How to Save Money on Homeowners Insurance

You’ve just purchased your new home and you know that homeowners insurance is a necessity, not an option.  Understanding why you need this insurance, what coverage choices are available, and how to choose the right insurer for your needs will help you make informed decisions about protecting your family and your assets.  When you do your homework, you’re likely to save money by making prudent choices and uncover ways to make use of special discounts.

Homeowner Needs - Homeowners, condominium owners, and mobile home owners have different needs.  Homeowners need to ask themselves how much it would cost to rebuild their home at today’s prices, if they need disaster insurance, and if their home can be made safer and, at the same time, how can they get the benefit of money-saving discounts.  Then there’s the issue of property protection.  Do you know how much it would cost to replace the contents of your new home?  Do you have adequate protection against liability claims?  Are you covered against medical expenses if guests injure themselves on your property?

Determining The Cost of Your Home’s Value - What we are referring to here is the estimated replacement cost of your new home.  You need to understand the difference between market value and replacement cost.  Replacement cost is the amount that is needed to repair any covered damage or to restore the home back to its pre-loss condition.  Market value is the price that a property would command in a free competitive market.  Although it is virtually impossible to predict what your new house will be worth in the future, it is important to make an educated estimate that will account for unforeseen circumstances so you can determine the appropriate homeowners insurance policy option.

Tip:  When you schedule your home appraisal during the new home buying process, ask the appraiser if a replacement cost estimate is available.  You may also ask your insurance agent or building contractor to help you with this.  Make sure you include any architectural or construction details that may affect the estimate such as upgraded kitchens and bathrooms, custom moldings, or additional rooms.

Disaster-Resistant Measures - Your insurance agent can offer suggestions on how you can better protect your new home from natural disasters, and let you know if there are money-saving discounts available for taking these steps.  Perhaps you can add storm shutters, reinforce your roof, or update your heating, plumbing, and electrical systems to reduce the risk of fire and water damage.

Insuring Your Possessions - Do you have an inventory and photographs of your personal possessions?  There are several cost-effective options of creating a home inventory record.  You can use using photos, video recordings, a written inventory booklet supplied by your insurer, or a software program made specifically for this purpose.  Here is a handy Home Inventory Checklist from Wells Fargo to help you with this task.  You may wish to consider extended coverage for items such as computer, jewelry, and silverware.

Homeowner Personal Liability Insurance - If a homeowner was ever held legally responsible for someone being injured in his or her home, it could mean financial disaster for the entire family.  Liability coverage protects the insured from personal liability, damage to the property of others, and medical expenses due to the injury of others.  For a minimal increase in your insurance premium, an additional $300,000 to $500,000 in coverage may be obtained.  If the insured owns extensive assets, it is probably wise to consider purchasing an Umbrella Policy, which usually adds $1 million or more to the policy.

Raising Your Deductible - Once you have your coverage established, think about whether you can pay a higher deductible for your policy.  The higher the deductible, the lower your premium.   It is common for an insurance company to recommend a deductible of at least $500.  You may be able to save as much as 25 percent if you raise your deductible to $1,000.  Just be aware that certain states have separate deductibles for specific damages such those caused by earthquakes or windstorms.

Comparison Shopping - Now you are ready to shop around.  You can start with asking your friends for recommendations, checking the yellow pages, contacting your state insurance department, or the viewing the Web site of the National Association of Insurance Commissioners, which not only provides guidance on choosing a provider but also lists any registered complaints against an insurer.  Many insurance companies provide online quotes.  You can check a company’s financial stability with these rating companies:  www.ambest.com<www.standardandpoors.comGet three quotes, compare the estimates, and make your decision.

Other Money-Saving Tips:

• Be sure to ask about any available home security-related discounts for installing such items as installing smoke detectors, dead-bolt locks, or sprinkler systems.
• Work to establish an immaculate credit record if you don’t already have one as insurance companies are increasingly basing rates on credit information.

Note:  And remember, it is always a good idea to review your policy on your new home annually to make sure that your coverage meets your needs. 

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