As a homeowner, there’s no doubt you’ve had to step back and take a look at ongoing expenses to see where you might be able to save some money.
One place that many people look to is their homeowners insurance policy. With the fluctuation in the housing market and a flood of offers from insurance companies to “bundle” coverage plans, cutting back on insurance costs might seem like the logical decision to make.
Be careful – 60% of homes are underinsured, and cutting back on such an important investment could hurt you in the long run.
Wheeler, DiUlio, & Barnabei have important advice for people who are thinking of taking this route. There are many options for you to consider, which will help protect your home and save you money in the short- and long-term.
Short-Term Savings #1: Should I Insure The Land Under My Home?
As you may already know, many insurance companies push homeowners to insure the land that underlies the house.
Think about it. In the case of most damages covered by your policy, such as a fire, wind storm, or theft, the land beneath your property will still be there. Why would you pay extra to insure land that isn’t going anywhere?
There is much less of a risk when it comes to your land than there is to the structure and contents which are typically covered under your homeowners policy.
Assuming you do not own a shore house (which is prone to flooding during storm and hurricane seasons) or that you do not live on top of a fault line, you may not need to spend the money on insuring the land under your property.
Do your research, but odds are this may be an area where you can cut down on your premium, potentially saving you hundreds of dollars each month.
Short-Term Savings #2: How Should I React To Market Fluctuations?
One huge mistake that many homeowners make is caused by knee-jerk reactions to an ever-changing market.
When the value of your home decreases, your initial thought might be that you can now reduce your insurance coverage. Why pay to cover a $200,000 home if it’s now only worth $150,000?
The best answer isn’t to reduce your coverage, but to raise your deductible. That way, in the off-chance that your home suffers damage, you may have to face a higher deductible up front, but you will pay less out-of-pocket each month.
Plus, your coverage can remain the same, keeping your home protected no matter what the market is doing.
Short-Term Savings #3: What About Bundling Coverages?
These days, all you hear about is how much you can “save” by bundling insurance policies under the same carrier.
It may make sense to get your auto and homeowners insurance policies from the same carrier. However, it is important to read the fine print of these offers and of the coverage you receive.
Make sure that the cost will, in fact, be cheaper if you bundle than if you use separate insurance companies. Some companies may offer comprehensive automobile insurance, while falling quite short when it comes to homeowners insurance.
In order to get the coverage you had from your previous insurer, you may have to tack on several additions to your policy, causing your premiums to spike and ultimately costing you more money per month.
Short-Term Savings #4: How Can I Protect Myself?
Ultimately, one of the best ways to save money on homeowners insurance is to find ways to protect yourself.
Contact your insurance agent or company representative. Ask them what sort of measure you can take to protect your property from damages.
Quick additions such as storm shutters or shatter-proof glass shows your insurance company that you’re taking extra precautions to protect your house.
These simple measures could lead your insurer to lower your premiums, or tack on additional discounts for making your home less susceptible to damage, therefore reducing the likelihood of a claim.
Taking a proactive approach could be all you need to do to save money in the short-term. Now, what is the best way to save money on homeowners insurance even further down the road?
Long-Term Savings #1: How Much Would It Cost To Rebuild?
The #1 thing to consider when looking for long-term savings on homeowners insurance is this: exactly how much will it cost to completely rebuild your home?
Before you answer this question, consider this important fact: The sale price of your home is not the same as the rebuilding price.
Although you may be able to save money in the short-term by insuring for less, if you have a total loss, you will not be able to rebuild your home once you take out a cheaper insurance policy.
Keep in mind that any replacement cost policy is still restricted by your policy limits. For example, if your policy limit is $300,000, but it costs $750,000 to rebuild your home, you will still only receive $300,000 for your damages.
In sum, there is no real long-term way to save money on homeowners insurance, without risking the possibility of “losing it all” if your home is ever destroyed.
If you have any more questions about how to save on your insurance policy, give us a call. We can give you real, unbiased advice on exactly where you might be able to cut back on your premium…and where you should begin allocating even more money to. Remember: the last thing you want is to lose your home.