Every homeowner who maintains a mortgage is required to keep a valid homeowners insurance policy on their property. Even once the financing portion of homeownership is finished, it’s still highly recommended that you keep a policy open to protect your most valuable asset. Many individuals lack the basic understanding of what this policy covers and how it connects to your overall mortgage. Once you understand this basic connection, you can find a number of savvy ways to lower homeowners insurance costs.
- FAQs
- What You Can Do to Lower Costs
- Shop Around Before You Buy
- Raise Your Deductible
- Disaster Proof Your House
- Upgrade Home Security
- Seek Discounts
- Get a Better Credit Score
- Bundle Insurance
- Eliminate Unnecessary Coverage
- Remove Old Structures
- Exclude Land Value
- Clean Up the Land
- Dog Breeds Can Matter
- Conclusion
- Resources
What is Homeowners Insurance?
A homeowners insurance policy is used to help protect your interest in the home. They typically cover major categories of harm such as interior damage, exterior damage, loss of belongings or assets (including theft), and bodily injury on the property. An insurance company will offer a certain degree of protection across these four categories in exchange for your monthly insurance premium.
When something goes awry, you may have to pay some money upfront to cover your deductible before the claim can be approved by the insurance company. The details of both the coverage and the deductible amount will vary based on the policy you select.
This simple home insurance policy is very important to help provide you with financial security in the event of a disaster. A storm, a freak accident, or a flooded home can happen in the blink of an eye. Without an insurance policy in place, the majority of people would lack the necessary funds to cover the cost of repair out of pocket.
The danger can be even greater if someone is injured on your property, whether they slip coming down the stairs or trip over a lawn gnome in your front yard. Insurance can help to cover the cost of the medical bills sustained as a result of the injury, preventing you from being sued. This provides some legal and financial protection in the rare event this ever occurs.
You can ultimately lower homeowners insurance costs by altering the degree of coverage for your home. With every change you make to the policy, you have an opportunity to save a few dollars on your monthly costs. Unfortunately, few homeowners realize just how much control they may have over the final price they pay for insurance.
How Does Insurance Relate to Your Mortgage?
It becomes even more unclear to homeowners who are still paying off their current mortgage. Until the home is officially your own, your monthly insurance premiums are usually covered by an escrow account set up by your lender. This means that your mortgage payment bundles in a certain amount to cover your insurance premiums along with your principal and interest payment. Your property taxes may be handled similarly.
If you fail to keep the policy active, the lender has the right to place a new policy over your property at an additional fee. You may end up paying more for one of these policies that offers a different degree of coverage than you would with some of these money-saving tips that can help you to save money on your own home insurance.
What You Can Do to Lower Homeowners Insurance
Fortunately, you aren’t necessarily stuck paying the price that your insurance company quotes to you. There are many different attributes you can change on your plan to increase the value while simultaneously decreasing what you pay each month. It helps to determine just how much you can afford to pay out of pocket in the event of a disaster, as well as what you can afford monthly.
If you’ve been trying to figure out what you can do to lower homeowners insurance costs, take a look at these top suggestions for finding a better rate.
Shop Around Before You Buy
The company you select for your homeowners insurance really does play a part in how much you will pay month to month. Much like car insurance, there are variations in price that are more related to the company than the policy itself. This can be time-consuming to compare quotes that are apples to apples but ultimately has the potential to pay huge dividends when it comes to your savings.
One suggestion for shopping at multiple companies is to enlist the help of an insurance agent. Many of your local agents may provide coverage through multiple companies. With their help, you can compare the prices of policies that offer comparable coverage under the watchful eye of a professional. The bonus is that you also have someone readily available to answer questions about small details you don’t understand.
Of course, money shouldn’t be the only thing you consider when looking at various homeowners insurance companies. You also need to think about how previous and current customers feel about their coverage.
Some insurance companies will try to find loopholes in your contract with them, transferring some of the financial responsibility back onto the homeowner. You may spend a lot of time filing claims and arguing with representatives in order to get the money you need to cover extensive damage that you believe is included in your comprehensive homeowners insurance plan.
This would be an excellent time to ask friends and family members if they are satisfied with their provider. Look for reviews online about the service they provided and how happy homeowners were regarding their claims resolutions.
Shopping for the perfect homeowners insurance company means looking for a reputable organization that charges fairly and has great success rates and recommendations from their clients. There has to be a balance between these items or you may be unsatisfied with the long-term repercussions of choosing this company.
