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 consider this: 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 you have on your home should address the value of the building — which changes with upgrades — and the value of belongings you have in your home, especially high-value items like jewelry, antiques and other collectibles.
As we head into summer, and the pace of things slows down a bit, it’s good to 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 going over your policy may save you a substantial amount of money. And it may even go a long way to restoring some sense of normalcy for you if that barbecue turns into a blaze.
Check out these tips for getting the best deal.
1. Shop Around
As it turns out, it’s easy to find a way to save money on insurance, as the internet makes shopping simple.
Once you have the basics down, take a look at the various policies you can buy. But, like with anything else, you should not jump at the lowest rate simply because it’s the lowest. It may not have everything you need or really be the best value. You may also consider checking with the National Association of Insurance Commissioners to review insurers in your state and check complaints. Their 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
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 10-30%. 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 or 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 if you need it, and in the meantime, you’ll save a substantial amount of money on premiums.
3. Look Into Discounts on Multiple Policies
If you do live in an area that is prone to earthquakes, floods or other natural 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 5-15% 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
This is often confusing to people: You want sufficient insurance to cover the cost of replacing your home from scratch if the worst happens. 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 insurance 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
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
- Don’t allow smoking inside your home
Senior citizens or people associated with certain professional organizations may also be eligible for discounts. You may want to call your insurer to see what discounts could be available to you.
6. Don’t Forget DIY Protection
A number of insurers offer discounts of at least 5% if your home is equipped with a smoke detector, burglar alarm or dead-bolt locks. This amount may increase to 15% 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? Consider these 20 tips to harden your home security for next to nothing.)
7. Get to Know Your Agent
You know how the local mechanics give you extra tips and services 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 can be the same way. Plus, according to the Insurance Information Institute, your insurance company may provide a 5% discount if you have been with the company for at least 3 to 5 years, and 10% for 6 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
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 you had on these items.
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? You can read this guide for some tips on creating a home inventory.
9. Keep Your Credit Score Solid
Premiums may be higher or applicants may not be eligible for homeowners coverage if they have poor credit scores. Before you apply, it’s a good idea to review your credit so you have an idea of where you stand. (You can see two of your credit scores for free, updated monthly, on Credit.com.) If you aren’t happy with what you see, you can work to fix your credit by disputing any errors, paying off credit card debt and limiting credit inquiries until you see an improvement in your scores.
More From Money Talks News:
- 8 Smart Ways to Save on Teen Auto Insurance
- 6 Ways to Ready Your Home for Hurricane Season
- 12 Cheap Summer Projects That Make Your Home Feel New
Image: Miodrag Gajic