Alyssa Lane
Homeowners insurance premiums have been skyrocketing, rising by 33% since 2020, far above the rate of inflation. This makes it increasingly important to find ways to save money on homeowners insurance. There are several strategies to achieve this, including shopping around for the best deal, raising your deductible, improving your credit score, taking advantage of discounts, and improving your home's security and disaster preparedness. By combining these strategies, homeowners can effectively reduce their insurance costs and mitigate the impact of rising premiums.
| Characteristics | Values |
|---|---|
| Shop around | Compare quotes from multiple insurance companies to find the best deal |
| Raise your deductible | The higher your deductible, the more money you can save on your premium |
| Improve your credit score | Insurers often charge higher premiums based on credit scores |
| Bundle your insurance | Many companies provide discounts if you buy both auto insurance and homeowners insurance from them |
| Improve home security | Installing a smoke detector, burglar alarm, or deadbolt locks may qualify you for a discount |
| Remove attractive nuisances | Getting rid of items that could tempt children, such as trampolines or playground equipment, reduces liability risks |
| Choose disaster preparedness | If you live in a disaster-prone area, take preparedness steps such as installing storm shutters or reinforcing your roof |
| Modernize systems | Upgrading heating, plumbing, and electrical systems can reduce the risk of fire and water damage |
| Review policy limits and possessions | Ensure your policy covers any major purchases or additions to your home, and periodically review the value of covered items |
| Exclude land value | Don't include the value of the land under your house when deciding on insurance coverage, as it is not at risk from perils like theft or fire |
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What You'll Learn
Shop around for the best deal
Shopping around for the best deal is a smart way to save money on your homeowner's insurance. Each insurance company will have its own way of calculating your premium, taking into account factors such as your location, the construction of your home, previous claims, and your credit score. By comparing quotes from multiple companies, you can find the most cost-effective option for your needs.
It is recommended to get sample rates from various insurers and then contact the companies to learn more about their services and current offerings. Online quote services can be a good starting point, but it is important not to rely solely on these. Once you have narrowed down your options, ask for detailed quotes from your top choices.
When shopping around, it is also essential to review your home inventory and any upgrades you have made. Ensure that your policy covers any major purchases or additions to your home, and that you are not paying for coverage you don't need. For example, if an item has decreased in value since you purchased insurance for it, you may want to reduce or cancel that specific coverage.
Additionally, consider the cost of insurance when shopping for a house. Home buyers' insurance guidelines can help you understand the factors that influence the cost of coverage, such as location and construction type. By taking insurance costs into account before purchasing a home, you can make more informed decisions and potentially save on your overall expenses.
Finally, when shopping around, don't forget to ask about discounts. Many insurance companies offer discounts for security features such as smoke detectors, burglar alarms, and deadbolt locks. You may also be eligible for discounts if you have multiple policies with the same company or if you have not filed any claims recently. By combining these strategies with a careful review of different insurers, you can effectively shop around to find the best deal on your homeowner's insurance.
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Raise your deductible
Raising your deductible is a good way to save money on your homeowners insurance. The deductible is the amount you pay towards a loss before your insurance company starts to pay a claim. By increasing your deductible, you can reduce your premiums. The higher the deductible, the more you save on premiums. For example, if your deductible is $500 now, increasing it to $1,000 can lower your premiums by up to 25%.
The average savings by raising your deductible is $408 per year, but this can vary depending on your insurance company, location, and other factors. For instance, in Maryland, the average savings are $74 per year when increasing from a $500 to a $2,500 deductible, while in Oklahoma, the average savings are $1,228 per year.
It's important to note that a higher deductible means you will pay more out-of-pocket expenses if you need to file a claim. Therefore, it's recommended to ensure you have enough savings to cover the higher deductible in the event of a claim. The average homeowner files a claim once every 8 to 10 years, so you can take the money saved in premiums and add it to your emergency fund each year to prepare for potential claims.
By raising your deductible, you can also avoid filing small claims that could lead to a rate hike. For example, if your insurer raises your rate by 10% for three to five years after a claim, it may exceed the amount they paid beyond the deductible. Therefore, it's generally advised to file a claim only if it is at least several hundred dollars more than the deductible.
In summary, raising your deductible can be an effective strategy to reduce your homeowners insurance costs, but it's important to weigh the potential savings against the risk of higher out-of-pocket expenses in the event of a claim.
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Improve your credit score
Improving your credit score can help you save money on your homeowners insurance. Here are some ways to do that:
Firstly, understand your credit history. Request a full credit report to identify any factors that may be negatively impacting your score. This can be done for free through the main credit reporting bureaus. Once you have identified the areas dragging your score down, you can start to address them.
