How to Save on Homeowners Insurance: 6 Tips to Consider

In the face of rising costs, some homeowners might be tempted to reduce or drop certain policy coverages in hopes of lowering their premiums. But keep in mind that inadequately insuring your home carries a big potential risk: You may find yourself having to shoulder higher out-of-pocket costs to repair your home should a natural disaster arrive at your doorstep.

So what are some things homeowners could do to help manage insurance costs? Here are six tips to consider.

1. Understand your potential climate risks

Whether you’re a first-time homebuyer or a homeowner, it’s important to understand the potential climate risks your property may face, so you can be prepared to deal with any related costs down the road.

Depending on where you live, you may be more exposed to certain natural disasters such as floods, wildfires, hurricanes, and drought, which could impact your insurance rates, utility costs, and frequency of home repairs. If you live in a particularly vulnerable or high-risk area, this could also affect your ability to purchase an insurance policy or certain types of coverage.

For instance, not many people are aware that most standard home insurance policies do not cover flood damage. In such cases, you may have to turn to the government for options through the National Flood Insurance Program.

When buying a home, your real estate agency may include information about potential climate risks in their listings. But it’s also a good idea to do some additional research on the property area.

The federal government suggests the following online tools for prospective and current homeowners:

• Federal Emergency Management Agency’s National Risk Index
• US Department of Agriculture’s Wildfire Risk to Communities
• Risk Factor
• Climate Check

2. Take a closer look at your homeowners insurance policy

Reviewing the details of your insurance policy at the start of each year or whenever your policy is up for renewal is a good habit to get into.

That way, you can stay on top of any renewal changes that might affect your coverage (e.g., deductible amounts, exclusions, limitations, etc.) and make sure your home is adequately insured. For instance, double-check to see if your policy actually covers the replacement cost of your home.

Ideally, you don’t want to be underinsured or overinsured. Being underinsured could mean more out-of-pocket expenses for you when you file a claim. And if you’re overinsured, you may be paying for coverage you don’t need. If you don’t know what your policy covers, get in touch with your insurance agent and review the details together.

If you’ve been experiencing more extreme weather in your area, ask your agent what kind of policy adjustments might be needed to address those climate-related risks.

3. Ask about policy discounts for certain risk mitigation measures

Some insurance companies offer policy discounts if you take steps to help protect your home against the risk of loss or damage. As you’re reviewing your coverage details with your insurance agent, ask about those discounts. Are there certain weather-proofing home improvements you can make to help you save on premiums?

For example, if you live in a hurricane-prone area, some insurance providers offer discounts if your home is equipped with reinforced doors, hurricane shutters, or impact-resistant windows/roofing.

Good to know: Not all insurance companies may offer these discounts and the qualifying rules may vary from state to state. So always contact your insurance company for the most up-to-date information.

4. Consider increasing your deductibles

Raising your deductibles is a common way to help lower your monthly insurance premiums. (A deductible is the amount you have to pay out of pocket whenever you file a claim for a covered loss or damage.)

It’s important to remember that while increasing your deductibles could help you save on premiums, typically, that also means you’ll be paying more yourself toward any insurance claim.

So whether this option is right for you will depend on your financial situation. For example, do you have enough in your emergency fund to help cover your deductible payments or any other unexpected expenses that might crop up?

5. Shop around and think about bundling your insurance policies

Doing comparison shopping could help you find more competitive rates out there. When comparing prices, however, make sure you’re also comparing the coverages and coverage amounts as well. Sometimes a more affordable rate may not provide the right level of coverage you need to protect your home.

And don’t forget to weigh in other factors such as customer service, claim response time, and the reputation of the insurance company.

If you’re satisfied with your current insurance company, another possible way to save on premiums is to bundle multiple insurance policies (e.g., home, auto, boat, etc.) with the same provider. Some insurance companies offer multi-line policy discounts. Also, if you’ve been a long-time customer, don’t be shy to ask about a loyalty discount.

6. Maintain good credit

Certain states allow insurance companies to use a credit-based insurance score to help them set policy premiums and renewal rates.

Be aware that this insurance score isn’t exactly the same as your credit score. Even though they may sound similar, they measure different types of risk. While your credit score helps to assess your creditworthiness, your insurance score is used to assess the likelihood or probability you’ll file an insurance claim as a policyholder.

But similar to your credit score, your insurance score is partly determined by what’s in your credit report—such as your overall credit history, payment history, and credit utilization.

This means that maintaining a good credit score could help you with your insurance score as well, which could result in lower premiums.