How to save money on home insurance

• By Milt x_Zall
• Sep 14, 2001

The price you pay for your homeowner's insurance can vary by hundreds of dollars depending on a number of factors, including the company you buy your policy from.

Here are some steps you can take to help you save money on your homeowner's insurance:

Shop Around

Ask your friends, check the phone book, call your state insurance department. You can also access insurance information for your state on the Internet at the National Association of Insurance Commissioners' site (www.naic.org/1regulator/usamap.htm). States often make information available on typical rates charged by major insurers, and many states provide the frequency of consumer complaints by company. Also, check consumer guides, insurance agents, companies and online insurance quotation services. This will give you an idea of price ranges and tell you which companies have the lowest prices.

But don't consider price alone. The insurer you select should offer a fair price and deliver the quality service you would expect if you needed assistance in filing a claim. So talk to a number of insurers to get a feeling for the type of service that they provide. Ask them what they would do to lower your costs.

Also, check the financial ratings of the companies with AM Best Co. (www.ambest.com) or Standard and Poor's (www.standardandpoors.com).

Raise Your Deductible

Deductibles are the amount of money you have to pay toward a loss before your insurance company starts to pay a claim, according to the terms of your policy. The higher your deductible, the more money you can save on your premiums.

Nowadays, most insurance companies recommend a deductible of at least $500. If you can afford to raise your deductible to $1,000, you may save as much as 25 percent. Remember that if you live in a disaster-prone area, your insurance policy may have a separate deductible for certain kinds of damage. If you live near the coast in the East, you may have a separate windstorm deductible, if you live in a state vulnerable to hailstorms, you may have a separate deductible for hail, and if you live in an earthquake-prone area, your earthquake policy has a deductible.

Buy From the Same Insurer

Some companies that sell homeowners, auto and liability coverage will take 5 percent to 15 percent off your premium if you buy two or more policies from them. But make certain this combined price is lower than buying the different coverages from different companies.

Make Your Home More Disaster Resistant

Find out from your insurance agent or company representative what steps you can take to make your home more resistant to windstorms and other natural disasters. You may be able to save on your premiums by adding storm shutters, reinforcing your roof or buying stronger roofing materials. Older homes can be retrofitted to make them better able to withstand earthquakes. In addition, consider modernizing your heating, plumbing and electrical systems to reduce the risk of fire and water damage.

Consider Rebuilding Costs Only

The land under your house isn't at risk from theft, windstorm, fire and the other perils covered in your homeowner's policy. So don't include its value in deciding how much homeowner's insurance to buy. If you do, you will pay a higher premium than you should.

Improve Home Security

You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm or deadbolt locks. Some companies offer to cut your premium by as much as 15 percent or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. Those systems aren't cheap and not every system qualifies for a discount. Before you buy such a system, find out what kind your insurer recommends, how much the device would cost and how much you'd save on premiums.

Seed Out Other Discounts

Companies offer several types of discounts, but they don't all offer the same discount or the same amount of discount in all states. That's why you should ask your agent or company representative about any discounts available to you. If you're at least 55 years old and retired, you may qualify for a discount of up to 10 percent at some companies.

See About Group Coverage

Professional, alumni and business groups often work out an insurance package with an insurance company. Ask your association's director if an insurer is offering a discount on homeowner's insurance to you and your fellow graduates or colleagues.

Stay With the Same Insurer

If you've kept your coverage with a company for several years, you may receive a special discount for being a long-term policyholder. Some insurers will reduce their premiums by 5 percent if you stay with them for three to five years and by 10 percent if you remain a policyholder for six years or more. But make certain to periodically compare this price with that of other policies.

Review Policy Limits and the Value of your Possessions

Do this review once a year. You want your policy to cover any major purchases or additions to your home. But you don't want to spend money for coverage you don't need. If your 5-year-old fur coat is no longer worth the $5,000 you paid for it, you'll want to reduce or cancel your floater (extra insurance for items whose full value is not covered by standard homeowners' policies) and pocket the difference.

Consider Insurance Costs When Buying a Home

You may pay less for insurance if you buy a house close to a fire hydrant or in a community that has a professional rather than a volunteer fire department. It may also be cheaper if your home's electrical, heating and plumbing systems are less than 10 years old. If you live in the East, consider a brick home because it's more wind resistant. If you live in an earthquake-prone area, look for a wooden frame house. Choosing wisely could cut your premiums by 5 percent to 15 percent.

Remember that flood insurance and earthquake damage are not covered by a standard homeowner's policy. If you buy a house in a flood-prone area, you'll have to pay for a flood insurance policy that costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance on its Web site at www.fema.gov. A separate earthquake policy is available from most insurance companies. The cost of the coverage will depend on the likelihood of earthquakes in your area.

Zall, Bureaucratus columnist and a retired federal employee, is a freelance writer based in Silver Spring, Md. He specializes in taxes, investing, business and government workplace issues. He is a certified internal auditor and a registered investment adviser. He can be reached at miltzall@qis.net.