If you think homeowners’ insurance  is a luxury, better think again! If you owe money on a home loan, your lender probably requires that you carry home insurance and can provide proof of coverage for the full or fair value of your real property, which is typically the purchase price you paid.
These days, with home prices declining, some homeowners may be inclined to want to reduce their coverage, thinking that since the price of their home may have gone down, they could be paying for more insurance than needed. But you are probably well-advised not to insure your home for less than the price you originally paid when you bough it if you want to be sure you comply with the terms of your home loan.
Even if you are one of the estimated 40 percent of American homeowners who do not owe anything on their home (congratulations!), you still need to carry adequate homeowner’s insurance.
Ok, I know what you’re thinking; paying premiums on a homeowner’s insurance policy is very expensive. But actually, compared to the investment you have in your real estate, I would argue that it’s a great deal! And besides, there are ways to keep the cost down without risking the loss of your investment should the worst case happen and your home burns to the ground, burglars ransack it or some other insurable peril occurs!
Like many things in life, you could risk it and go without, but really this is something on which you should not take the low road unless you just have so much money that rebuilding your home, apartment building or other improvements is something that won’t really put a dent in your pocket book. In that case, you’re probably in the top one percent most wealthy individuals and can afford to be self-insured. However, my guess is that you wouldn’t bother reading this if that were the case!
So, read on and learn SurfRate’s top tips to saving money on your home insurance:
Tip #1 – Security System and Smoke Alarms
Installing a burglar alarm that is monitored remotely by a central station or connected to a local police station can help lower your annualized homeowner’s insurance premiums by 5 percent or more. Provide proof of central monitoring to your insurance company by showing them your contract and/or bills for central burglar alarm monitoring. If they don’t offer you a discount for having one, then you should shop around and consider switching insurers!
While almost all homes are now required by local code to have smoke alarms, installing them in an older home can cut premiums on homeowner’s insurance by as much as 10 percent. Even more important is that they may save your life or the lives of your loved ones in case a home fire occurs!
Tip #2 – Negotiate for Multiple Policy Discounts
It generally pays to go with a name brand insurer who offers multiple lines, including property and casualty insurance as well as life insurance and/or medical coverage. Larger insurers will typically offer you lower rates as a reward for your customer loyalty, so buying life insurance, property insurance (both home and auto) and medical insurance (if you are self-employed or do not have coverage available through your employer) can save you money across the board.
Tip #3 – Adjust Your Homeowner’s Insurance Deductible
While it is very enticing to buy a policy with the lowest possible deductibles, be sure to compare rates on all the deductibles available; you may be surprised at how much more it costs to insure your home with the lowest versus a higher deductible amount. And, while you may have to cover the cost of smaller insurable losses such as broken glass, leaky pipes, etc. the odds are that you’ll still come out ahead in the long run by going with the higher deductible!
Tip #4 – Think Ahead when Building or Remodeling Your Home
The type of construction and materials used to build your home effect your insurance premiums; if you are building a new home consider that a home framed using concrete or steel can cost less to insure than the traditional wood-frame construction, since it is more resistant to fire and adverse weather.
Also, unless you don’t care about higher homeowner’s insurance premiums, installing a swimming pool is not a good financial decision. Trampolines and other potential “attractive hazards” can also increase your home insurance premium.
Tip #5 – Pay Off Your Mortgage if Possible
As we said in the introduction, 40 percent of Americans do not owe anything on their primary residence (amazing but true!) Not only does this keep your fixed expenses lower, but it also brings you lower insurance premiums since insurers believe that you’ll take better care of your home if you own it outright. So, instead of buying a larger, more expensive home, you may be wise to pay off your existing home and reap the financial benefits all around!
Tip # 6 – Always Review and Compare Your Policy at Renewal
Now if you are a shareholder of a property and casualty insurance company you will appreciate that unless a policyholder asks, they won’t automatically give any of the above-mentioned discounts! On the other hand, as a homeowner, you should expect the best rates possible and only you can ensure that you insure for less!
The only way to be sure you are getting the best premium rates possible is to review your policy each year when it comes up for renewal and check periodically with other insurance companies to see if a better rate is available. It never hurts to keep ‘em honest eh?
A Few More Home Insurance Savings Ideas
- Keep tabs on changes in your community; a new fire hydrant or fire station built close to your home could entitle you to lower premiums
- In most cases, homeowners should carry a “guaranteed replacement value” policy, which means that your home will be rebuilt even though the replacement value may be far greater than the original cost to build the structure
- Buy endorsements if you need them; if you own expensive items such as jewelry, firearms, collectibles and artwork, etc. you will probably need to purchase specific endorsements to be sure these items are fully covered for their full value
- Keep records of all major purchases and inventory your personal belongings with video footage, receipts, appraisals and photographs to be sure that in case of a loss you will receive the full value without any complications or uncertainty in the claims process; be sure you keep these records in a safety deposit box or other location and not in your home!
OK, so hopefully we’ve convinced you that homeowner’s insurance is not a luxury, but rather a necessity and that you can save money on your premiums by following these important common sense tips.