My Homeowners Insurance Has a New Place to Live
November 06, 2013This November, my homeowners insurance policy came up for renewal. I’ve had my current policy ever since I purchased the home six years ago. In North Carolina, if the cost of your homeowners insurance is more than what the insurance commissioner deems a reasonable rate, the insurance company must send a “consent to rate” form, whereby the homeowner consents to pay a premium higher than the threshold set by the state commissioner. For the last several years, I’ve signed the consent without much thought, but this year I decided to shop around to see if I could get better rates somewhere else.
As it turns out, I am probably paying too much for my homeowners insurance. After shopping around on websites like https://www.lowermybills.com/ and http://www.insure.com/home-insurance/, it looks like I can save money by switching to a different insurance company. Here are a few important things I learned during this process that may help you save money when it comes to your homeowners insurance:
You receive discounts when you carry multiple policies with the same insurer
Most of us probably already know this, but it’s worth reminding everyone that most insurance companies will give you a discount if you write more than one policy with them. For example, if I write my homeowners insurance with the same company that insures my vehicles I will receive a 15% discount on my auto policy.
Boats, ATVs, and other personal property may be less expensive under a separate policy
Our family owns a 19 foot runabout, and for years I’ve had it insured under the current homeowners insurance policy, but that’s about to change. As I was shopping around for homeowners insurance, I discovered that not all insurance companies include boats as part of the homeowner’s policy. Instead, many simply write a separate policy for this type of insurance.
This proved to be a good thing, as before I had no idea how much my boat insurance was actually costing me. In addition, the boat was insured for more than it is currently worth (because of depreciation), so not only did I find a less expensive insurer, but I will save even more by not OVER insuring my property.
Automatically renewing the policy could equate to automatically overpaying for coverage
As David Bakke points out in his blog post from March of last year, having your policy paid automatically from an escrow account makes it easy to forget how much the insurance is costing you. While I don’t have a problem with using an escrow account to budget for this expense, it’s a good idea to review and shop around for auto and homeowners insurance at least every couple of years. That’s because some insurance companies lower rates every so often in order to write new business, much in the same way banks offer special interest rates on certificates of deposit (CDs) to attract new customers. Once these new policies are written, the insurance rates creep up over time, but because of financial inertia, many policyholders simply keep the policy with the new carrier.
A higher deductible is not always worth it
It’s true, and even I’ve advocated the idea that increasing your deductible will save you money by lowering your insurance premium, but you have to consider the tradeoff between paying a higher deductible versus the likelihood of filing a claim. Here’s what I mean. If you are certain that you will NOT file a claim unless something catastrophic happens, then you’re probably better off saving money by using a higher deductible on your policy. On the other hand, if you have a tendency to file a claim anytime something happens, a lower deductible may be worth the higher cost of the premium.
Here’s an example: Let’s say your homeowners insurance premium is $1,000 a year with a $1,000 deductible, or $1,050 a year with a $500 deductible. If you are claim free for ten or more years, it makes sense to save the $50 a year by going with the higher deductible, but any claim filed within that ten-year period may have ended up costing more because of the higher deductible.
Adjust your policy for changes in market value
Lastly, it’s important to review your coverage because home values change over time, and as is the case with my boat, it may be possible to have TOO much coverage. While it may be tempting to use an online discount insurance company to save on the premium, don’t overlook the value a local agent can bring. An agent may be able to more accurately assess your need for coverage based on the specifics of your home and location.
These are just a few of the things you should consider when you open your mailbox and see a letter telling you that your homeowners insurance is coming up for renewal. In so doing, you may find a new “home” for your policy as well.