Jeffrey Wade
Homeowners insurance is not a legal requirement in the U.S., but it is often necessary to secure a mortgage, and it provides vital financial support in the event of damage to your home. However, insurance rates have been rising faster than usual in recent years, and this has priced some homeowners out of the market. If you can't afford homeowners insurance, there are several steps you can take, including reaching out to your insurer to discuss potential solutions, gathering quotes from multiple carriers, and checking for discounts or changes to your policy that could reduce your costs.
| Characteristics | Values |
|---|---|
| Home insurance costs | Surging across the country due to inflation, natural disasters, and the rising cost of building materials |
| Reasons for high premiums | Exposure to extreme weather events and national disasters, such as hurricanes, tornadoes, and floods |
| States with high premiums | Alabama, Florida, Louisiana, Mississippi, Texas, Kansas, Nebraska, and Oklahoma |
| Impact of high costs | Home insurance has become a barrier to buying a home, with premiums making up about 10% of monthly housing costs |
| Options for unaffordable insurance | Reach out to your agent or insurer to discuss potential solutions, such as discounts or payment plans |
| Other options | Contact state insurance departments or independent agents for guidance on more affordable options; consider FAIR plans as a last resort |
| Discount options | Bundling multiple policies, having protective smart-home devices, working in certain professions, or making home improvements to prevent future claims |
| Policy changes | Remove optional coverage for identity theft, appliance breakdown, or supplemental coverage for items no longer owned |
| Deductibles | Increasing your deductible can lower premiums, but ensure it's an amount you can comfortably cover |
| Lender requirements | Banks or mortgage companies may require homeowners insurance, especially in high-risk areas, to protect their investment |
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What You'll Learn
Reach out to your insurer to discuss potential solutions
If you are struggling to afford your homeowner's insurance, it is important to reach out to your insurer as soon as possible. Ideally, you should contact them before your policy lapses. While there may be a grace period if you miss the due date, your insurance company will eventually cancel your policy if you don't pay the premium. This could make it harder to find affordable insurance in the future.
When you contact your insurer, they may be able to work with you to find a solution. For example, they may be able to check for extra discounts that you are eligible for. You should also ask about any potential changes to your policy that could reduce your costs. For instance, you could ask about removing optional coverage for things like identity theft, or reducing coverage for items that you no longer own, such as jewellery. You could also ask about changing your roof coverage from replacement cost to actual cash value. However, it is important to remember that this means the payout you receive for any damage or destruction to your roof will be based on the roof's depreciated value.
In addition to these options, you could also ask your insurer about setting up a different payment plan. You may also want to enquire about any discounts that you could qualify for. For example, many insurance companies offer discounts for bundling multiple policies, having protective smart-home devices, or working in certain professions. You could also ask your insurer about any potential improvements you could make to your home that could lead to insurance savings. For example, adding hurricane shutters in Florida can result in a discount, and creating defensible space around your home can help prevent wildfire damage and may reduce the cost of California homeowners insurance.
If you are unsure about what changes to make to your policy, an independent agent may be able to help. Independent agents typically work with multiple insurers and have a wide knowledge of the industry, so they can help you find a more affordable option. You can also gather quotes from as many carriers as possible to find the right insurer with the right plan for your budget.
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Opt for a higher deductible to save on premiums
Homeowners insurance is becoming increasingly expensive, with premiums increasing by 13% on average in 2024, and some states seeing rate changes of over 20%. The national average cost of home insurance is $2,181 per year for a policy with a $300,000 dwelling limit.
One way to save on your homeowner's insurance policy without sacrificing coverage is to opt for a higher deductible. A homeowner's insurance deductible is the part of a claim that you are responsible for paying out of pocket. Standard home insurance deductibles typically range from $500 to $2,000, although lower and higher amounts may be available. The higher your deductible, the less you'll pay for your policy. For example, raising your deductible from $1,000 to $2,500 can save you almost 12% on your premium on average. Raising your deductible to $5,000 can save you 37% on your premium, while raising it to $10,000 can save you 47%.
It's important to find a deductible that fits into your budget. Make sure you can cover the higher amount if you have to file a claim. You should also keep enough money in an emergency fund to self-insure up to the deductible, or even a few hundred dollars more. The average person files a homeowners insurance claim only once every eight to ten years, so you could take the money you save in premiums and add it to your emergency fund each year.
Additionally, you can save on your premium by bundling multiple policies, having protective smart-home devices, or working in certain professions. Making improvements to your home may also lead to insurance savings if the changes could help prevent future claims. For example, adding hurricane shutters can earn you a discount in Florida, and creating defensible space around your home can prevent wildfire damage and save you money on California homeowners insurance.
