Strategies For Affording Home Insurance

If you can't afford house insurance, it's important to take action to avoid financial trouble. While it may be tempting to cancel your insurance, this could leave you vulnerable to costly repairs if something happens to your home. Instead, you should contact your insurance company or agent as soon as possible to discuss potential solutions, such as alternative payment plans or discounts. You can also shop around for cheaper insurance, increase your deductible, or bundle your home and auto policies to lower your costs. Improving your credit score and making your home safer and more disaster-resistant can also help reduce your insurance premiums.

Contact your agent or insurer to discuss potential solutions

If you can't afford your home insurance, it's important to reach out to your agent or insurer as soon as possible. They may be able to work with you to find a solution that keeps your coverage in place. Here are some potential options to discuss:

Payment Plans and Grace Periods

Insurers may be willing to set up a different payment plan that works better for your financial situation. During the COVID-19 pandemic, many insurance companies offered flexible payment plans and extended grace periods for missed or late payments. While these measures were specific to the pandemic, it's worth asking your insurer if they can offer similar arrangements.

Discounts

Ask your agent or insurer about any potential discounts you may qualify for. For example, you may be able to get a discount for bundling multiple policies, having protective smart-home devices, or being a long-term policyholder. Your profession could also qualify you for a discount, so be sure to inquire about that as well.

Higher Deductibles

Choosing a higher deductible will lower your annual insurance bill. While this means you'll have to pay more out of pocket if you need to make a claim, it can significantly reduce your premium. Be sure to discuss the potential savings and weigh the risks before making a decision.

Shop Around for Quotes

If your current insurer is no longer affordable, consider shopping around for quotes from other companies. Rates can vary significantly between insurers, so getting multiple quotes can help you find a more affordable option. You can get quotes online, by calling insurers directly, or by working with an independent insurance agent who can compare rates from multiple companies.

FAIR Plans

If you're unable to find an affordable policy in the private market, consider looking into Fair Access to Insurance Requirements (FAIR) plans. These are last-resort insurance programs offered by most states and the District of Columbia. FAIR plans provide basic protection from catastrophes, but they typically cost more than standard policies. Contact your state's insurance department to find out if a FAIR plan is available in your area.

Raise your deductible

If you're struggling to afford home insurance, one option is to raise your deductible. This can be a good way to lower your annual insurance bill, but it's important to understand how it works and the potential risks involved.

A deductible is the amount you need to pay out of pocket when a home insurance claim is approved. For example, if you have a $1,000 deductible and a fire causes $8,000 worth of damage to your house, you'll pay the first $1,000, and your insurance company will cover the remaining $7,000. Raising your deductible means you'll pay less in premiums but more if you need to make a claim.

The amount you can save by raising your deductible depends on various factors, including your insurance company, where you live, and the type of policy you have. On average, homeowners can save around $500 a year by increasing their deductible from $500 to $2,500. However, this also means you'll need to pay an additional $2,000 out of pocket if you need to make a claim.

Before raising your deductible, it's essential to ensure you have enough savings to cover the higher deductible amount. You should also consider the likelihood of needing to make a claim and whether you can afford the additional expenses if something happens. Additionally, review the terms of your policy, as some insurance companies only allow deductibles up to a certain amount.

While raising your deductible can be a good way to reduce your insurance costs, it's not the only option. Other ways to lower your home insurance costs include shopping around for a cheaper plan, bundling your home and auto policies, improving your credit score, and making your home more disaster-resistant and secure.

Shop around for a cheaper plan

If you're struggling to afford your home insurance, shopping around for a cheaper plan is a good idea. Here are some tips to help you find a more affordable option:

Compare Multiple Providers

Start by comparing quotes from several providers. Costs can vary significantly depending on where you live and the type and level of coverage you need. By shopping around, you can potentially save hundreds of dollars per year. Online tools and insurance agents can help you get quotes from multiple providers.

Adjust Your Deductible

Another lever you can pull to reduce your premiums is your deductible—the amount you pay out of pocket before your insurance coverage kicks in. A higher deductible will lower your annual premium. For example, raising your deductible from $500 to $1,000 could save you as much as 25%. Just remember that if you ever need to make a claim, you'll have to contribute more yourself.

Bundle Your Policies

If you have separate home and auto insurance policies, consider bundling them with the same provider. Many companies offer multi-policy discounts, and you could save 10% or more on your premiums. Get quotes on multiple policy types to see how much you could save.

