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
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
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
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
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
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 [email protected]