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Home Insurance

Home Insurance Premium Facts That Will Save You Money

If you’re looking for the cheapest home insurance in your neighborhood, you can save money by understanding what risk factors raise your insurance premium rates.

Something not usually thought of during the home shopping and buying process is considering the cost of a home insurance policy for a specific home.

Because a home is such a large investment it’s extremely important to find affordable and appropriate protection for your home’s unique location, risk factors, and value of your possessions.

A good way to understand a homeowner's risk is to take a look at the home's CLUE (Comprehensive Loss Underwriting Exchange) report.

CLUE reports contain the insurance claim history of the home and property. This can help you determine what kind of coverage, like earthquake or flood insurance, and how much coverage you may need.

Making an educated estimate on possible perils and rebuilding costs could save you anywhere from 5 to 15% on your home insurance premium.

For example, a home structured for the severe weather in your area would cut you a discount, like a brick home to withstand the wind in the Eastern United States and a wooden home to combat earthquakes.

How to find cheap home insurance coverage

  1. Raise your deductible
    Home insurance company deductibles are the amount of money you must pay out of pocket to your home insurance company before your coverage will kick in for a loss.Insurance deductibles are the amount of money you must pay out of pocket to your insurance company before your coverage will kick in for a loss.

    For example, if you have a $1,000 deductible on your policy and you're facing $4,000 in damages after windstorm damages your home, you will have to pay your insurance company $1,000 before they cover the remaining $3,000.

    The higher you set your deductible, the lower your monthly premium payments will be because you are taking on more responsibility for possible damages.

    Most insurance companies recommend a $500 deductible, but if you can raise your deductible to $1,000 you could save as much as 25% on your premiums.

    It’s important to remember that if you live in an area with severe weather you may have a separate deductible to cover specific damages. For example, your flood insurance policy will have a deductible separate from your main home insurance policy.

  2. Ask about home insurance discounts
    Discounts aren’t just for car insurance policies. Homeowners can save with a variety of discounts depending on which ones their insurance company offers, which is why it’s important to shop around and compare which can save you the most money on appropriate coverage.

    A few examples of home insurance discounts include:

    • Distance from emergency services:

      Insurance companies may offer a discount depending on how far away your home is from emergency services like a fire hydrant, fire station, etc.

      Firefighters will have a faster response time to a home down the street as opposed to one over 10 miles away.

    • Gated community:Homes within gated communities have an extra layer of security between them and thieves and vandals that put your home at risk and thus raise your premiums. Homeowners in gated communities can save anywhere from 5 to 20% on their premiums.
    • New wiring:Not usually thought of, but your home’s wiring is a big risk factor. Old and/or faulty wires can lead to fire damage.

      According to a 2006 U.S. Fire Administration, home electrical problems result in an average of 67,800 home fires, 485 deaths and $868 million in property losses a year.

      So if you have an old home, you should hire a professional electrician to update the wiring. It’ll immediately decrease your risk and lower your premium.

      Rewiring your home yourself will not only scare your insurance agent, but it will send your premium skyrocketing.

      New wiring can save you up to 10% on your homeowner’s insurance.
    • Impact Resistant Roofing: The roof over your head can be damaged by wind, hail, rain, and hurricanes and even a little damage means an entirely new roof which is costly.

      Insurance companies therefore reward a strong roof with a strong discount of 10%.

      There are different levels of impact resistant roofing material, so talk to your agent about which brand and material will benefit you the most.
    • Claims-free credit:The less claims you make with your insurance company, the more money they get to keep to themselves. They’ll pass their savings onto you with a claims-free discount.

      Being claim free for as long as 10 years can cut 20% off your insurance premium.
    • Homeowner’s association:Some insurance companies offer discounts to neighborhoods that form a homeowner’s association (HOA), particularly with a community watch aspect.

      Your home could be considered less at risk for robbery if your neighbors are vigilant
      and save you up to 10%.
    • New home or renovation: Unlike a new car, a new or newly renovated home can actually save you money on your insurance premiums.

      New homes are considered low risk because new utilities are less likely to malfunction
      and cause damage. No leaky pipes, no exploding furnaces, no fiery wire boards.

      Especially in the case of new homes, inspectors have recently walked through the house. Their approval gives insurance providers a good idea of how safe your home is, which can save you up to 25% on your bills.
    • Non-smoker:A no brainer-- smoking in your home can lead to fires and property damage.

      According to a 2007 U.S. Fire Administration, smoking caused 18,900 residential fires, killing 595, injuring 1,200 and causing $327 million in residential property loss.

      Home insurance agents will raise your rates if there is a smoker in your home. And don’t think you can get away with it either because it’s a question on your underwriting form.
    • Mature Owner: Homeowners age 55 or older can enjoy the benefits of retirement and cheaper home insurance rates.

      On average, retired people spend more time at home and therefore can detect a
      possible hazard, like smoke or a gas leak, more quickly.

      Insurance companies reward the vigilance with savings up to 25% on premium rates.
    • Trim trees and brush around your home: If your home is situated in a wildfire prone area, trimming tree branches and eliminating brush around your home could qualify for a discount.

      You can also take down any dead or dying trees that can act as kindle or fall down and
      cause damage.
    • Avoid safety hazard toys: This one’s not as much fun, but still something to think about when underwriting your home insurance policy. Things like trampolines, tree houses, and pools can increase your homeowners premiums because they are considered a liability.

