Strategies to Reduce Homeowners Insurance Premiums

The last three years have not been kind to U. S. homeowners renewing their homeowners insurance policies.

As noted in a Wall Street Journal article, “For many Americans, getting insurance has gone from a routine, generally manageable expense to a do-or-die ordeal that can strain household budgets” amid sharply rising premiums and fewer choices of insurers. Another WSJ article said home insurers are using drones to check the life expectancy of roofs and spot yard debris and undeclared pools.

 

There is a “perfect storm” of reasons for premium hikes including an increased cost of building materials and labor, fraudulent claims, fewer insurance companies writing policies, and climate change effects (e.g., wildfires, coastal flooding, hurricanes, and tornadoes) resulting in increased claims payouts.

 

What to do? Below are nine strategies that may save money on homeowners insurance without sacrificing robust protection for your home:

 

Obtain Multiple Quotes- Get quotes from at least three different insurance companies using online comparison tools to facilitate this process.

 

Use an Independent Agent- Consider working with an independent insurance agent who can provide quotes from various insurers to help identify the best deal.

 

Do an Annual Review- Reassess your insurance needs and compare rates annually to ensure that you are still being charged a fair premium.

 

Consider a Higher Deductible- Ask your insurance agent to provide premium quotes for different deductible amounts and “do the math” to decide if a higher deductible makes sense.

 

Bundle Your Property Insurance- Ask about available discounts if you bundle your homeowners insurance with other insurance such as auto, umbrella, and life insurance.

 

Install an Impact-Resistant Roof- Make your home less of a risk for an insurance company. Insurers look favorably on homes with new, impact-resistant, and well-maintained roofs.

 

Take Advantage of Discounts- Inquire about discounts for bundling, loyalty (i.e., long-term customers), age (e.g., age 55 or 60+), and a claims-free record. It never hurts to ask.

 

Pay Premiums Less Frequently- Find out how much paying your premium annually or semi-annually will save versus making more frequent payments (e.g., monthly or quarterly).

 

Maintain Your Home- Keep your HVAC, plumbing, and electrical systems in good working order to reduce the risk of fire or water damage. In some areas (e.g.,  parts of Florida) with intense heat, humidity, and storms, insurance companies are starting to require 4-point inspections (HVAC, electrical, plumbing, and roof) to better assess the risk of insuring a home.

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.

 

Auto Insurance: Strategies to Save

One of the largest items in household budgets is car insurance. According to Bankrate, the average annual cost of car insurance in June 2022 was $1,771 per year ($148 per month) for full coverage and $545 for just the minimum coverage required by state law.

Of course, individual insurance premiums vary widely according to multiple factors (e.g., driver characteristics, type of vehicle, location of vehicle, and the current economic climate for labor and parts costs).

Do you want to save money on car insurance without sacrificing needed coverage? Below are ten general tips for purchasing an auto insurance policy:

¨    Don’t Skimp on Liability Coverage- Remember that liability coverage is the most important part of an auto insurance policy because there is no upper limit on a potential liability judgment. It can be whatever the results of a lawsuit are if you are in an auto accident and a court decides that you are at fault. Awards in the millions of dollars are not unheard of and minimum amounts required by states are inadequate.

 

¨    Watch Your Numbers- Increase liability coverage to at least 100/300/50. Limits of $250,000 per person, $500,000 per accident, and $100,000 of property damage coverage (250/500/100) are even better or, better still, a $1 million umbrella liability policy if you have a significant net worth (assets minus debts). In addition, raise your “uninsured motorist” coverage (which covers you if a driver with no liability insurance or inadequate liability insurance hits you) to 100/300/50 or higher. In some states, including mine (Florida), more than 1 in 5 drivers is uninsured!

 

¨    Revisit Your Deductibles- Check with your insurance agent on policy premium costs and consider raising the deductibles on your policy (e.g., collision and comprehensive coverage) to the highest level that you can afford to pay in case of an accident. Do this (e.g., a $500 to a $1,000 deductible), however, only if there is significant savings. Make sure that you have the deductible amount (e.g., $1,000) saved in your emergency fund in case you need it.

 

¨    Revisit Your Coverage- Evaluate the cost and payoff for collision and comprehensive coverage if you drive an older (7 to 10+ years) car. Check the Kelly Blue Book website to find out what your car is worth. If it got totaled, that is approximately how much you would get from your insurance company, after the deductible. Taking collision and comprehensive coverage off of insurance policies for older cars is a way to keep premiums down.

 

¨    Take Advantage of Available Discounts- Ask your insurance agent for available discounts. For example, I have 14 listed discounts on my auto insurance policy including: safe driver, multiple policy (auto insurance bundled with homeowners and umbrella policies), full payment, anti-theft devices, antilock brakes, age 55+, responsible payer, homeowner, electronic stability control, and preferred package (I have no idea what this is, but I’ll take it!).

 

¨    Choose Your Car Carefully- Buy a make and model of car that is less costly to insure and equip it with money-saving features; e.g., air bags, antilock brakes, and alarms. High performance sports cars are naturals for high-priced coverage and standard sedans are usually the cheapest to insure. The location where a car is garaged also matters. Factors considered by insurance companies include traffic volumes, claims reporting rates, and theft/vandalism rates.

 

¨    Keep Your Driving Record Clean- Never drive when impaired (e.g., alcohol, drugs, lack of sleep) and try to stay off the road during bad weather conditions (e.g., snow and ice storms). Also consider taking a Defensive Driving course (e.g., the “55 Alive/Mature Driving” class offered by AARP). Make sure that teen divers in your family take driver’s education training and maintain a good academic record.

 

¨    Avoid Unnecessary Duplication- Ask your insurance agent about this. An example is coverage for auto-related medical expenses if you have a good comprehensive health insurance policy. However, if you drive at lot of non-family members around (e.g., carpooling), you may want to keep medical payments coverage. Otherwise, an injured passenger without health insurance may have to sue you for negligence to get coverage under your liability.

 

¨    Shop Around- Get information about premiums, coverage, and claims service from a number of insurance companies or agents. Also ask about available policy discounts. A few phone calls could save $50 or $100. 

 

¨    Keep Personal Information Current- Notify your insurance company if you, or an insured household member, substantially change your driving patterns; move to a different city or state; buy or sell a car; marry; or turn 21, 25, or 29. For example, former commuters who are now working from home and recent retirees may see a drop in their premium because they are incurring less risk of being in an accident by driving less often.

 

This post provides general personal finance or consumer decision-making information and does not address all the variables that apply to an individual’s unique situation. It does not endorse specific products or services and should not be construed as legal or financial advice. If professional assistance is required, the services of a competent professional should be sought.