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Compare quotes from multiple carriers
Comparing quotes from multiple carriers is a great way to save money and find the best coverage options for your needs. Here are some ways to go about it:
Work with an Independent Insurance Agent or Broker
An independent agent or broker can shop around and get quotes from multiple companies for you. They have a wide knowledge of the industry and can quickly evaluate your options to guide you toward a carrier that fits your budget and needs. They can also help you decide what coverage you need. However, they can only give you quotes from the companies they represent, and they may charge a fee.
Use an Online Quote-Comparison Tool
You can use an online quote-comparison tool such as Insurify to view quotes from multiple companies without visiting each insurer's website. These tools use AI to pull your personalized quotes, and some also offer expert guidance from licensed agents.
Get Quotes Yourself
If you are confident about your needs and how to get quotes, you can go through the process yourself. Most companies offer quotes online after you fill out a form, while others may require you to call and speak to an agent.
Use a Comparison Website
You can also use a comparison website that provides multiple quotes at once. This allows you to compare rates side by side and choose the best option for your needs.
Talk to Neighbours
If you don't know where to start, you can talk to your neighbours to find out which insurance carriers they use. This can give you a good starting point for gathering quotes.
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Review your policy for optional coverages you can remove
If you're struggling to afford your homeowner's insurance, it's important to take a close look at your policy and identify areas where you can cut costs. One way to do this is by reviewing your policy for optional coverages that you may no longer need or be able to afford. Here are some things to consider:
- Identify optional coverages: Go through your policy document carefully, especially the declarations page, which summarizes your coverage. Look for optional coverages that you may have added, such as identity theft protection, appliance breakdown cover, or supplemental coverage for valuable items like jewellery. Consider whether these are essential for your current situation.
- Assess your valuables: Review the coverage for valuable items like jewellery, high-end computers, or artwork. If the value of these items has depreciated or if you no longer possess them, you may be able to reduce or remove this supplemental coverage.
- Evaluate risk coverage: Consider the risks covered by your policy. For example, if you live in an area prone to coastal storms, fires, or crime, you may need to retain certain coverages. However, if your circumstances have changed, you might be able to reduce coverage in areas that are no longer relevant.
- Consider actual cash value: In some cases, you may be able to change your coverage from replacement cost to actual cash value. For example, instead of covering the full replacement cost of your roof, you could receive a payout based on the roof's depreciated value. While this may reduce your premiums, it's important to weigh the potential savings against the cost of repairs or replacements.
- Review discounts and incentives: Insurance companies often offer a range of discounts and incentives that can help lower your premiums. These could include discounts for bundling multiple policies, having protective smart-home devices, or being a long-term policyholder. Reach out to your agent or company representative to ensure you're taking advantage of all the discounts available to you.
Remember, while reviewing your policy and removing optional coverages can help reduce costs, it's essential to ensure you retain adequate coverage for your needs. Carefully consider the risks and potential expenses you may face, and seek professional advice if needed to make informed decisions about your homeowner's insurance.
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Consider state insurance departments for guidance
If you can't afford homeowners insurance, state insurance departments can provide valuable guidance and resources. These departments exist to ensure that insurance companies operate lawfully and fairly, and they can help you navigate your options.
State insurance departments can offer guidance on which insurers in your area may be the best fit for your needs and budget. They can provide insights into the insurers' financial viability and ability to pay out claims. This information is crucial, especially if you've been denied coverage by other insurers due to residing in a high-risk area.
Additionally, state insurance departments can help you understand the specific coverages mandated by state law or required by your mortgage contract. For example, in Texas, most home policies include dwelling coverage, personal property coverage, other structures coverage, additional living expenses coverage, and personal liability coverage. Understanding these requirements can help you make informed decisions about your insurance choices.
It's worth noting that state insurance departments also oversee the insurance underwriting process, which considers factors such as your home's age, condition, replacement cost, construction materials, and location when determining your premium. By understanding the underwriting process, you can better navigate ways to reduce your premium, such as by taking advantage of discounts offered for protective devices or home improvements that prevent future claims.
While state insurance departments are a valuable resource, it's important to remember that their plans are intended to be a last resort. Before reaching out to them, it's recommended to explore other options, such as gathering quotes from multiple carriers, speaking to independent agents, and reviewing your policy for any optional coverages that can be adjusted or removed to reduce costs.
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Frequently asked questions
Homeowners insurance is not a legal requirement in the US, but it is often necessary to secure a mortgage. If you can't afford it, you can try to find ways to save on your policy, such as by bundling multiple policies, installing protective devices, or taking steps to make your home more resistant to natural disasters. You can also shop around for quotes from different insurers or speak to an independent agent for guidance on finding an affordable plan.
You can reduce your premium by raising your deductible, but this should be an amount you can comfortably afford. You can also limit the number of claims you submit, as policyholders with few to no claims are considered lower risk.
If your financial circumstances have changed, you should reach out to your agent or insurer as soon as possible. They may be able to work with you on a solution, such as setting up a different payment plan.
