Homeowner’s insurance is one of those things that you just can’t skip. Even if you’re a devotee of extreme frugality, this is something that is too important to put on your chopping block when you’re looking for ways to cut expenses. Though you’re not legally required to purchase a policy, approximately zero lenders will allow you to bail on homeowners insurance if you still owe them money on your house. They want to protect their investment from going up in both literal and figurative flames, so if you’re paying off your house, insurance is a non-negotiable.
That doesn’t mean that you have to saw off one your arms to pay for it, though. There are plenty of ways to cut costs on your insurance policy while still covering yourself in the event of a calamity. For reference, I’m going to use my own house and insurance policy as a model to talk you through the potential savings of each one of these tips. I live in a three-bedroom, 2,200-square foot house in New England that’s over 100 years old. Your mileage will definitely vary, but you should still be able to cut your costs using any or all of these tips.
1. Shop Around
Seriously, you can’t get good deals if you’re not willing to put in the legwork. Frugality is hard work, but the internet makes it a whole lot easier. Take the time to request a quote from several insurers. The big guys are easy to find because they spend a lot of money on advertising to make sure you remember their names, but it’s worth checking your state’s list of licensed insurers to check out the ones you may not have heard of.
You can either request quotes online by filling out a bunch of forms, or you can talk to a local insurance broker who will do that legwork for you. It’s best to talk to an independent insurance agent rather than a representative of a particular company so you can cast a wide net with the quotes.
My total savings? $0, because at last check, only one company will insure our old house. I’m sure you’ll do better.
2. Raise Your Deductible
When shopping for insurance, don’t ignore the line items. You can play with the numbers for your coverage to reduce your rates, and the biggest boost you can get is with your deductible. The deductible is the amount you’ll pay out of pocket if you need to make a claim for damage to your house. $500 is standard, but if you raise it, your insurance premiums will go down — meaning you pay less for insurance each year. Just make sure you have the cash to cover your deductible in your savings account just in case.
My total savings? $349 per year, thanks to bumping my deductible from $500 to $2,500.
3. Try Bundling Your Policies
When you’re shopping around for those insurance quotes, make sure you ask for a separate quote that reflects the prices you’d get if you bundle your policies. Bundling means having your home, auto and perhaps your life insurance policies all with the same company. To encourage you to give them all your business, companies will often offer you a discount. Average savings amount to a 7.7 percent discount, but results vary widely depending on the company in question.
My total savings? $0. It’s good to remember that bundling isn’t always cheaper! My auto policy is so much cheaper with Geico that the bundling discount my homeowners insurance company offered was canceled out by Geico’s rock-bottom premium.
4. Cut Unnecessary Coverage
Be sure to look over the list of “optional premiums” before agreeing to your insurance policy. There can be things here that you don’t really need. For example, I recently discovered — during a horrifying wintertime furnace failure — that we had been paying for something called “equipment breakdown coverage.” Sounds awesome, right?
Not so much. This turned out to be a pretty narrowly defined benefit, and my old furnace didn’t end up qualifying for replacement. The lesson: Ask about the meaning of everything you’re paying for, and cancel line items that you don’t actually need.
My total savings? $46 per year, since I promptly canceled that useless coverage right away.
5. Consider Your Replacement Costs
Your house’s market value and its replacement value are two different things. If your house burns down, it probably won’t cost as much to build a new one on your lot as it would to go buy a whole new house, because you already own the land. You can calculate your replacement cost and insure for that amount, which will definitely lower your premiums (if your lender is okay with it).
My total savings? $102 per year for having a dwelling coverage amount that’s just 84 percent of my house’s current value.
6. Ask for Discounts
Squeaky wheels, y’all. They get the discounts. Insurers like to encourage you to be safe and responsible, so they’ll give you cash for making good decisions. Got a burglar alarm? They love that. Live close to a fire hydrant? Money in the bank. Ask your insurance agent about all possible discounts — they should have a list handy so you can see what you qualify for.
My total savings? $402, thanks to credits for renovations, protective devices and loyalty to the company (we’ve had the same insurer for eight years now).
7. Raise Your Credit Score
There’s no official line item for this on your homeowners insurance policy, but insurers often check your credit score as a way of determining how big a risk you are. The idea here is that if you run fast and loose with your money, maybe you you’ll be just as careless with matches or keeping batteries in your carbon monoxide detector. Keep plugging away at bringing up your credit score, and you should be able to negotiate a lower premium in the future.
My total savings? $0, since my credit score is already over 800. (Which is why you’re reading this for expert advice, right?)
The Bottom Line
With some smart shopping and a willingness to go over my homeowners insurance policy with a fine-toothed comb, I saved a grand total of $899 on my annual premiums. Not too shabby!
How much will you be able to save?
Have you tried any of these methods? How much did they save you?