Raise Your Deductible
One of the fastest ways to lower homeowners insurance is to raise your deductible. Your deductible is the amount of money you will have to pay out of pocket before the insurance company will consider your claim. There is an inverse relationship between your deductible and the price of your insurance premium. Generally speaking, a lower deductible will mean a higher premium amount and vice versa.
Before you immediately raise your deductible to the maximum amount, you should consider whether you can truly afford it in the event of an emergency. Is a $10,000 deductible reasonable and could you cover that cost if you had a disaster strike your property? For many people, they need to select a deductible that is more in the middle and could be considered affordable based on their budget.
You can work up to raising your deductible to the maximum limits by setting aside a savings account with the total amount needed. This gives you some financial protection and security in knowing that you will be protected in these worst-case scenario situations.
Much like finding the perfect insurance company, finding the deductible that works for your family will require striking a balance between monthly savings and what you could afford to pay upfront if you need coverage.
Keep in mind that you may have different deductibles for separate aspects of potential damage to the property. For example, water damage may have a separate deductible than hail damage. It may pay bigger dividends to investigate all of these minor possibilities. Some experts estimate that raising your deductible by just $500 can save you 25 percent on your monthly homeowners insurance costs.
Disaster Proof Your House
With a few simple home modifications, you could lower homeowners insurance and protect your investment all at the same time. Areas that are particularly prone to natural disasters such as hurricanes and tornadoes will want to consider making some key changes to the home in order to “disaster proof” it. This may include installing storm shutters and doors that are professionally placed on the home.
An insurance company could view this attempt at protecting your investment as a reason to lower your monthly costs. While these may be minor changes, they could mean that your home is less likely to be damaged in the event of a natural disaster. This is beneficial for you and the insurance company who will be less likely to see a claim coming from your property.
Keep in mind that most insurance companies are going to want proof that these were quality investments that were professionally installed before they offer a discount. You may need to provide them with product information, receipts, and photographic evidence that the work has been completed on the home.
If you’re in the process of purchasing a new home that has these features and you want to gather insurance quotes, you will need to mention that these items are available upfront. The insurance company has no way to identify their presence without your direct input. You may also ask them what kind of a discount you could receive on the policy if you were to make these changes. This can help you to evaluate whether you feel it is worth the investment.
Upgrade Home Security
Common home insurance policies cover the property in the event of a theft or burglary as well as a physical disaster. Depending on the details of your plan, you may have a certain deductible to meet before they will cover the remaining assets that have gone missing. You may even choose to place coverage on specific items such as expensive electronics or equipment used for work.
If you’re taking steps to minimize the likelihood that a burglar would get away with your goods, an insurance company is likely to shave a few dollars off your monthly bill. This keeps your house safe and lessens their overall risk when it comes to insuring your property.
Similar to disaster-proofing your home, you will also want professional installation from a home security company. The insurance company might ask to see your contract or receipt from the installation. Keep in mind that they are looking for a system that does more than simply scare off the bad guys. They also want the system to automatically dial out to first responders whenever the alarm sounds.
Predicting how much money you can save by installing a professional home security system is difficult because each company has a unique policy. However, some insurance companies are willing to issue discounts of twenty percent simply for adding this feature.
Be sure to keep in mind that you will be offsetting the savings on your homeowners insurance policy with the additional cost of maintenance on the security system. This could be a great tradeoff that allows you to receive more peace of mind in your home for a reduced fee that can help to balance it out.
Seek Discounts
Most homeowners insurance companies are willing to offer discounts to their clients, but you have to be willing to ask about them. Too many people are hesitant to discuss the intimate details of their finances. Money is such an uncomfortable topic that they simply accept the bottom line number that the company gives them.
They may not even realize that there is some room to negotiate inside of this figure.
Browse through the insurance company’s website to see if they offer an extensive list of potential discounts that they’re willing to give out to their customers. This can give you a great starting point for contacting a customer service representative to see how to go about making use of them. For example, many companies will issue discounts based on common things like these:
- Long-standing customer with the company
- Bundled policies
- Home remodels
- Auto-pay enrollment
- Discounts for time without claims
- Retiree discounts
Companies are willing to give out these discounts, but only customers who are bold enough to ask will receive them. They are very rarely applied to your insurance policy automatically, so don’t forget to speak up and ask if any of these common discounts are offered. After all, some of them could save you up to thirty percent on your monthly homeowners insurance premium.
Make a list of the potential discounts that you believe you could be eligible for. It’s also helpful to get a few quotes from other insurance companies to see if your company can offer a discount or match their rates on a comparable policy.
