To figure out how to lower your homeowners premium, it helps to know how insurance companies come up with them.
What determines your homeowners insurance rate?
Insurers look at many variables to determine your homeowners insurance rate. These include:
- Your home's rebuilding cost and materials
- The age of your home
- Your area's fire protection rating
- Claims in your area
- Your personal claims history
- And more
Ultimately, insurers want to get an idea of how safe your home is. And your home's safeness can help determine your homeowners insurance rate.
How to reduce your homeowners insurance premium
Now that you know some of what goes into your home insurance rate, here are a few ways to see if you can lower it.
1. Compare homeowners insurance quotes
And compare them apples to apples. One policy might be $50 cheaper per month than the other. But looking closer, the cheaper policy may not stack up in the way of coverage options, limits, deductibles, claims service ... or all of the above!
Check out discounts too ... and read the fine print. Two companies may offer a Claims Free discount, say. But their conditions may differ. One might say this discount's yours as long as you're claim free for one year. The other might say the discount's yours as long as you're claim free for five years. So the fine print can really make a difference.
Also, check the insurer's financial rating. Companies like the National Association of Insurance Commissioners and A.M. Best use a rating system to gauge an insurer's financial strength. A strong rating can indicate the company's ability to pay claims.
2. Install safety features
As mentioned above, a safer home can lead to lower premiums. For example, the types of safety features that can land you Home Safety Features discount with Esurance include (but aren't limited to):
- Smoke detectors
- Carbon monoxide detectors
- Alarm systems
- Lightning protection systems
- Storm shutters
3. Increase your deductible
A deductible is what you pay out of pocket before insurance helps cover the rest. The more you're willing to pay out of pocket, the lower your premium. Generally speaking. But make sure you weigh the pros and cons of high deductibles. A lower deductible is a good option if you have a lot of savings in the bank.
4. Add Claims Forgiveness to your policy
While claims don't automatically cause rate increases, they are one of the more common reasons rates go up. Adding the Claims Forgiveness feature (available from many companies) can help prevent rate increases if you do need to make a claim. What's more, if you previously had the Claim-Free discount, you wouldn't lose it as a result of filing a claim.
5. Bundle home and car insurance
Many insurance companies offer discounts for buying more than one policy with them. Buy home and auto with Esurance (for instance), and you could save up to 10%. Also, say you accidentally back into the garage door, busting your bumper in the process. If you need to file both a home and auto claim, you only pay one deductible if your policies are bundled. Not bad, right? Plus, there's the added convenience of having both policies in one place.
6. Improve your credit score
Most homeowners insurance companies use your credit score to create what's called an insurance-based credit score. It weighs certain parts of your credit report differently than your normal credit score. But both gauge your financial strength. Actuarial studies show that financial strength correlates strongly with how likely you'll file a claim. In a way, it's similar to an insurance company's financial strength — a good indicator of how well they pay out claims.
The practice of using Insurance scores isn't allowed in all states. Even in states where it is allowed, there are often stiff regulations in place. For instance, in most states, insurers can't use your score as the sole basis for determining your rate, or for denying, canceling, or not renewing your coverage.
7. Pay your premium in full
If you have the funds available, pay for your homeowners premium all in one go. Why? To avoid monthly installment fees. And plus you won't have to think about payment until renewal. Also, many home insurance companies reward customers who consistently pay on time. Double win!
8. Get a hail-resistant roof
An older roof is likely more prone to leaks than a newer roof. Installing a new one will help curb leaks and claims — and likely reduce your premium substantially. And if the new roof is certified hail-resistant? That could earn you a homeowners insurance discount. Seriously!