Review Your Policy

It's important to periodically review your policy to account for any changes in your circumstances. For example, if you've recently paid off your mortgage, made home upgrades, or improved your credit score, you may be eligible for lower rates. Take an inventory of your home and belongings, and consider depreciation when reviewing your coverage.

Seek Out Discounts

Insurance companies offer a variety of discounts, but they vary by company and state. For example, retirees who spend more time at home may qualify for a discount of up to 10% at some companies. You can also get discounts for installing security systems, deadbolts, smoke detectors, carbon monoxide detectors, and sprinklers. Ask your agent or company representative about all the discounts you may be eligible for.

Check Financial Stability and Service Quality

When comparing insurers, be sure to consider more than just price. Check the financial stability of the companies you're considering using rating companies like A.M. Best and Standard & Poor's. Also, look at consumer reviews and complaint data to assess the quality of their service. You want an insurer that offers a fair price and quality service when you need to file a claim.

Review your policy for unnecessary coverage

If you're struggling to afford your home insurance, one option is to review your policy for unnecessary coverage. Here are some ways to do that:

Understand your coverage options

Homeowners insurance policies typically include six types of coverage: dwelling, other structures, personal property, loss of use, personal liability, and medical payments. Understanding these coverage options will help you assess if you have adequate coverage or if there are areas where you can cut back.

Assess your personal property coverage

Personal property coverage insures your personal belongings, such as clothing, furniture, electronics, and appliances, from theft, fire, or other covered events. You can consider reducing this coverage if you feel you have sufficient coverage elsewhere or if you no longer have certain valuable items.

Evaluate your dwelling coverage

Dwelling coverage pertains to the structure of your home and attached structures, such as a porch or garage. While it's essential to have sufficient coverage to repair or rebuild your home, you may be able to adjust this coverage if you feel it exceeds your needs.

Review optional coverages

In addition to the standard coverages, insurance companies offer various optional coverages, such as identity theft protection, valuable possessions coverage, and green improvement coverage. Review these optional coverages and consider removing any that you feel are unnecessary for your situation.

Consider the likelihood of certain risks

Assess the likelihood of specific risks covered by your policy. For example, if you live in an area with a low crime rate, you may decide to reduce your coverage for theft or vandalism. Similarly, if you live in an area with a low risk of natural disasters, you may opt for lower coverage for events like hurricanes or earthquakes.

Shop around for alternative policies

Finally, it's worth shopping around and comparing policies from different insurance providers. You may find a policy that offers similar coverage at a lower price or allows you to customise your coverage to a greater extent.

Remember that reducing your coverage can save you money but also increases your risk if an incident occurs. Carefully assess your needs and consider seeking advice from a qualified professional before making any changes to your policy.

Seek out other discounts

If you're looking to save money on home insurance, one of the best ways to do so is to seek out other discounts. Here are some ways to do that:

Discounts related to your home and area

Your house itself might have features that can save you money. For example, if you have a new or renovated home, you may be eligible for a discount as upgraded systems like wiring and plumbing are less likely to fail and result in an insurance claim. Similarly, if you live in an area that's prone to severe weather, your insurer may give you a discount if you take steps to prevent damage, such as by installing storm shutters or reinforcing your roof. You may also be able to get a discount if you live close to a fire hydrant or fire department, or if your roof is relatively new.

Homeowner profile discounts

Some home insurance companies offer discounts based on your profile. For instance, if you're a current military member, veteran, or the spouse or child of a military member, you may be eligible for a discount. Additionally, certain occupations, such as educators, may qualify for a discount, and some insurers offer discounts to members of unions, organizations, or professional associations. If you're retired or a senior working part-time, you may also be able to get a discount, provided that your house is your primary residence and you work outside of your home less than 24 hours a week.

Policy-related discounts

There are also various policy-related discounts you may be able to take advantage of. For example, some insurers offer an advance quote discount if you get a price quote in advance, usually around four days or more. You may also be able to get a claim-free discount if you haven't made any claims for a certain period, as well as a discount for paying your bill in full or going paperless. Staying loyal to your insurance company may also pay off, as some insurers reward customers who have been with them for several years. If you insure more than one home or bundle your home and auto insurance, you can typically get a significant discount. Additionally, some insurers offer an umbrella package discount if you also purchase umbrella insurance.

Frequently asked questions