      The 2014 Consumer Product Safety Commission estimated that there were 104,691 emergency room visits associated with trampolines. The National Safety Council predicts there are over 7,000 drowning deaths a year associated with residential pools and spas.

      Consider getting rid of the trampoline and putting a fence around the pool to avoid accidental fallings.

    How much you paid for your house is not the same as the rebuilding cost

    The physical land on which your home sits is NOT at risk for perils such as theft, windstorm, fire, etc. So do not include its value when you’re calculating the rebuilding cost of your house and thus how much home insurance you should buy.

    If you do include the value of the land, you will be paying much more for coverage you don’t need.

    However, keep in mind that there are 3 different levels of home insurance coverage and which one you choose will decide how much you may have to pay out of pocket if your home is damaged.

    Actual Cash Value pays for replacement costs while factoring in depreciation value.

    So, if you bought your home for $400,000, but your home is only valued at $375,000 at the time of damage, you will only receive $375,000 from your insurance company.

    Home insurance policies are defaulted to Actual Cash Value unless otherwise states.

    Replacement Cost pays for replacement costs without factoring in depreciation. However, the payback is limited to a maximum dollar amount you have decided and written on your policy.

    Replacement cost is NOT the market value of your home, the home's purchase price or the cost of the land, or an outstanding amount of a mortgage loan.

    Rather, the replacement cost is an estimate of how much money would be needed to rebuild the entire home.

    For example, if you and your insurance agent estimated the rebuild cost of your home to be $500,000.

    Guaranteed Replacement Cost pays the full cost of replacement with NO depreciation or dollar limit.

    This coverage option isn't available in all states and if it is, it's usually limited to 120% of the cost to rebuild your home.

    Guaranteed coverage allows you to account for construction cost and other inflations.

    Bundle your home, auto, life insurance policies

    Purchasing your home, auto, life, etc. insurance policies all from the same company will unlock a large discount anywhere from 5 to 15% off your premium.

    Contact your homeowner’s agent about moving your other insurance policies over to one company.

    Prepare your home for disaster

    There are many ways to disaster-proof your home that will not only protect it from future loss, but will also lead to discounts.

    To make your home more resistant, you could:

    • Add storm shutters

    • Reinforce your roof with stronger material

    • Retrofit your old home to withstand earthquakes

    • Modernize your heat, plumbing, and electrical systems to avoid fire and water damage

    A home structured for the severe weather in your area would cut you a discount, like a brick home to withstand the wind in the Eastern United States and a wooden home to combat earthquakes.

    Improve your home security

    Not every kind of home security will automatically get you a discount from your insurance company.

    Most insurance companies usually offer a 5% discount if you install smoke detectors, a burglary alarm, or deadbolt locks.

    You can save as much as 20% off your premium with a high-level sprinkler system and/or an alarm system that directly notifies the police, fire, or other public safety station.

    However, these advanced alarm systems are quite expensive and your insurance provider may not grant a discount to every single one.

    Before you purchase such security devices for your home, be sure to contact your insurance agent and ask which devices qualify for a discount, how much it costs, and how much you’d save on your monthly premium.

    Keep a good credit score

    Just as some states require a credit score to determine auto insurance premiums, providers are also using them to set homeowner’s insurance costs.

    Having a strong credit score can lower the cost of your insurance significantly, while having a poor credit score could hurt.

    Provide the most accurate information about your credit score to receive a real quote.

    You can maintain a strong credit score by paying your bills on time, keeping your credit balances low, and checking your score on a regular basis for accuracy.

    Stay with the same home insurance company

    Some insurance companies reward their customers for having a policy through them for a certain number of years. This is usually referred to as a loyalty discount.

    Generally, providers will reduce your premium rates by 5% after you’ve been a policyholder for 3 to 5 years, and 10% after 6 years.

    Review your home insurance policy and value of your possessions once a year

    A lot can change within your home after a year, so it’s important to review the value of your possessions and your homeowner’s policy at least annually.

    Any additions, renovations, new furniture, new entertainment systems, jewelry, swimming pools, trampolines, etc., etc. should be included on your policy. They will either increase or decrease the cost of your insurance depending on whether they are considered risks.

    For example, if a fur coat you purchased 2 years ago is no longer worth the $3,000 you originally paid for it, you’ll want to reduce or cancel your additionally policy protection on it.

    Another example would be if you recently bought your children a trampoline, you should consider increasing your home’s liability insurance to cover any lawsuits should a visitor be injured while using the trampoline.

    Reduce flood risks

    Behind wind and hail damage, water damage is the second most reported claim when it comes to home insurance.

    If you live in a high-risk flood zone there are ways to reinforce your house the will reduce damage when a flood occurs and may even grant you a discount from your provider.

    You can prepare your home by installing proper flood openings and raising your utilities and physical structure above flood line levels.

    Even if you live in a low to moderate flood risk area, you should consider adding flood insurance coverage to your policy because it is NOT covered in a standard home policy.

    The average cost to dry out and restore a home after flood damage costs thousands of dollars.

    The Bottom Line: Cheap Home Insurance

    Understanding your coverage and discount options for your homeowner’s insurance policy is the only way to know you’re signing up for the correct policy at the most affordable cost for you.

    Compare quotes from multiple companies and get coverage recommendations from various agents to weigh your choices.