Is home insurance required? If you have a mortgage lender, yes. But fortunately, there are ways to save on homeowners insurance while still protecting your investment.
It makes good financial sense to insure your home and the valuables in it, even after your mortgage is paid off and it is no longer mandatory to have a homeowners insurance policy. Losing a home due to a fire, for example, could cost you hundreds of thousands of dollars if you do not have coverage. That is why insurance professionals advise that you maintain homeowners insurance after you have paid off your mortgage, even though you are not legally required to maintain coverage if your loan is paid in full.
The key to understanding how to save on home insurance is to find the balance between having enough coverage in case of a disaster while keeping your premiums affordable. Here are some ways to lower home insurance costs.
1. Bundle your insurance policies
You may have insurance from more than one provider. For example, your auto insurance may be with the same company you have been insured with since you were a young adult and your life insurance is with the insurer your employer uses. Bundling your insurance products by using one insurance company for all your needs could save you significant money, as most insurers will give you a multi-policy discount to reward your loyalty.
Samantha Rheel, a Senior Sales Executive at Coughlin Insurance Services in New York, agrees that bundling policies can result in savings.
“Companies target packaged policies rather than monoline policies, offering the best rates,” Rheel says. “If you are working with an agent, requesting them to quote your other lines of business could not only get you better coverage but turn out to be pretty significant savings.”
Ask your agent or insurance provider about what discounts are offered when you add on other policies, like auto and life insurance. Bundling at least two policies could result in significant savings.
2. Shop around
Like comparing apples in the grocery store, you can perform a home insurance comparison.
Each insurance provider has its own guidelines and can set different prices based on the coverage of your home. With your home insurance comparison, you can see the premiums from multiple companies and if you qualify for any discounts. Prices can fluctuate from provider to provider, so comparing multiple quotes is a great way to see what company can offer you the lowest premium.
If you are trying to capitalize on bundling savings to lower home insurance costs, cross-reference your home insurance options with this list of car insurance providers to find companies that can offer you both.
3. Ask for discounts
Find out from your insurance provider what discounts it can offer you and how you can qualify for them. Discounts can run the gamut, from loyalty and multiple-policy discounts to discounts for home updates.
“Insurance companies love to see a responsible homeowner,” Rheel says. “Keeping up with updates to things like your roof, heating and plumbing system and electric will help.”
Rheel also suggests taking preventative measures, like installing an alarm system, surveillance cameras and water shut-off valves.
“Insurance carriers have become pretty creative when it comes to what type of deductions and discounts they offer,” Rheel says. “The more preventative action you take, the better chance you have at qualifying for their top-tier discounts.”
If you are wondering how to lower homeowners insurance costs, discounts are a great place to start. Here is a quick list of common discounts:
- Discounts for safety measures: Something as simple as installing smart smoke detectors could save you money. Homeowners insurance providers also frequently offer discounts for home security systems, so consider investing in one to get lower home insurance premiums.
- Roofing discounts: Your roof does a lot to protect your home. A newer roof, particularly one built with impact-resistant materials, can result in lower premiums.
- Loyalty discounts: If you have been with your insurer for a while and you are wondering how to lower homeowners insurance costs without switching, call and ask if they offer a loyalty discount.
4. Evaluate your policy and increase your deductible
Looking for even more ways to learn how to lower home insurance? Take a closer look at your coverage. There are some parts of your home insurance that you are often required to have, such as:
- Coverage for damage to the house and other structures, like a fence or a shed
- Personal property coverage
- Additional living expenses, in the event you have to stay somewhere else if your home is uninhabitable due to a covered claim
- Liability and medical payments
“These coverages are the bones of a homeowner contract and should never be removed under any circumstances,” Rheel says. Going without homeowners insurance is not worth the risk, but that does not mean you need to pay for excess coverage. You can talk to your provider or agent to see if there are optional coverages included on your policy that are not a good fit for your needs.
You may also want to consider raising your deductible. This is the amount you pay out of pocket for a covered claim. If your deductible is $500, for example, and you have a covered claim worth $4,000, you will pay the first $500 of the claim and the insurance company will pay $3,500.
A higher deductible means you will pay more in the event of a claim, but the larger your deductible, the lower your premium. Keep in mind that raising your deductible means you are responsible for more money out of pocket. Be sure that you can afford a higher deductible before you make the change on your policy.
5. Improve your credit score
Unless your home is in the state of California, Maryland or Massachusetts, where insurance companies are prohibited from using a homeowner’s FICO to determine premium price, a low credit score could mean you’re paying a higher monthly premium.
Insurance expert Laura Adams, explains:
“When you have good credit, home insurers view you as a less risky customer who may make few or no claims.”
Adams recommends following up with your insurer if your credit score has improved. The higher your score, the better chances you have of paying less.
6. Get an agent
An agent is not only someone who helps you select insurance, but also helps you file a claim and get damages fixed with local contractors. Depending on your agent, they might get paid a commission based on the type of coverage you buy.
Experienced agents know the ins and outs of the insurance companies they represent and can provide you with valuable advice and recommendations on the type and amount of insurance you may need or if you need additional coverage.
“You receive personalized service and a person looking out for your best interest,” Rheel says. “A good agent will fight for you in the event of a claim, acting as the liaison between you and carrier.”
7. Make updates to your home
If you make certain changes to your home, your insurance provider could reward you with lower home insurance premiums. There are two ways to obtain these home update discounts.
Protect your home from disasters
Here are a few updates you can make to keep your home safer — and possibly get lower home insurance premiums:
- Get a new roof: As we mentioned before, some insurance providers offer discounts for storm-proof roofing, and in general newer roofs are less likely to be damaged by storms than older roofs.
- Update your electrical system: Updating your electrical system can reduce your risk of a home fire, so insurers may reward you with lower premiums.
- Update your plumbing: Lower risk at home means lower home insurance costs. So new pipes — which can help to avoid water damage at home — can incentivize your insurance provider to lower the cost of your policy.
Make your home more secure
Similarly, safety and security features mean a lower risk, so they can result in homeowners insurance discounts. For example, you might be able to save by installing:
- More/smart smoke alarms: If you do not already have a smoke detector in every room of your house, add one and let your insurance provider know. When you are comparing options for new alarms, consider smart smoke alarms. Your insurer might offer you bigger savings for alarms that can push a notification to your phone in case you are away from the house, for example.
- Fire sprinklers: If a fire does break out at home, these systems kick in to make sure the damage is mitigated. Insurers frequently offer discounts for sprinkler systems, as they keep the cost of a claim lower.
- Burglar alarms: Since your home insurance policy also covers theft, insurers may offer a discount for installing theft prevention measures like a home security system.
How to save on homeowners insurance
Whether it is time to switch insurance companies or talk to your agent about the right coverage for you, there are plenty of ways to save. Home insurance might be necessary, but it does not mean you need to overpay for it.
Review your coverage to make sure you have everything you need, ask about discounts and keep your credit score as high as you can.