When you buy home insurance, you enter into a contract with your insurance company. The contract states that you’ll pay for the coverage in exchange for financial protection if something happens to your home.
Having home insurance is vital. Approximately 93% of homeowners in the U.S. have home insurance. However, the insurance premiums can be high. The most common way to lower the cost of this type of coverage is by buying a policy with a higher deductible, the amount you have to pay before the insurance company starts paying out benefits. But there are other ways to save money on your premiums, such as bundling auto and home insurance, installing security systems in your home, maintaining good credit scores, and taking advantage of discounts by not making small claims.
Raise Your Deductible
The term deductible refers to the total amount you pay from your pocket before your insurance company starts paying for damages. For example, if you have a $1,000 deductible and get in an accident, you would be responsible for the first $1,000 of your damages (plus any applicable taxes). If you were to raise your deductible to $2,000 or even more, in some cases as high as $5,000, your premium would decrease significantly. However, there are two significant drawbacks:
- Your out-of-pocket expense will increase if something happens. A higher deductible means that if something does happen and damages require repairs or replacement costs totaling more than what’s covered by insurance (e.g., a roof repair after hail damage), the policyholder may need to pay the remaining costs out of pocket until they reach their new predetermined limit (i.e., their new higher deductible).
- It could result in getting denied when filing a claim. Having too high a deductible could cause an insurer not to cover damage after all because its estimate exceeds your policy limits. This may leave you on the hook for repair costs even though they’re still considered “covered” by coverage under standard home insurance policies today.
Bundle Home and Auto Insurance
You can save money on your home insurance premiums by bundling your policies. Bundling is the practice of combining multiple types of insurance into one procedure, which lowers costs and streamlines processes.
For example, if you have a car and a house with separate policies but live in an area where combining them is more efficient, you might decide to bundle those two together. When done correctly, this can save up to 25% on your premium prices. The average savings on bundling insurance packages is around 15%.
While the combination of home and auto insurance is considered the best bundle, you can also opt for combining home insurance with life or even pet insurance. The discount depends on multiple factors, but the home and auto insurance bundle will give the best-reduced premium. If you’re interested in learning more about the process or want help finding out if it’s right for you, ask a local agent for advice.
Maintain a Good Credit Score
A credit score can affect your home insurance premium. That’s because companies can use your scores to determine your premiums in most states and under most credit-based insurance systems. The average FICO score in the U.S. was 714 in 2021. A credit score of 700 or more is generally considered good.
Your insurance company may charge you higher rates if you have a low credit score. If you discover that your credit score is low, carefully review your credit report for possible errors. You can improve your credit score by paying bills on time, keeping balances low on credit cards, and not opening new lines of credit.
Look for Discounts
While not all homes are worth spending more to reduce insurance premiums, it may be possible that insuring a high-value home could result in lower premiums. For example, insurers often offer discounts based on location (such as remote rural areas versus cities), type of construction materials used (brick versus wood frame), and age (older homes tend to cost less).
Residents of hurricane-prone areas may be eligible for property insurance discounts if they make wind-mitigation improvements to their homes. For example, Massachusetts has been prone to hurricanes for a long time, be it Hurricane Carol or Hurricane Edna from 1954 or Hurricane Irenes from 2011.
The most recent example of hurricane storms in Massachusetts was in August 2022, when a few storms hit the counties like Hampshire, Berkshire, Connecticut, and others in Western Massachusetts.
Hence, making wind-mitigation improvements to your home can get you the best homeowners insurance in Massachusetts. Similarly, if you are living in a flood-prone area, measures like building the house on a raised column can help reduce premium costs.
Skip Small Claims If Possible
When something minor happens, filing a claim with your insurer may be tempting. However, paying out of pocket is often more financially prudent in the long run. Some insurance providers offer premium discounts to customers who have not filed claims for a specified period, usually a few years.
Small claims can be expensive. A claim for weather damage will increase your annual insurance cost by about 17%. On the other hand, water damage claims can raise your yearly premium by 25%, on average.
If your claim is relatively minor and the insurer’s payout is relatively low, you may spend more on rate increases than the insurer pays out.
Protecting Your Home Can Save You Money on Your Home Insurance
Do you know how you pay less for a home insurance premium if an alarm system and smoke detectors are in your house? That’s because the more you protect your home, the less likely it is that something will happen to it.
Home insurance companies offer discounts for burglar alarms and fire extinguishers, so make sure these are installed (and kept up-to-date). If possible, install deadbolt locks on all exterior doors and replace old glass panes with shatterproof ones. You can also consider using security cameras around the exterior of your house or adding additional lighting as another layer of protection. Some investments in strengthening your home, particularly retrofitting an older home to resist earthquakes, can reduce insurance costs.
If all else fails and disaster strikes anyway, keep thorough records of everything that happens so that when it comes time to file a claim with an insurer, they can see exactly what happened and how much money went into fixing things up again.
Home insurance costs can vary significantly as they depend on multiple factors. However, you can take measures to bring down the premium prices. If you follow the tips above, you may be able to reduce your premiums by hundreds of dollars every year.