Get a Better Credit Score
If you live in a state that allows insurance companies to use your credit score, you may face higher premiums for bad credit. The logic behind this concept makes sense, but few homeowners take the time to truly consider what a low credit score is costing them. Insurance companies have their own scoring system that uses your credit score, A lower insurance credit score generally results in lower homeowner’s insurance rates.
Insurance companies are more apt to raise the rates for a person who may not be consistently reliable at paying their monthly premium. Poor credit tends to be an indicator that you don’t have a favorable long-term history of making timely payments, so the insurance company attempts to minimize their risk by insuring your property at a much higher rate.
The best thing you can do to lower your homeowners insurance rates would be to raise your credit score.
This money-saving technique does require a long-term commitment to working on your financial health, but it pays big dividends in every area of your life. You will almost definitely qualify for better interest rates, better terms on credit cards, and more favorable loan programs when you have a better credit score. All it takes is a commitment to managing your money well on a monthly basis.
For most individuals, the biggest struggle they face with their credit score is making their monthly payments on time. Set up an autopay function on your accounts whenever possible and set an alarm on your phone to remind you to pay the others. This prevents the due date from passing you by, creating yet another blemish on your credit report.
Credit utilization also plays a role in determining your final credit score. Most experts recommend using only thirty percent of your available credit at any given time. If you have excessive debt, you can actually improve your credit score and your finances by paying off some of those high-interest credit cards, student loans, and auto loans.
If you know that you’ve had a major overhaul of your credit score over the past couple of years, you may want to consider reaching out to your insurance company to see if they will think about lowering your rates. They may just reward you for your hard work and put you in an even better spot financially.
Bundle Insurance
Most companies offer more than one type of insurance. They probably also provide car insurance, RV insurance, motorcycle insurance, and other types of coverage that you may need. One of the easiest ways to receive a discount on your homeowners insurance is to bundle all of your insurance policies in one place.
Insurance companies make more money when they receive more of your business and keep it out of the hands of their competitors. In exchange for your business, they are often willing to pass along significant discounts that can save you in every area. This also makes it more convenient for you to pay your bills if they are all due in one easy location.
Be aware that there could be a major pitfall to bundling your policies under one carrier, particularly if you’re considering switching your car coverage. If you have a long driving record full of tickets and accidents, your carrier may drop both your auto insurance and homeowners insurance all at the same time.
Research the companies and ask to receive price quotes separately to see the breakdown of what each policy will cost you. It may still be less expensive for you to keep your policies under two separate companies that offer fantastic rates instead of bundling them. In the end, it’s possible that you may pay more for the bundle so make sure to do your homework.
As with most discounts, the specific amount that you will save is based on your location and the details of your coverage. However, it’s estimated that you could save between ten and twenty percent when bundling policies together.
Eliminate Unnecessary Coverage
As time passes, you may not necessarily need the same amount of coverage you signed up for when you first purchased your home. Eliminate coverage that is no longer pertinent to your property, including any major changes regarding valuables within the home. This may be particularly true for families who downsized in recent years or parted ways with many of their more expensive gadgets.
However, it could also mean that you change the type of coverage on your house. For example, that tree in the front yard that loomed ominously when you first moved in may have been cut down last year. This would reduce the amount of coverage you feel is truly necessary in order to replace or rebuild your home.
The key to eliminating unnecessary coverage is to be thorough in what it would cost to rebuild and re-furnish your home. No matter what, your coverage should always cover the complete cost to rebuild the entire structure and replace everything that was inside. This saves you from massive out of pocket costs in the event that a disaster does occur on your property.
It also helps to make a home inventory during this stage. This document outlines all of the major items that are within the home, as well as their value. Be sure to include photos of each item as proof that it was in the home. This is key to ensuring that you have enough money to replace all of the items you care about most if disaster strikes.
It’s a good idea to reevaluate your degree of coverage at least once each year. You want to be careful not to over-insure the property because you will ultimately pay for this amount, even though it will yield few results. Stolen goods will be replaced at their actual value, even if they happened to be “valued” in your eyes much higher.
The same goes for damages done to the property. You may have your home covered for up to $200,000 in rebuilding costs, but it could cost just $150,000 to actually rebuild. Unfortunately, the insurance company is only going to cover the real cost to rebuild. The excess funds are simply a reason to charge customers more for their premiums on a monthly basis. You could be paying twenty percent more each month for no additional benefit or protection if you have overvalued the property.
