How To Save Money on Your Homeowners Insurance
March 08, 2017When my husband and I shopped for homeowners insurance back when we bought our condo a couple of years ago, I knew from my CFP® training that all homeowners policies are required to cover the basics. I also knew that if we wanted coverage of things like flooding from a backed up toilet or frozen pipes, we’d need to ask for those. But beyond that, we wanted to make sure we were adequately covered without over-paying.
Now as our premiums go up about 6% per year, purportedly to account for the increase in what it would cost for the insurance to cover a loss (if only wages kept up with this supposed increase in costs!), we are shopping around to make sure we’re still getting the best value for our money. If it’s been several years since you’ve shopped your homeowners insurance policy around, it could be a great place to find some extra money in your budget. Here are some tips from my colleague Teig Stanley on how to go about doing that:
First, you’ll need your “DEC page,” which is short for “declarations” page. Then, take the following 5 steps:
1. Use a broker to shop for coverage. There is no need for you to go through all the time/effort yourself. Ask the broker to provide three quotes compared side by side so you can compare apples-to-apples.
2. Make sure the quotes have the same criteria:
Deductible – This should include the separate deductible for wind/hail/water or other events that are geographically specific.
Home Value – If it’s been several years, this probably needs to be adjusted since your home has probably increased in value. Most insurance companies’ software will assign a value automatically based on actuarial data specific to the address.
Cost – Is the payment quoted monthly, annual, quarterly, etc?
Replacement Cost Coverage – Some policies replace up to 100% of the benefit for which they’re written. Others replace 125% – 150% if the home is a “total” loss.
3. See if you can apply any special discounts – military, occupation, no recent claims, alarm systems, etc.
4. Contact insurance companies that don’t broker out (like USAA) if you qualify so you can obtain a quote to compare.
5. Give the broker a copy of your current DEC page and cost (don’t worry, they can’t do anything manipulative with the premium) as well as permission to pull your credit so they can get accurate quotes. It’s a “soft” credit hit, so it won’t have a negative effect on your credit score.
Finally, you can find some additional insight and tips in this post from another colleague, Greg Ward. He shopped around himself and found a much better deal. Of course, I would be remiss if I didn’t point out that any cost savings you realize from this process should be used to either increase high-interest debt payments or bump up your savings rate toward your emergency fund, retirement or other goals.
Kelley Long is a resident financial planner with Financial Finesse, the leading provider of unbiased workplace financial wellness programs in the US. For more posts by Kelley or to sign up to have her weekly post delivered to your inbox each Wednesday, please visit the main blog page and sign up today.