How to Save Money on Homeowners Insurance

Many American consumers are struggling to deal with skyrocketing homeowners insurance premiums. Since 2020, premiums have increased by 33%-far above the rate of inflation. Since lenders require people with mortgages to have this coverage, these price increases make it more important than ever to find ways to save.

Some Reasons for Rising Homeowners Insurance Rates

There are many reasons for rising homeowners insurance rates, including weak regulation of insurance companies, increasing climate risk,and huge increases in "reinsurance," which is the insurance that insurance companies buy for themselves.

Consumers are being impacted in numerous ways. First, insurance premiums are rising, often significantly, to the point where consumers sometimes have to pay thousands of dollars more per year for coverage than even just a few years ago. Second, many consumers who have had insurance are being nonrenewed, meaning that insurers are refusing to continue their policies and forcing customers to find coverage elsewhere. This is occurring even if consumers have been with the same insurer for years or even decades. Third, consumers are sometimes finding it difficult to get any insurance policies, either because the premiums are so high or because most companies are not writing policies in certain areas. Fourth, consumers without coverage are being subjected to force-placed insurance, which is when the lender buys an insurance policy that only protects their financial interest in the home. These policies are usually more expensive and do not protect the consumer's interests. Finally, the policies that homeowners are finding in the market provide much weaker coverage than in years past, so people are paying more and getting less.

Here are some tips on how to lower premiums and make homeowners insurance more affordable.

Understand Your Coverage

Homeowners' insurance policies don't cover every scenario and typically exclude earthquakes and flooding that come into the house as a result of an external source such as the overtopping of a river or a tidal surge. To get this protection, you must purchase an additional flood insurance policy.

A standard homeowners insurance policy generally covers damage to your home from any cause except the causes specifically excluded. It includes several types of coverage:

1. Dwelling coverage, which covers damage to the home and attached structures like a porch;
2. Other structures, which protects stand-alone structures on your property such as fences or sheds;
3. Personal property, which covers the repair or replacement of stolen and damaged belongings;
4. Loss of use, which pays for temporary living expenses (like a hotel and meals) while your home is being repaired; and
5. Personal liability and medical payments, which pays if you injure someone else or cause property damage unintentionally or through negligence, and pays to treat someone injured on your property regardless of who is at fault.

Tips to Save Money on Homeowners Insurance

1. Shop Around: Each insurance company will calculate your homeowner's insurance premium differently, using factors like your location, the construction of your home, prior claims on your property, and your credit score. Compare quotes from multiple insurance companies to find the best deal. Online tools can be useful but you shouldn't rely solely on them-contact insurance agents for a more complete picture.

1. Raise your deductible: Your deductible is the amount of money you pay if you have to make a claim. For example, if your deductible is $1,000 and you file a claim for $30,000, you would have to pay $1,000 toward the repairs and your insurance company would cover the rest. Increasing your deductible lowers your premium but also means you will pay more out-of-pocket expenses if you file a claim. If your company uses a deductible based on a percentage of your coverage, remember that the dollar amount you will have to pay for repairs before the insurer pays will go up every time the insurer raises the amount of coverage in your policy due to increased costs of reconstruction.

For example, if your home insurance has a 1% deductible and provides $350,000 of coverage, you will have to cover the first $3,500 of repair costs before the insurer pays anything. If, upon renewal, the company raises your coverage $370,000 due to inflation, then you will have to spend $3,700 before the insurer covers anything.

1. Improve your credit score: Unfortunately, insurers often charge consumers higher premiums based on their credit score. If your score is low, it can dramatically increase your costs. Check your credit report for errors- mistakes happen more often than you'd think! You can request a free copy of your report online. Over time, focus on improving your credit score if needed and then reach out to your home insurer to ask them to recalculate your premium. You can also check out the many credit-score-focused resources available on the America Saves website. Bundle your auto and homeowners insurance: While it varies depending on the insurance company, many companies provide discounts if you buy both auto insurance and homeowners insurance from them. Typically, these discounts range from 5 to 15%. Ask your company about the bundling discounts that they offer. However, just because a company offers a bundling deal doesn't mean it will get you the best price. Always compare the bundled premium's cost against what it would cost if you bought policies from separate companies.

1. Strengthen your home against natural disasters: making home improvements to reduce your risk can really pay off. Adding features such as storm shutters, a fire-resistant roof, or a reinforced roof might lower your premium-in some states, insurers are required to offer discounts to homeowners who submit proof of these measures. Additionally, some states provide grants or other assistance to homeowners so they can undertake these measures. Check with your state Insurance Department to see if they have a grant program or can direct you to other assistance opportunities. Once you have completed the improvement, make sure your insurance company knows.

1. Look for discounts: Some insurance companies offer homeowners certain discounts if they recently bought their home, choose paperless billing, pay their premium automatically, are members of a professional organization, or a veteran. Check with your insurance company to see if you are eligible.

1. Improve your home's security: By installing a smoke detector, burglar alarm, or deadbolt locks you may qualify for a discount.

While these tips can help you save money, the Consumer's Federation of America believes the homeowners insurance market needs systemic reform. Click on the link above to read more about what the Consumer Federation of America is advocating for to improve access to affordable and high-quality homeowners insurance coverage across the nation

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