Homeowners insurance can protect you and your house in the event of a tragedy, such as a fire or other natural disaster. But homeowners insurance isn’t always affordable — according to the National Association of Insurance Commissioners, most homeowners pay around $1,200 a year for their insurance policy.
Additionally, about two-thirds of all homes in the U.S. are underinsured to some degree, according to a recent survey conducted by Nationwide Insurance. Although it may seem tempting to drop or reduce your insurance coverage, particularly if you’re struggling with financial hardship or facing bankruptcy, having the right coverage in place can provide a lifeline if your home is suddenly damaged, broken into, or destroyed.
Whether you’re looking to switch homeowners insurance companies, find coverage to satisfy a mortgage lender’s requirements, or increase your coverage at an affordable rate, here are seven ways to save money on your homeowners insurance.
Before you can save any dollars, it’s important to review your current policy (if you have one) to determine how much coverage you need to fully protect your home. Then, compare offers. Your mortgage company might recommend preferred providers, but it’s up to you to decide whom to purchase insurance from.
If you’re buying a new home and shopping for homeowners insurance, this step is the most important. You can easily compare different insurance policy quotes online to find the provider with the best rate. You should also check with your bank, credit union, or employer to see if they offer a discount. And while finding the lowest rate can save you the most money, make sure to weigh other aspects of your insurance coverage, like customer service ratings and discounts on other insurance products you might bundle for greater overall savings.
Insurance companies offer many different discounts, so make sure you review any options available to you when applying for a new policy. For example, sometimes you’ll save more on your homeowners insurance when you pay for the first few years outright. You might also be able to save money when you bundle insurance services (like auto or boat coverage).
But there are plenty of other discounts offered, including energy-efficient discounts, safety discounts, autopay discounts, and new construction discounts. Be sure to review the full list across different providers to make sure you’re shaving off every dollar you can from your overall cost.
If you already have homeowners insurance, it’s important to review it at least once a year to make sure you’re up to date on what it covers. Most homeowners insurance policies come with dwelling protection (which insures your house itself) and some form of personal property protection to insure the items in your home. But others might include loss-of-use coverage to help you pay for shelter if your home is unavailable or other structure insurance, which could insure detached structures like garages.
Be sure to review all the types of protections you’re receiving to make sure the price justifies the services you’re paying for. And be sure to review any exclusions, so you’re not caught off guard in the future. Lastly, if your policy pricing increases, make sure you understand why, and always compare similar coverage options from other insurance companies. You might find you’re paying for perks you don’t need.
One of the easiest ways to lower the annual cost on your homeowners insurance is by boosting your deductible. If your deductible is currently $500, for example, you might be able to lower your costs by nearly 25% (or more) by raising it to $1,000, according to the Insurance Information Institute.
But make sure you crunch the numbers before raising your deductible by too much. You’ll want to make sure you can afford to pay the deductible if you need to file a claim against your policy. Otherwise, you risk not being able to afford to use your policy when you might need it most. You can chat with a real estate professional or current homeowners insurance provider to find out how much you can save by increasing your deductible.
Your credit score — the three-digit number that helps show your creditworthiness to lenders — can impact the rate of your homeowners insurance policy. By keeping your credit score high (think 700 or up), you’ll be able to qualify for lower rates, which will keep your homeowners insurance costs lower.
The best way to boost your credit score is by making on-time payments every month. Pay at least the minimum (if you can’t afford the full balance) and set up autopay to avoid accidentally missing a payment. From there, work on lowering your debt, a tactic that will help you financially, while lowering your credit utilization rate — a major factor that goes into calculating your credit score.
If you’ve been working on your credit, it might be time to compare rates from other providers to see if you now qualify for a more affordable homeowners insurance plan.
Yes, your homeowners insurance is there to protect you financially, but each time you file a claim, your insurance costs can creep up. Many insurance providers reward you each year you’re claim-free, and every small claim adds up.
A general rule of thumb to follow is if your claim would be less than your deductible (say $1,000), pay out-of-pocket rather than filing a claim. In the end, you’re paying the same amount you would anyway, without the hassle of additional paperwork. And you’ll keep your claims record clean, which can help you save money overall.
The best way to avoid high homeowners insurance costs is by preventing accidents in the first place. While you may not have control over a fire or flood, you can take steps to ensure your home is safe. Test smoke alarms and carbon monoxide detectors regularly. You might even consider having sprinklers or materials that are fire-resistant installed if you live in an area prone to fires.
Installing a security system can help prevent theft and also keep your home safe during an emergency. Even installing something as simple as a deadbolt lock for extra protection can chip away at your insurance costs, while making your home a little safer. While some of these installations may cost extra money upfront, they could save you big dollars in the long run.
Homeownership can come with a lot of additional fees, including homeowners insurance, mortgage insurance, and, in some cases, HOA fees. But your homeowners insurance is there to protect your home and provide financial peace of mind. Even if you’re planning on selling your home in the near future, homeowners insurance is a smart move. Remember that there are ways to make your coverage more affordable, while still ensuring you and your family are fully protected.