Talk with your insurance agent to see what degree of coverage you currently have. This may answer any questions you have regarding what level of coverage you could drop to in order to save a substantial amount on your monthly premium.
Remove Old Structures
Do you have an abandoned detached garage in the backyard or a barn that’s seen better days? Even if you’ve never used these structures, you may still be paying to cover them under the umbrella of your homeowners insurance policy. Removing them from the property could save you a significant amount on your insurance premiums.
Because these structures are located on the property, there is still a risk that someone may be injured in or around the buildings. This philosophy could be particularly true if the buildings are dilapidated and run-down. They could collapse suddenly or have bits and pieces falling off that harm passersby. Taking them down lowers the overall safety risk to your property and can lower homeowners insurance costs as well.
If you aren’t using these buildings and have no intention of doing so, removing them should be relatively simple. Be sure to take before and after pictures to demonstrate just what work was done to the property in order to justify your request for a reduced homeowners insurance rate.
Be careful to ensure that you follow all of the local rules, codes, and regulations when it comes to dismantling a building on your property. You want to ensure that you do everything properly if you hope to receive a price break on your insurance costs.
Exclude Land Value
Some homes come with a large plot of land in addition to your actual house. Depending on the circumstances or the layout of the property, the land value may also be covered by your homeowners insurance. You might not even be aware that this trivial detail has slipped into your coverage unless you specifically ask.
You could consider removing the value of your land from the insurance policy. After all, you’re more likely to use the insurance policy to cover the cost of rebuilding or replacing your home in the event of a disaster than you are to use it for repairing the land itself. Some companies may allow you to keep bodily injury protection on the land without covering it for damages.
Talk with your insurance agent or customer service representative to see just what is covered under your policy in regards to land values. This may be an easy way for you lower your coverage and save money quickly on your monthly expenditures. Just be certain that you can afford to take care of the land if you would need to in the event of a disaster.
Clean Up the Land
You might have noticed that there were a few trees that needed to be cleaned up on the property when you first purchased it. That mighty oak in the front yard was attractive when you first moved into the home, but now its limbs are stretching dangerously over the roof. An insurance inspector who views the property may look at all of the limbs and debris as a hazard, forcing them to raise your homeowners insurance rates as a result.
Try combating these price increases by cleaning up the land around the house. This not only improves the curb appeal of your home, but it also makes the home safer and could boost the market value if you ever look to sell the property.
Removing major risks to the structural integrity of your property is important, but it could be essential in locations prone to fire. Dry areas that see many wildfires throughout the year should view cleaning up the land as completely necessary, apart from any potential discounts on homeowners insurance they could receive. You will have many benefits from this simple task and it can pay dividends in the years to come.
Take some before and after pictures to demonstrate the level of work that went into improving the quality of the land around the property. This can also help you to prove that the modifications will help your home to remain intact for longer periods of time into the future. Be sure to write down your justification for why these changes should warrant a reduction in your premium amount for home insurance.
Ensure that you are following local codes and ordinances to have any trees, structures, or limbs removed from the property. This could be essential, particularly if you are removing certain types of trees. Fines may be forthcoming if it isn’t done according to the local standards.
Dog Breeds Can Matter
Unfortunately, the type of dog you own can definitely influence the overall amount of your monthly insurance premium. Some companies maintain a long list of breeds that have been commonly and historically known for their aggressive tendencies. Homeowners who consider their furry friends a part of the family may face higher premiums as a result.
Depending on the company and the specific breed of dog, you might even have a difficult time finding an insurance company that will allow it. Animals are often viewed as unpredictable because they can run off or bite someone at any given time. Dog breeds that seem more susceptible to act on an impulsive desire to bite a stranger will cost you more on your insurance because it covers bodily injury on your property.
Muscular dog breeds tend to be more likely to fall under the list of “aggressive breeds” because their attacks could potentially inflict more damage. There isn’t an official list that all companies will refer to, but many of these common breeds will hike up your premiums:
- Pit bulls
- Dobermans
- German Shepherds
- Chow Chows
- Boxers
While most people know that not all of these breeds are harmful or aggressive, the stigma is still there and it can cost you. A more “docile” breed is less likely to cause a price increase. Cats are less susceptible to face the same stigma as larger dogs known for their size and aggression.
Not all pets will raise your insurance premiums, but it is worth checking with your company before you purchase a new pet for your family.
