How To Lower Your Homeowners Insurance Bill

Most people don’t think about homeowner’s insurance until they need it — or their premium goes up. It protects your home, belongings, and other assets in a disaster and is paid for annually or monthly with your mortgage.

As a result of inflation and recent natural disasters, homeowner’s insurance premiums have been rising. Per the BLS, also known as the U.S. Bureau of Labor Statistics, the cost of building materials has risen 22.5% since last year, making it more expensive to rebuild a home after a disaster. Living on a fixed income makes this a costly expenditure for many retirees.

To minimize your liability for accidents on your property and decrease the cost of homeowner’s insurance, take steps to protect your home. However, don’t be underinsured.

You should reconsider your policy right now. According to one estimate, more than 1,000 homes lost or damaged in the Marshall fire in January, Colorado’s most destructive in history were underinsured. According to DeDe Jones, a certified financial planner (CFP) at Innovative Financial, LLC in Lakewood, Colorado, there is an increased risk of exposure. Make sure to balance managing your insurance costs with adequate coverage while managing your insurance costs.

What factors affect your premium the most? Do you have adequate coverage? A thorough examination may reveal opportunities for discounts and any coverage gaps you may have.

How does your policy safeguard your home?

According to NerdWallet’s analysis of 150 insurance companies in every state and the country’s largest cities, the average homeowner’s insurance premium is $1,784 per year. That amounts to $300,000 in dwelling coverage and $300,000 in liability coverage, with a $1,000 deductible. Dwelling coverage covers damage to your home, whereas liability coverage covers injuries to others on your property. You have to pay a deductible before your insurer covers the rest.

A standard homeowner’s policy usually covers damage caused by fires, smoke, lightning, wind/hailstorms, heavy snow or ice, power surges or explosions, vandalism, and theft. Other events that may be covered include dog bites, tree removals, mold, water damage, foundation issues, and roof leaks.

Most standard homeowner’s insurance policy does not cover earthquakes, floods, arson, pests, or problems with your home caused by age or normal wear and tear. Take note of the specifics in your policy’s statement of coverage. If your pipes burst, you may be covered for water damage but not pipe repairs. Insurance will typically cover sudden and accidental damage; long-term wear and tear are typically not covered.

Your premium may rise for a variety of reasons. As the cost of rebuilding increases, dwelling coverage limits must increase to keep up. This is especially true in disaster-prone states or states that have already experienced disasters. Insurers have suffered losses in recent years due to hurricanes, tornadoes, and wildfires, as well as a severe, unexpected cold snap in Texas in February 2021. They raise their rates to compensate for losses.

How to Lower Your Premiums

1. Maintenance

If your insurance company determines that your home requires new electrical or plumbing after an inspection, your premium may increase. The same could be said for your roof. The insurer threatened to cancel the policy of Dennis Nolte’s 85-year-old father’s roof because it was more than 12 years old. The carrier dropped his father despite spending $16,000 on a new roof. Nolte stated his father found new coverage for $2,300 per year, significantly more than the previous year’s $1,600.

2. Inform your insurer of any improvements.

Even though a new roof costs around $11,500, you may be able to get a discount on your homeowner’s insurance. Insurance companies and roof types determine the discount amount, and insurance company Clovered estimates that a new roof can result in a 20% reduction in homeowner’s insurance.

3. Increase security

Using Policygenius, a site that compares insurance policies, homeowner’s insurance protects you from theft losses. Homes with a security system can earn you a discount on your insurance policy. With a security system, you can save up to 15% on your homeowner’s insurance, especially if it includes 24/7 professional monitoring.

4. Avoid things that insurers despise.

A trampoline will be a hit with your children or grandchildren. Insurance companies don’t like trampolines because of liability concerns. Have you filed any large claims? Insurance companies dislike that as well. What about an in-ground pool? Insurance companies consider Pools an “attractive nuisance, ” meaning they could attract and endanger a child.

5. Combine your policies

Blue Ocean Global Wealth CEO Marguerita Cheng, CFP, recommends combining your auto and home insurance policies with one carrier and purchasing insurance through affinity groups like alumni associations to save on premiums.

A higher deductible will lower your insurance costs. Make sure you have an emergency fund that can cover your chosen deductible. “I’ve also asked my clients if they still require mortgage insurance,” Cheng stated. If not, freeing up those funds may allow them to increase their deductible, Cheng says.

You may despise your insurance premiums, but you also don’t want to go without coverage, especially if you don’t have an emergency fund.

Why you should consider expanding your coverage

1. Your home’s value has increased.

The housing market has been scorching, and if you bought your home five years ago, it’s probably worth far more than you paid. Keep in mind that you only insure the value of your home, not the land on which it sits.

2. It may be worthwhile to purchase replacement cost coverage.

Unless you have sufficient assets to cover losses, you may want to pay a higher premium to cover the replacement of damaged goods. Insurance will typically pay you the depreciated value of your property rather than the cost of replacing it.

3. Additional riders may be necessary.

What about personal belongings? Assume your policy has a maximum limit of $250,000, with $1,500 for jewelry, antiques, or other valuables. You should add a rider if your valuables are worth more than that in case they are damaged by fire, stolen, lost, or misplaced. According to a recent survey, 60% of respondents had no additional coverage for jewelry, and 90% had none for artwork, according to Rob Greenman, CFP, chief growth officer at Vista Capital Partners. Separate coverage for these valuables is frequently a few hundred dollars for $100,000 of coverage.

Other riders include water damage from a clogged drain, the cost of bringing your home into compliance with building codes, business property damage, identity theft, and improvements like renovations or landscaping. Furthermore, if your mortgage is government-backed and you live in a flood-prone area, your lender will require flood insurance.

4. Umbrella coverage

Frank Summers, a CFP at Cetera Investors in Charlotte, North Carolina, provides additional liability coverage above and beyond typical homeowner and auto liability coverage. “It’s relatively cheap but can provide a significant benefit.” If you have significant assets to protect, are a landlord, have a pool or trampoline, host frequent parties at home, coach kids’ sports, own guns or certain breeds of dogs, or participate in sports where you might injure others, an umbrella policy makes sense.

Summers believes that working with an agent is a good idea. A good one will inspect your roof, inquire about your personal belongings, reconsider your deductible, check whether your credit score has improved, assist you in navigating claim procedures, and refer you to reliable contractors. Summers adds, “Mine increased my coverage while lowering my premium.”

According to Catherine Valega, a CFP at Green Bee Advisory in Winchester, Massachusetts, you should ask your agent to review your policy once a year. “Are your children or grandchildren old enough for you to get rid of that dangerous trampoline?” Have you made any home improvements that should be accounted for? Being proactive will protect your security — and save you money.”