here are nine effective ways to save on your homeowners insurance.
1. Increase Your Deductible
One straightforward method to lower your home insurance premium is to increase your deductible, which is the amount you pay out-of-pocket when you file a claim. NerdWallet’s rate analysis suggests a deductible of $2,500, instead of $1,000, could save you an average amount annually. This approach puts money back in your wallet each month. However, ensure you have sufficient savings to cover a larger out-of-pocket expense if you need to make a claim.
2. Enhance Home Security
Simple home security measures can provide cost savings. Installing smoke detectors, burglar alarms, or deadbolt locks can qualify you for a discount. Upgrading to a comprehensive sprinkler system or an actively monitored fire and burglar alarm can offer even greater savings. Moreover, some insurers offer discounts for smart-home devices, such as water sensors that alert you to leaks.
3. Avoid Filing Small Claims
While it may be tempting to file claims for minor incidents, it might be more advantageous in the long term to pay for those small expenses out of pocket. Many insurers offer discounts to policyholders who remain claim-free for a specific period, often a few years. Filing even a single claim can substantially affect your rates; for instance, a wind damage claim can raise your annual insurance cost by about 9%, according to a NerdWallet analysis.
4. Inquire About Lesser-Known Discounts
It’s worth asking your insurance provider about lesser-known discounts you may be eligible for that aren’t always advertised. Some insurers offer discounts for homeowners that:
- Don’t have any smokers living in the house.
- Recently purchased their home.
- Pay their premium via automatic bank payments.
- Choose paperless billing.
- Work in specific careers such as teaching, engineering, or firefighting.
5. Account for Home Improvements
Home improvements can make you eligible for homeowners insurance discounts. Adding features like storm shutters or impact-resistant roofing can make your home more resilient to damage, leading to insurance savings. Upgrading outdated plumbing and electrical systems can also result in discounts. Contact your insurance agent to inform them of any improvements and inquire about potential savings.
6. Bundle Your Auto and Home Insurance
Combining your auto and home insurance with the same company, often results in significant savings, potentially up to 30% depending on the provider. You may qualify for additional discounts by adding other policies to the package, such as life, umbrella, or boat insurance.
7. Build Your Credit Score
Your credit score significantly impacts your home insurance premium. In most states, insurers use a credit-based insurance score to determine rates. A low credit score, such as a FICO score under 630, may lead to higher rates. A NerdWallet analysis indicates that individuals with poor credit pay considerably more for homeowners insurance than those with good credit. Check your credit report and take steps to improve your score, such as making timely loan payments and reducing credit card balances.
8. Shop Around
Home insurance rates for identical coverage can vary significantly between companies. Some homeowners can save a significant amount by finding the most affordable rate. Many insurers provide online tools to obtain quick quotes. Comparing rates from different companies can show you potential savings by switching. Alternatively, you can use an independent insurance agent or broker to find the best deals.
9. Remove High-Risk Items
Having what your insurer deems an “attractive nuisance,” such as a trampoline, could increase your home insurance premium. An “attractive nuisance” is a feature on your property that children are tempted to play on. If they get injured while doing so, you could be held legally responsible. Because insurers consider this a liability risk, removing these items could save you money on homeowners insurance.
Important Note: Don’t Drop Coverage To Save Money
It is not recommended to cut necessary coverage to save money. If you do and a disaster strikes, you will be left with the bill for rebuilding your home and replacing lost belongings. If possible, consider getting quotes from private flood insurance companies to find a cheaper option.
