12+ Tips to Avoid Overpaying for Home Insurance

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Paying too much for anything is pretty painful, and paying too much for home insurance is no different. Just because you're shelling out your hard-earned dough to pay for inflated home insurance costs doesn't mean that you're getting superior coverage.

It's always a good time for a homeowner to take another look at home insurance. For one thing, you may be paying for insurance products that you no longer need or never needed in the first place.

We've got some basic information about home insurance and tips on how to lower your rate so you can rest easy, knowing you're home, your family and your investment are protected without overpaying for your home insurance costs.

A Tip from the Insurance Information Institute

"The land under your house isn't at risk from theft, windstorm, fire and the other perils covered in your homeowners policy," notes the Insurance Information Institute. "So don't include its value in deciding how much home insurance to buy. If you do, you will pay a higher premium than you should."

While your liability protection extends to the edges of your property and to a vacant site, it does not cover the land itself. In fact, land itself is never insured, so if your insurance agent suggests doing just that, you should probably look for another insurance agent. Start by entering your zip code on this page.

"Scope of Insurance" vs. a Standard Policy

While having zero home insurance is not against the law in any state in the U.S., your mortgage lender will require a certain amount of insurance, called a "scope of insurance," to protect its investment. In fact, your mortgage loan will not be approved until you have "proof of homeowners insurance."

Your mortgage lender will require you to purchase a "scope of insurance."

While the standard policy sold by the home insurance industry covers four basic areas—dwelling, personal property, additional living expenses and liability—your mortgage lender will most likely require only one of these products: dwelling. Your lender will probably want you to buy liability and, if you live in a flood-prone area, flood insurance, which is entirely separate from a home insurance policy.

Your dwelling insurance should cover the cost of rebuilding your house.

Dwelling insurance is what pays for your house to be repaired or rebuilt. It kicks in when your domicile is damaged by explosions, fire and smoke, lightning, falling objects, vehicles, frozen pipes, vandalism, riots, and the weight of snow, ice or sleet.

So, if you want to pay the bare minimum for your home insurance, you may want to purchase only your mortgage lender's scope of insurance, which is usually less than the insurance industry's standard home coverage. If you purchase only dwelling coverage, your house will be rebuilt after a devastating event; however, your possessions will not be covered, you won't be compensated for your food and lodging while your home is uninhabitable; further, you will be vulnerable to lawsuits if someone has been injured or died as a result of hour abode's conflagration.

Actual Cash Value vs. Replacement Cost

Some home insurance policies allow you to insure your home for its market value, or the actual cash value (ACV) of your home just before the loss event. But this type of coverage's liability limits go up and down with the market, meaning you might not receive enough compensation for rebuilding costs at the time of your loss.

You should make sure that you have enough coverage to completely rebuild your home, despite real estate trends. Of course, lenders and insurers will recommend insuring your domicile for all rebuilding costs. Ask your insurance agent about dwelling insurance that covers the replacement cost of your most valuable financial investment. Consider what you own when you set limits for contents or personal property coverage for your prized possessions.

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Home Insurance: the Basics

Hazard insurance is the same thing as homeowners insurance.

As mentioned before, a standard homeowners policy, also called hazard insurance, includes four types of coverage:

Dwelling coverage, which protects your domicile's structure

Personal property coverage, which protects your furniture, clothing, electronic equipment and so on

Additional living expenses coverage, which pays for your lodging and food while your house is uninhabitable

Liability coverage, which protects against a lawsuit if someone is injured in your home or on your property

Every insurance company calculates risk in different ways, so it pays to look at as many homeowners policies as you can, talking with insurance agents about the premiums and deductibles for different combinations of insurance products, what's covered and in what ways.

What Determines My Home Insurance Premium?

Your premium depends upon many factors, including credit scores, insurance history, the amount of coverage and the deductible, among others. You have no power over some factors, but you can improve credit scores.

Here are other factors that determine home insurance rates:

  • Location

  • Type

  • Square footage

  • Age and condition

  • Security and safety features

  • Purchase price

  • Cost to rebuild

  • Local state and building codes

  • Local building cost data

As you can see, there are a lot of ways risk determines insurance premiums. Would-be policyholders should always be on the lookout for great deals, and current policyholders should try to snag better deals, comparison-shopping to find the lowest-cost coverage for the right kind of insurance.