Pay your bills on time. This includes loan and credit card bills. Late payments negatively impact your credit score, so it is important to stay on top of them. If possible, pay certain bills as a lump sum upfront to avoid the need to keep up with monthly payments. Similarly, pay off your credit card balance in full each month to avoid interest charges.
Only use a small portion of your credit card limit to maintain a low credit utilization rate. It is recommended to keep your credit utilization ratio at no higher than 30%. For example, if you have a credit limit of $10,000, try to keep your balance below $3,000.
Limit hard credit checks, which are performed when you apply for a loan or credit card. Too many of these can negatively impact your score. However, shopping for insurance quotes will only result in soft credit inquiries, which will not hurt your credit score.
Keep unused accounts open, as the length of your credit history is a determining factor in your score.
By implementing these strategies, you can improve your credit score over time, which may lead to lower homeowners insurance rates.
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Remove 'attractive nuisances'
An attractive nuisance is a feature on your property that increases its appeal but simultaneously increases the risk of danger. These features can draw uninvited guests, especially children, and cause accidents, making you liable for their injuries. Examples of attractive nuisances include swimming pools, playground equipment, trampolines, water features, construction materials, and toys.
To save money on homeowners insurance, removing these attractive nuisances is one way to reduce your liability and lower your premium. Here are some ways to address these features:
- Swimming Pools: Fences, locked gates, and warning signs are essential safety measures to protect children from accessing your pool. Consider installing a fence around your pool that is at least four feet high and difficult to climb. Floating alarms that sound when someone enters the water can also help alert you to potential trespassers.
- Playground Equipment and Trampolines: While these may be enjoyable for your family, they can pose a significant liability risk. Removing them can help reduce the chances of injuries to children who may be drawn to your property. If removal is not an option, consider erecting physical barriers, such as fences, to restrict access and provide warning signs to deter use by uninvited guests.
- Water Features: Fountains, wells, and other water features can pose a drowning hazard. Consider removing them or modifying them to make them safer. For example, you could add protective covers or install alarms that alert you when someone enters the water.
- Construction Materials and Tools: Unfinished structures, power tools, and bare wiring can be extremely dangerous, especially to curious children. Ensure that any construction projects are properly secured and that tools and hazardous materials are locked away and out of reach. If you have ongoing construction, consider erecting temporary fencing or barriers to prevent unauthorized access.
Remember, while warning signs are helpful, they generally won't protect you from liability in court. Physical barriers and safety measures are often required to demonstrate that you have taken reasonable precautions to reduce risk. Consult with your insurance agent and review local laws to ensure you are taking the necessary steps to protect yourself and others.
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Discounts for security devices
Installing security devices is a great way to save money on homeowners insurance. Research shows that most home security discounts fall in the range of 2% to 20% of the premium amount. The discount varies depending on the insurer and the type of security device installed.
- Deadbolts and smart locks: Deadbolts and smart locks are simple yet effective security measures that can help you save on homeowners insurance. These devices provide an extra layer of protection against unauthorized entry, making your home more secure.
- Burglar alarms: Traditional burglar alarms that emit a loud sound when triggered can also help you save on insurance. These alarms deter burglars and alert you and your neighbours of a potential intrusion.
- Monitored smoke detectors: Smoke detectors are often required by insurance companies, but installing monitored smoke detectors can earn you additional discounts. These devices not only detect smoke but also alert monitoring stations or authorities, helping to mitigate fire damage.
- Sprinkler systems: Installing a sprinkler system in addition to smoke detectors can provide further savings on your insurance. Sprinkler systems help to control and extinguish fires, reducing potential fire damage to your home.
- Video surveillance cameras: Insurance companies often offer discounts for installing video surveillance cameras as part of your home security system. These cameras deter potential criminals and provide valuable footage in the event of a break-in.
- Motion sensors: Motion sensors can detect and alert you to any unexpected movement within your home, providing an additional layer of security.
- Smart home devices: Smart home devices that help prevent water damage, fire, or theft may also be eligible for discounts. These include water leak sensors, temperature monitoring systems, and monitors for your home's electrical network.
It is important to note that the availability and amount of discount vary across insurers, so it is recommended to shop around and compare quotes from multiple insurance companies. Additionally, some insurers may require documentation of ownership or usage data sharing for certain devices to be eligible for the discount.
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Frequently asked questions
Increasing your deductible will save you money on your premium. Just be aware that this means you will pay more out-of-pocket expenses if you need to make a claim.
Shop around for the best deal. Each insurance company will calculate your premium differently, so it's worth comparing quotes from multiple companies.
Yes, some insurance companies offer discounts for things like paperless billing, paying your premium automatically, or having certain security features installed, such as smoke detectors, burglar alarms, or deadbolt locks.
Yes, insurers often charge higher premiums to those with a low credit score. So, establishing a solid credit history can help to lower your insurance costs.