You will want to ensure that your pet is covered by the policy in case something unpredictable happens on your property. This means being forthcoming with veterinary records and documentation about what type of dog is living in your home. This should be a real and serious consideration before you make a purchase, as some companies will refuse to provide service to homeowners with certain breeds.
When it comes to more exotic pets, check with your agent to see if they are covered. Snakes, monkeys, and some other types of animals may be considered dangerous to visitors and won’t be covered under the policy. This also means that any injuries they inflict on guests or visitors won’t be covered under the policy.
Conclusion
Saving money on your homeowners insurance can be simple when you know what to expect and how to ask for the right discounts. Maintaining coverage of your most valuable assets is absolutely essential to giving yourself peace of mind and protecting your financial future, even beyond the point where your mortgage company will require this coverage.
Consider what steps you can take today to start asking for a reduction in your homeowners insurance policy. You may decide to do a little remodeling, install the security system you’ve been wanting for years, or hold off on purchasing that new pit bull puppy. Sometimes, the small things that you do around the home can yield the largest payoff when it comes to your overall savings.
Make a list of the steps that you can take before you talk with your homeowners insurance company about any possible discounts you may eligible for.
FAQs
What are typical homeowners insurance rates?
The typical homeowners insurance rates will vary based on your state and the type of coverage you have on your property. The average across the nation usually measures at approximately $1,000 per year, but it typically ranges anywhere from $300 to $1,500 annually. You may be able to more accurately calculate the total by dividing your home value by 1,000 and multiplying the result by $3.50.
What is a homeowners insurance premium?
Your homeowners insurance premium is the amount of money you pay monthly or annually in exchange for the insurance company providing coverage in the event of a disaster to your property. The specific details of the coverage will vary, as will your insurance premiums.
What should my deductible be for my home insurance?
Your deductible should be set at the amount you are able to and willing to pay upfront out of pocket in the event of a disaster. This will vary for each homeowner. Some may be comfortable paying a common deductible amount, such as $500 or $1,000. However, you may save up to 25 percent on your homeowner insurance by opting for higher deductibles between $2,500 and $10,000.
Do home insurance rates go up after a claim?
Yes, insurance rates will typically go up after a claim is made. It is estimated that they rise approximately ten percent after the first claim and twenty percent following the second claim. This is why some homeowners will choose to pay the total cost of a small repair out of pocket instead of filing it with their homeowners insurance company.
What does homeowner insurance cost?
Homeowner insurance costs will vary across the nation, but many premiums range from $300 tp $1,500 depending on your coverage, location, and insurance company.
Is homeowner insurance negotiable?
There is some flexibility in the rates provided by insurance companies for homeowner coverage. You may be able to negotiate a lower rate by making improvements to your home and property, changing the coverage, or bundling your insurance policies together under one company.
What home insurance discounts should I ask for?
Many companies will offer common discounts including:
- h2
- Claim-free discounts
- Senior citizen or retiree discounts
- Long history of being a customer with the company
- Bundled policies
- Home remodels
- Auto-pay enrollment
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Why is my homeowners insurance so high?
The cost of homeowners insurance will vary based on the specific details of your policy and the location of your home. Your policy may be high because you have had many claims over the years, have a low deductible plan, or are insuring your property for more than it’s worth. The value of your home will also play a role in raising your homeowners insurance rates.
How much does a security system save on homeowners insurance?
The specific discount afforded to homeowners for a security system will vary based on your policy, state, and the insurance company. You may save up to twenty percent with this change. Keep in mind that you will have the additional cost of paying to maintain the security system on a monthly basis as well.
How much is homeowners insurance?
Homeowners insurance varies based on your coverage, the policy details, your insurance company, and the state in which your property is located. The average homeowners insurance premium in the country is around $1,000 but rates typically fall between $300 and $1,500.
A rule of thumb for estimating costs is to divide the value of the home by 1,000 and then multiply by $3.50. This should give you a rough idea of what you can reasonably expect to pay for insurance.
Resources
Homeowners Insurance and Such: What You Forgot to Think About
U.S. Homeowners: Tax Benefits and Deductions for You!
12 Ways to Lower Your Homeowners Insurance
How To Lower Your Homeowners Insurance Premium
18 Ways to Lower Your Homeowners Insurance Premiums
10 Ways You Can Lower Your Homeowners Insurance Premium (U.S. News & World Report, 8/31/2016)
Homeowners Insurance Buying Guide – Consumer Reports
10 Hidden Home Insurance Credits
Your Government Helps You Find Lower Auto & Home Insurance Rate
