Mortgage payments, property taxes, utility bills — the cost of homeownership comes at a steep price. Another major expense is your homeowner’s insurance. Ninety-five percent of homeowners have home insurance, according to the Insurance Information Institute, which estimates that that equates to about 70 million homes. Yet nearly four million households are holding out on home insurance.
Average annual premiums run the gamut from as little as $500 to as high as $3,500 or more, depending on a variety of factors — most of which are in your control. The average national cost sits at about $1,200 per year, but the average premium has crept up in recent years — by 3.3 percent in 2014 and by 3.6 percent in 2015, according to a January 2018 report by the National Association of Insurance Commissioners.
Whether you’re looking to lower your premium or you’re a new homeowner shopping for your first policy, here are eight ways you can lower your home insurance costs.
1. Do Your Homework and Shop Around
Comparison shopping usually leads to decent savings, and this applies to homeowners insurance, too. Don’t just take the first quote you’re given from a single insurance provider — your mortgage lender may make home insurance a requirement and point you to their preferred insurers, but you should seek out quotes from at least three insurers.
Shopping around can be done through insurance companies’ websites using their online calculators, but your best bet is to talk to an agent, explain your needs and see what they have on offer. Check to see what each provider’s policy entails and how they suit your needs stacked next to their annual premiums. It’s worth checking to see if your employer or your bank offers a discounted rate.
Be selective when choosing your insurer. After all, this is the company that will be issuing the policy to cover your home and your life’s possessions. There are many tools at your fingertips to help you discern between providers, including Google reviews and ratings from agencies like Moody’s and Standard & Poor’s.
Another good resource is the National Association of Insurance Commissioners, which lists insurers in each state, along with any complaints they’ve received. Your state’s insurance commissioner provides a comprehensive “complaint index” as well. Doing this research is an important step because it could steer you away from insurers that are repeat offenders in certain areas.
Don’t fixate on price alone: You’re looking for a great price point but you also need an insurer that values customer care and delivering quality service. You could short-change yourself by choosing a no-frills insurance provider only to be left with very little help or support when it’s time to make a claim.
2. Raise Your Deductible
Your deductible is how much you’re willing to pay out of pocket n an insurance claim before your coverage kicks in. If you choose a higher deductible, you’ll lower your insurance premiums substantially. Bumping up your deductible by about $1,000 could save you as much as 25 percent on your premiums, according to the Insurance Information Institute.
Think strategically when it comes to setting your deductible. If things go sideways and you’re faced with having to make a claim, how much can you realistically fork over in the claims process? Consider how much you have in emergency savings and, at the same time, evaluate how much the cost of repairs or rebuilding may be. You may face incidents that will need only minor repairs. In those cases, you might be better off covering the expenses without your insurance to steer clear of small claims and help keep your premiums down.
If you have a $1,000 deductible but wouldn’t bother to file a claim for that amount,, then you’re better off boosting your deductible. Play around with the math for different deductibles and strike the right balance between what would make a claim worthwhile and what you can afford to pay on your own.
It’s worth noting that, depending on where you live, your policy may call for different deductibles depending on the circumstances. If you live on either coast or your state is prone to flooding, you could have separate deductibles for windstorm damage, hail or flooding.
3. Ramp Up Your Home Security
Staying on top of your home security not only provides your household with peace of mind, but a potential reward from your insurer for your efforts.
Measures most of us stick to in our homes — checking smoke and carbon monoxide detectors, setting up a security system, securing windows and using dead-bolt locks — could unlock at least 5 percent less on your premiums.
Installing tech like heat-activated sprinkler systems along the perimeter of your home and on your roof — especially in wildfire-prone areas — could shave up to 15 to 20 percent off your premiums. Homeowners who add another layer of defense with an alarm system that calls emergency responders also benefit from up to one-fifth off on premiums.
If you’re upgrading your home security with the latest tech with the specific intention of lowering your insurance premiums, consult with your insurance provider first to get an estimate on how much you could save.
4. Armor Your Home Against Natural Disasters
Mother Nature can bring an onslaught of disasters your way. Depending on where you live, you may be worried about flooding, wildfires, earthquakes, windstorms and more. While it’s impossible to build homes that are impenetrable in the face of natural disasters, armoring your home to better it protect can lead to steep decreases on your premium.
Here are just a handful of ways you can protect your home:
Against flooding. Simple upgrades, such as installing flood boards and air brick covers to keep water out of the home, are the most obvious. You can go more extreme by constructing or rebuilding the part of your home within the base flood elevation with materials that are resistant to floodwaters, for wet floodproofing. Dry floodproofing includes using floodproof sealants and barriers, and adding a draining system to divert water away from the house.
Against wildfires. Constructing your home with Class A fire-rated roofs, metal screens that cover all vents, and double or multipaned tempered glass windows is a great start to guard your home against wildfires. Choose materials like stucco, stone, brick, interlocking tiles and concrete blocks over wood shingles or planks to make your home more fire-resistant too.
