Insurance: Avoid The House Trap

Home insurance is an essential way to protect your home, one of your biggest financial assets. However, there are ways to lower your insurance costs or, in some cases, avoid getting insurance altogether.

Firstly, it's important to note that if you have a mortgage, your lender will almost certainly require you to have home insurance. If you own your home outright, you could technically skip purchasing insurance, but this is not recommended. Without insurance, you could face huge costs if disaster strikes.

If you are looking to lower your insurance costs, there are several options. You could increase your deductible, make your home more secure, or bundle your auto and home insurance. You could also shop around for quotes from different insurance companies or ask an independent insurance agent to do this for you.

If your home is considered high-risk, it may be more difficult to get insurance coverage. However, this doesn't mean it's impossible. Repairing or upgrading your home can make it easier to qualify for traditional homeowners insurance. You could also look into non-standard home insurance companies or special assigned-risk plans offered by some states.

Make your home more secure

Making your home more secure is a great way to avoid paying high house insurance premiums. Here are some ways to do this:

Firstly, even the basics of home security can save you money. Install a smoke detector, burglar alarm, and deadbolt locks on your home to earn a small discount. Adding a comprehensive sprinkler system, along with an actively monitored fire and burglar alarm, could save you even more. You can usually get discounts of at least 5% for these basic security measures, and some companies offer to cut your premium by 15-20% for more sophisticated systems.

You can also make your home more disaster-resistant. Find out from your insurance agent what steps you can take to make your home more resistant to windstorms and other natural disasters. You may be able to save on your premiums by adding storm shutters, reinforcing your roof, or buying stronger roofing materials. Older homes can be retrofitted to make them better able to withstand earthquakes, and you can also modernise your heating, plumbing, and electrical systems to reduce the risk of fire and water damage.

If you live in an area prone to natural disasters, your home may be considered high-risk, and it might be difficult to get homeowners insurance coverage. However, there are almost always options for insurance as long as your home is in good shape. Repairing or upgrading your home can make qualifying for traditional homeowners insurance easier.

Improve your credit score

Improving your credit score is a good goal to have, especially if you plan to either apply for a loan to make a major purchase or qualify for one of the best rewards cards available. It can take several weeks, sometimes several months, to see a noticeable impact on your score when you start taking steps to turn it around. Here are some tips to improve your credit score:

• Make on-time payments: Your debt payment history accounts for 35% of your FICO score and is the most important credit score factor. Payment history includes on-time, late and missed payments, all of which are reported to one or more of the national consumer credit bureaus (Experian, TransUnion and Equifax). Always making payments on time can go the furthest to helping you improve your credit.
• Pay down revolving account balances: How much you owe accounts for 30% of your FICO score, and your credit utilization rate—the percentage of available credit you're using on revolving credit accounts such as credit cards—is a major element. While some experts recommend keeping your utilization rate below 30%, there's no hard-and-fast rule. Aim to keep it as low as possible.
• Don't close your oldest account: Length of credit history makes up 15% of your FICO score and is heavily influenced by the age of your oldest account and the average age of all of your accounts. While loan accounts are typically closed once you pay off the debt, you can keep credit cards open indefinitely. Closing a credit card can hurt your credit score, especially if it's one of your oldest.
• Diversify the types of credit you have: Credit mix accounts for 10% of your FICO score and involves managing different types of credit. For example, someone with two credit cards, an auto loan and a mortgage loan will have a stronger credit mix than someone with just one credit card.
• Limit new credit applications: Virtually every time you apply for credit, the lender will run a hard inquiry on one or more of your credit reports. These inquiries and how long it's been since you've opened a new account make up 10% of your FICO score.
• Dispute inaccurate information on your credit report: Inaccurate credit report information can have a significant negative impact on your credit score, especially if it's a serious issue like a late payment or a high credit card balance. If you're a victim of identity theft, you may have multiple derogatory marks on your credit reports in the form of fraudulent accounts.

Make your home more disaster-resistant

Making your home more disaster-resistant is a crucial step in protecting your property and ensuring the safety and well-being of your loved ones. Here are some measures you can take to achieve that:

Location

The location of your home is the most important factor in reducing the risk and impact of natural disasters. Research the area's history of natural disasters such as floods, hurricanes, earthquakes, and wildfires. Avoid building in flood zones, coastal areas prone to storm surges, earthquake-prone regions, or high-risk wildfire zones. Instead, opt for elevated sites that are less vulnerable to flooding or landslides.

