Tips to Lower Your Home Insurance Premium

Homeowners insurance policies are as unique as the individuals and homes they protect. With numerous variables at play, understanding how to optimize your coverage can lead to significant savings. Below we’ll explore key factors influencing your home insurance premium and savvy strategies to help you trim costs while ensuring optimal coverage.

The following are policy items that have the greatest impact on the amount you pay:

• Different types of coverage influence premium cost. There are different coverage options you can purchase for your home insurance policy:
  • Replacement cost pays to repair or replace your home or belongings without any deduction for depreciation.
  • Extended replacement cost is the more expensive coverage option– but, it will pay to rebuild your home even if the replacement cost exceeds your policy limit.

• Higher limits of insurance equate to a higher premium. Your policy limits are the maximum amount your insurance will pay in case of a covered loss. Higher limits mean a higher payout in the event of an accident, which correlates with a higher up-front premium cost.

• Your deductible is the amount you pay in order for your insurance coverage to kick in to help cover a loss. While a lower deductible may offer peace of mind, it often comes with a higher premium. On the other hand, opting for a higher deductible can significantly reduce your premium payments without sacrificing coverage quality. It’s about finding the right balance between protection and cost-efficiency. If you’re confident in your ability to handle unexpected expenses without compromising financial security, raising your deductible can be a smart financial move, allowing you to save on premiums while still maintaining adequate insurance coverage. It’s a matter of assessing risk and managing costs effectively.

• Review your policy limits and the value of your possessions at least once a year. You want your policy to cover any major purchases or valuables not traditionally covered under your homeowners policy (jewelry, fine art, silverware, furs, etc.), typically by adding supplemental Valuable Articles coverage. However, you don’t want to spend money for coverages you no longer need. If you’ve downsized your fine arts collection or given pieces of jewelry away to family members, you may want to remove those items from your scheduled articles and pocket the premium difference.

Your credit history and claims history can contribute to your premium costs:

• Maintain a good credit record. Establishing a solid credit history can help cut your insurance costs. In most cases, insurance companies will consider your credit history when calculating your home insurance premium. Insurance companies will look at how good you are at making payments and how much debt you currently have. Typically, the better your credit score, the lower your insurance premium.

• It’s also worth noting that paying for accident expenses yourself that are near your deductible can help you avoid higher premiums. Accidents happen, and when they do, filing claims may be necessary. However, it’s essential to understand that the frequency and severity of your claims can impact your premium at renewal time.  When determining your premium, your insurance company will assess any claims you’ve made at previous residences. The type and frequency of the claims you’ve filed can lead to higher premiums. While insurance is there to cover you in times of need, paying for small expenses yourself may help you save money in the long run and avoid higher premiums over time.

• Your home’s value can influence your insurance cost. Typically, the greater the value of your home, the higher your insurance premiums will be.

• Homeowners insurance is designed to protect the structure of your home and your belongings from covered perils such as fire, theft, windstorm, and more. It’s not intended to insure the land upon which your home is built since land itself is not at risk from these perils.

• Older properties may lead to higher premiums. Older buildings tend to have costlier premiums since the materials they’re built with may be more expensive and harder to replace. For example, if you have stained-glass windows in your home, that would cost more to replace than a standard window since stained-glass windows are far less common. However, if you own an older property, it may be possible to cut premium costs by modernizing or reinforcing your home’s systems and accessories. Consider modernizing your heating, plumbing, and electrical systems to reduce the risk of fire and water damage if they are old or in poor condition.

• The age and condition of your roof are considered when pricing your home insurance premium. If you have been avoiding getting a new roof or fixing problem areas, it may be doing your premium more harm than good. A strong roof helps prevent disasters like leaks, structure damage, mold, and pests. Older roofs pose a higher risk, and therefore lead to higher premiums.

• Remodeling may increase or decrease your home insurance premium, depending on the type of remodel. Certain home improvements will increase your premium since renovations often increase the value of your home— therefore increasing your home’s replacement costs. For example, adding an addition to your home, adding a deck, replacing a normal tile floor with heated tile, or replacing a laminate countertop with marble would all increase your home’s value and possibly lead to higher premiums. However, as mentioned previously, repairs made to your roof, electrical, or plumbing that increase safety or efficiency may allow you to receive discounts that can reduce your premiums. Always alert your broker about new home remodels to ensure they can be replaced if damaged or destroyed.

• Improving your home security may help you save on premium dollars. You can usually get premium discounts for a smoke detector, burglar alarm, or dead-bolt locks. Some companies offer to cut rates even further if you install sophisticated sprinkler systems and a fire or burglar alarm that automatically rings the police, fire, or other monitoring stations. These systems aren’t cheap and not all systems qualify for a discount. Before you buy such a system, find out what your agent recommends and how much it might save you on premiums.