How to Save on Homeowners Insurance

If you own a home, it is most likely your largest single investment, so it stands to reason that you would want to insure it with the best policy available. Of course, no one wants to pay too much for insurance. The good news is that there are numerous ways to save money on homeowners insurance while still getting the coverage you require at a price that works for you.

How Much Is Homeowners Insurance?

According to the National Association of Insurance Commissioners, the average homeowners insurance policy in the United States costs around $1,200 per year (NAIC).

Your premiums may be higher or lower depending on factors such as the replacement value of your home, its location, age, size, condition, and security devices. Your marital status, claims history, and credit history, as well as the coverage limits and deductibles you choose, all play a role. Because each insurer weighs these factors differently, the cost of your insurance is also affected by the company from which you purchase it.

How to Save on Homeowners Insurance Costs

While some variables cannot be changed, such as the size of your home, you do have control over some that can affect price. Here are ten tips for lowering your homeowners insurance premiums.

  1. Shop Around

The cost of a policy varies depending on the company. Do some comparison shopping to ensure you get the best deal—which isn't always the cheapest option. Obtaining quotes from at least three companies is a good idea. You can contact them directly, work with an insurance agent, or look up information on the internet.

  1. Understand Rebuilding Costs

The cost of rebuilding is not the same as the cost of purchasing the home. This is due to the fact that the purchase price includes the value of the land, whereas rebuilding costs only apply to the home. In general, land is not at risk from theft, fire, storms, or other hazards, so its value should not be considered when determining coverage limits. Otherwise, you risk overpaying for more coverage than you require.

  1. Increase Your Deductibles

A deductible is the amount of money you pay toward a covered loss before your insurance coverage kicks in. The greater your deductible, the lower your premiums, and vice versa. You may be able to save money on your annual premiums if you raise your deductibles by even $500. Just make sure you have enough money to cover the deductible if disaster strikes.

  1. Bundle Your Policies

Customers who bundle plans are rewarded by insurance companies. You may be eligible for a discount if you purchase two or more policies from the same company (for example, homeowners insurance, auto insurance, and an umbrella policy). Check the numbers to ensure that the bundled pricing is actually less expensive than purchasing separate policies from different companies.

  1. Make Your Home More Disaster-Resistant

Updates or improvements that make your home more resistant to fire, water, and weather-related disasters can help you save money on your insurance premiums. You may be eligible for a discount if you reinforce your roof, install storm shutters, or upgrade your heating, plumbing, and/or electrical systems, depending on the insurer and where you live.

  1. Mention Your Home’s Security Devices

Most insurance companies provide discounts for homes equipped with security devices such as smoke detectors, burglar alarms, fire extinguishers, sprinkler systems, water leak detectors, gas leak detectors, and deadbolt locks. If you don't have these devices right now but decide to get them later, make sure to update your policy.

  1. Ask About Other Discounts

Discounts may be available depending on the insurer if you are a first-time homebuyer, 55 or older, retired, a nonsmoker, work from home, or set up automatic payments to pay your insurance bill. Make sure to ask if you are eligible for any discounts and to return whenever your situation changes (e.g., you turn 55). You should also check in on a regular basis to see if the company has any new discounts that you should be aware of.

  1. Be Rewarded for Your Business

Many insurance companies provide discounts to loyal customers. If you've been with the same insurance company for a number of years (or more), make sure you're taking advantage of any available loyalty discounts.

  1. Review Your Policy Each Year

Every year, go over your policy to ensure you have enough—but not too much—coverage. If you buy a new piano or build an addition, for example, you may need to increase your coverage limits. You may be able to lower your coverage limits or cancel your floater if you sell your Star Wars collectibles.

  1. Explore Group Coverage Options

Your employer may manage a group insurance plan. Similarly, some professional, alumni, and business groups offer discounted packages. Organizations such as AAA, AARP, and wholesale clubs, for example, provide discounts to their members. However, just because you get a discount doesn't mean you're getting the best deal. Before making any decisions, make sure to compare at least three options.

The Bottom Line

When you review your policy each year, it's a good time to not only ensure you have the right coverage, but also to speak with your agent to ensure you're getting the best rate—and taking advantage of any available discounts.

Of course, price is an important consideration, but it isn't the only one to consider when shopping for (or renewing) a homeowners insurance policy. Make sure to consider the company's reputation and customer service as well. That way, if disaster strikes, you'll be in the best possible condition.