And be strategic about your landscaping: Line your home with a non-combustible defensible space using gravel, brick or concrete, instead of mulch.
Against earthquakes. Interlocking steel beams together to reinforce the structure and foundation of your home will add an extra layer of security should an earthquake rattle your neighborhood. You can also build floors — using plywood, chipwood or timber — with joists bolted into the flooring and reinforce the sides of your home with horizontal joints and strategic framing.
It’s worth noting that flood insurance is purchased as an extension to your standard homeowners policy and is provided through the National Flood Insurance Program. Fire insurance is typically covered in the basic homeowners policy, but if you’re in a state that’s often grappling with wildfires, you’ll likely need an extension as well.
Earthquakes also aren’t covered in your standard home insurance policy. Unlike flood insurance, earthquake insurance is available through private insurance either as a separate policy or as an add-on to your existing policy through an endorsement.
5. Update Your Insurance Policy as Needed
While you may need to ramp up your insurance coverage if you inherit an art collection or some family heirlooms, you should also consider downgrading your coverage when necessary. You could be spending more on a policy and coverage you don’t actually need.
Study your policy and the claim limits and scour your inventory list to decide if your policy lines up with the level of coverage you need. You may discover you added extra personal belongings insurance to cover a brand new fur coat or a home entertainment system that’s now a decade old and depreciated in value.
Reducing or canceling your floater — the extra insurance you buy — can also make a difference to your premium.
6. Take Advantage of Discounts
Discounts on home insurance are abundant but you need to look for them. An easy one is bundling your auto or life insurance with home insurance with the same provider. Some insurance companies offer up to 15 percent off of your premium if you buy two or more policies from them. Your job is to calculate if this discount exceeds quotes from competitors.
You can unlock a discount if you pay your annual premium in full for the year. You can save even more by paying ahead for future years, locking in a set price.
A major discount applies to new construction homes — you can save up 35 percent on premiums if you’re moving into a brand new home.
Discounts are also available depending on your demographics. Seniors typically pay about 10 percent less on premiums due to often being at home where they can maintain watch over any potential hazards or break-ins.
Your employer may provide discounts through a group insurance deal they’ve brokered to lock in lower prices.
Don’t let loyalty go to waste either. If you’re a longstanding customer of your insurance provider and you’ve rarely made claims, use this to your advantage and negotiate a lower premium. The Insurance Information Institute suggests insurers will cut premiums by 5 percent for clients who have stayed with them for three to five years, up to a 10 percent discount for policyholders of six years or more.
Finally, if you’ve made upgrades to your home — even added a fire extinguisher or made energy-efficient changes — let your insurance provider know, because cuts to your premium may be applied.
7. Keep Your Credit Score Intact
These days, your credit score isn’t just used by mortgage lenders and banks. Even insurance brokers are looking into your credit record and standing.
At the end of the day, insurance providers — just like financial institutions — are looking for financially responsible and stable clientele who know how to manage their money. Maintaining a solid credit score can help you secure a lower premium so it’s worth paying your bills on time and not maxing out your credit cards.
Keep an eye on your credit score before you shop for home insurance or renegotiate rates. Check your credit report to make sure all information is accurate and up to date. You don’t want to be penalized because of errors, misinformation or even identity fraud tarnishing your credit history.
8. Reflect on Where You Live and the State of Your Home
Many factors go into how much your insurance premium will be, but at the heart of it, where you live plays the biggest deciding factor.
States that are most often at the hands of natural disasters come with the highest home insurance rates. Florida tops the list with insurance premiums at $2,055 — a whopping 90 percent above the national mean. Texas follows at $1,947 per year, along with Louisiana, Oklahoma and Mississippi.
On a local level, insurance providers also consider how safe your neighborhood is, the prevalence of crime and break-ins, and how many claims have already been made at your address and in the vicinity. They’ll even take into account how often you’ve made claims at your current and previous addresses. This is why many homeowners often forgo making a claim on small repairs around the home — if you’re a repeat offender persistently processing a claim, you could see a bump in your premiums moving forward.
The age and condition of your home are on the table too. Just as insurance providers are looking for safety measures in place, they’re also looking at the overall health of your home to decipher the likelihood of you making a claim. A brand new structure, built with state-of-the-art techniques and adhering to the latest building codes, won’t face as many issues as a decades-old home. As you crunch the numbers on your insurance budget while home shopping, keep all of these factors in your back pocket. That way, you’ll be ready when it’s time to get that home insurance policy at a premium you can afford.
Carmen Chai is an award-winning Canadian journalist who has lived and reported from major cities such as Vancouver, Toronto, London and Paris. For NewHomeSource, Carmen covers a variety of topics, including insurance, mortgages, and more.