How to Battle Rising Insurance Premiums
Home insurance premiums go up – it’s just a fact. But unlike when bacon prices or cable television rates go up, you don’t have to just take it.
The good news: You can take a number of steps to combat increases in how much you pay for home insurance. The great news: You can do it without affecting the level of coverage you have.
Here are a few ways you can address rising home insurance premiums:
Don’t be too loyal
Loyalty is commendable in nearly every situation, and it’s a hard habit to break. But loyalty could work against you when it comes to home insurance.
Why? Because providers base how much they charge for home insurance on what they perceive as your risk of filing claims, and every provider weighs risks differently.
Chances are you didn’t shop around when you first purchased home insurance – you took the recommendation from a family member or friend or maybe even your real-estate agent or mortgage officer. When it came time to renew, you might have continued coverage without considering any alternatives.
It’s time to correct that. Consumer experts recommend shopping your home insurance coverage at least annually to see whether there’s a better alternative.
One warning: Make sure you’re comparing the same coverage with every provider. You don’t want to pay less and then find out you have substantially less protection from your policy.
Look for a bundle of saving
Most home insurance companies also sell auto insurance. So what, you ask? If you purchase home and auto insurance from the same provider – they call it bundling – you can often save on your premiums. How much? Up to 20%.
You can also bundle coverage for your home and your RV or boat or motorcycle.
Count on some discounts
Here’s a little-known fact about home insurance providers – they offer discounts on premiums, especially if you take precautions to make your home safer.
For example, if you have deadbolt locks on exterior doors, you can save up to 5% on your premium. You also can win discounts if you have a security system or smoke alarm or if you haven’t filed a claim in 10 years. Check for some other potential price breaks, but keep in mind that discounts vary widely by provider and state.
Check out your replacement cost
A large part of your home insurance premium is tied to your dwelling coverage – the part of your policy that offers help if the physical structure of your home is damaged or destroyed by a covered peril such as fire.
You should have enough dwelling coverage to rebuild the home from the ground up – it won’t be the same as the market price of the house because you’ll still own the land and have the view and the proximity to good schools or shopping that might have affected the cost. Typically, the replacement cost is calculated by multiplying the square footage of the home by local building costs and then factoring in upgrades such as granite countertops or hardwood floors.
But here’s the thing: Many policies include inflation escalators that drive up the replacement cost – and your premiums – over time. Revisit your dwelling coverage limit – you can use an online calculator to get an estimate – and make sure it’s not too high.
Raise your deductible
Your deductible is the amount you agree to pay toward a claim. For example, if your deductible is $500 and your house suffers $2,000 worth of damage in a kitchen fire, you’d pay $500 and your provider could pay $1,500.
Your deductible has an inverse relationship with your premium – the higher you set the deductible, the less you’ll have to pay for coverage. If you increase it to $1,000 or more, you can reap substantial savings on your premium. However, only do this if you have the discipline to keep enough money on hand to pay the deductible should you need to file a claim.
One other benefit of raising your deductible is that it will discourage you from filing small claims – over time, that can keep your premium down because insurance providers prefer customers who don’t file many claims.
Don’t just accept rising insurance premiums as inevitable! Fight back and see if you can lower what you pay for coverage instead.