Building Materials

The choice of building materials is vital for constructing a disaster-resistant home. Select durable materials that can withstand the forces of nature. Recommended materials include reinforced concrete, brick, and steel, which offer better structural integrity and resistance against wind, water, and fire damage. Additionally, consider impact-resistant windows and doors to tolerate high winds and flying debris during hurricanes and tornadoes.

Structural Design

A well-designed and reinforced structure is key to disaster resistance. Work with a professional architect or engineer to create a robust design that accounts for potential natural hazards. Implement techniques such as reinforced concrete foundations, steel frame construction, and proper bracing to enhance the structural integrity of your house. This will ensure your home can withstand powerful forces exerted by earthquakes, hurricanes, and high winds.

Waterproofing and Drainage

Water damage is a common consequence of natural disasters. Incorporate effective waterproofing and drainage systems into your home's design. Install a high-quality waterproofing membrane in the foundation and walls to prevent water intrusion during floods or heavy rainfall. Ensure proper grading and slope away from the house to direct water flow away from the foundation. Consider installing a sump pump system to remove excess water during flooding.

Wind and Storm Protection

Hurricanes and high winds can cause significant damage, so it's essential to incorporate wind and storm protection measures. Use impact-resistant windows and doors that meet hurricane zone standards. Reinforce roof connections to the walls with hurricane straps or clips. Choose a hip or gable roof design for better wind resistance than a flat roof. Secure outdoor structures such as decks, sheds, and carports to prevent them from becoming airborne debris.

Fire-resistant Strategies

Wildfires pose a severe threat to homes in fire-prone areas. For a fire-resistant home, choose non-combustible materials for the exterior, such as metal or fiber cement siding. Ensure proper venting and screening to prevent ember entry. Clear vegetation and maintain a defensible space around the house by removing dead plants, leaves, and branches. Install fire-resistant windows and exterior doors, and consider using fire-resistant roofing materials such as metal or tile to reduce the risk of ignition.

Emergency Preparedness

Even with a disaster-resistant home, it's important to be prepared for any emergency. Develop an emergency plan and educate your family on evacuation procedures, emergency contacts, and the location of emergency supplies. Install smoke detectors, carbon monoxide detectors, and fire extinguishers throughout the house. Consider investing in a backup power generator to ensure electricity during power outages. Additionally, create a designated safe room or shelter within your home for severe weather events.

Buy home and auto policies from the same insurer

Buying home and auto insurance from the same provider is known as insurance bundling. It is a great way to save money on insurance costs and is offered by most insurance companies.

Insurance bundling can get you a discount on both policies, and you can save money by paying lower premiums. The discount can be anywhere from 5% to 25% of the total premium. For example, Allstate offers savings of up to 25% when you bundle home and auto insurance. Amica offers discounts of up to 20% when you combine homeowners insurance with auto insurance, and up to 30% when you combine home with auto, condo, life, or umbrella policies. USAA, on the other hand, offers an average savings rate of 10% overall for bundling home and auto policies.

Another benefit of insurance bundling is that it simplifies your record-keeping and streamlines your bill payments. You only need to make payments to a single company, instead of multiple payments to different companies. This makes it easier to keep track of payments and ask questions about your premium, reducing the chance of forgetting to pay your bill.

Additionally, having your insurance policies in one place can make it more convenient to manage your policies. You can easily check coverages, update coverages, ask questions about your policies, find insurance documents, and even file claims.

However, it is important to note that insurance bundling may not always be the best option in terms of pricing. Even without a bundle discount, some insurers might be less expensive. Therefore, it is recommended to shop around and compare quotes from different insurers to ensure that you are getting the best price.

Seek out other discounts

There are several ways to seek out other discounts on your home insurance. Firstly, if you are aged 55 or over and retired, you may be eligible for a discount of up to 10% with some insurance companies. This is because retired people are at home more often, so they are less likely to be burgled and may spot fires sooner.

Secondly, if you have been with the same insurance company for several years, you may be eligible for a long-term policyholder discount. Some insurers will reduce their premiums by 5% if you stay with them for three to five years, and by 10% if you remain a policyholder for six years or more.

Thirdly, if you have two or more policies with the same company, such as home and auto insurance, you may be eligible for a multi-policy or bundling discount. Some companies will take 5 to 15% off your premium if you buy multiple policies from them.

Fourthly, if you work in certain professions, such as the military, emergency services or education, you may be eligible for an occupational discount on your home insurance.

Finally, if you have made upgrades to your home, such as installing a burglar alarm or a fire alarm, you may be eligible for a discount on your insurance. Similarly, if you have made upgrades to your home's electrical, heating, or plumbing systems, you may be eligible for a discount.

Frequently asked questions