Take Advantage of Websites

A standard homeowners policy does not include flood insurance.

Wondering what version of dwelling insurance you should purchase? Looking for a flood insurance policy? Can you file a claim on water damage? Here are some tips.

Do your research

The internet has article after article and website after website about all sorts of home insurance topics and news that will interest you. A great place to start is your state's department of insurance, which will always have the latest news about any changes in the law. When shopping for insurance to protect your home or business, you've got to make use of all the information have.

Keep a dedicated folder

When you're investigating insurers and getting more and more information, you need to be organized. Many savvy customers use a simple folder to organize their research.

Comparison-Shop Home Insurance Policies

Real-time quotes for home policies change daily, even hourly, so it pays to shop around to business business find the best deal. You may have never have shopped around because your mortgage company set up homeowners coverage for you or you may have been with the same company for years and feel hesitant about switching your homeowners insurance carrier. Your insurance doesn't have to be tangled up with your mortgage payments. Chances are that your lender set up an account on your behalf and didn't compare rates. Do so today by entering your zip code on this page.

Get a New Insurance Quote Every Two Years

You should shop around for home insurance quotes every couple of years, to make sure you're getting a competitive rate. Your goal is to have the highest level of insurance for the lowest price. If you're not shopping around every couple of years, your rate and coverage may no longer reflect your needs.

Report Any Changes to Your Carrier

Home values often change, especially if you upgrade your home with a swimming pool or a new kitchen. Whenever the value of your home increases or decreases, you should adjust your policy accordingly. Even if there's an increase, it'll be well worth a hike in premium to make sure your policy covers everything. 

Let's say you added a gym to your abode and that room holds state-of-the-art equipment. You ought to add a rider to your home insurance in case there is a fire or natural disaster that destroys your new Peloton bike or even your pearl necklace.

Bundle Your Home and Auto Insurance

Bundling two policies together isn't just convenient. It can save you lots of money. If you aren't insuring your car and home with the same insurer, it's time to make the change now. In fact, the more policies you buy from the same carrier, the more you can negotiate a lower premium for all of your insurance products.

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Snag All the Homeowner Discounts You Can

You may be eligible for more discounts than you think. Often, your agent doesn't even know that a certain discount applies. Ask questions to see which discounts apply. Did you know that if you're retired you get a big discount on homeowners insurance? Also, your job and professional associations may earn you even more savings.

Loyalty Discount

Insurance carriers really value loyalty from their customers. So, if you stay with the same insurer long enough they may give you some savings on your policy. It's definitely worth checking on.

Being Claims-Free

Insurance carriers may lower your rates if you go a certain amount of years without filing a home insurance claim. They like it when their customers are low maintenance. So, if you've had insurance from the same company for many years and you haven't had to ask the insurance carrier for money, you could qualify for a discount.

Having a Monitored Burglar System

Many insurance carriers offer a reduced price to homeowners with a monitored security system. Burglar systems deter would-be thieves, reducing your chance of being a victim of a break-in. Plus, having a monitored security system allows the police to respond faster, which increases the chance of catching the burglar.

Having a Monitored Fire Alarm System or Other Safety Measures

The faster the fire department can respond to a fire, the less damage your home will suffer. That means your claim to the insurance carrier would be smaller, hence why they may offer a discount.

Getting an Impact-resistant Roof

Roofs are expensive. If hail punches a bunch of holes in your roof, that's not good. Having an impact-resistant roof lessens the chance of hail causing lots of damage to your home, so your insurance carrier might have a discount available. Keep in mind that you'll need to make sure your new roof will qualify for that discount.

Home Improvements

If you make your home stronger in terms of safety, longevity, or structure, you could be able to get discounts because the chances of having a claim are reduced.

A few examples of improvements that may qualify for discounts:

  • New wiring
  • Water shutoff devices
  • New plumbing
  • Storm-safe windows
  • New roof
  • Invest in smart home technology

Insurance Rates Fluctuate Every Couple of Years

The value of your home isn't the only thing that changes constantly. Insurance rates vary from year to year as well. By comparison shopping for homeowners insurance, you'll see if you are currently paying too much. You may also make a new connection with an agent who can lower your rates for other coverages, like auto or life insurance. Let SmartFinancial bring you multiple free home insurance quotes to make your life easier.

Your Lenders Requirements Changed

Your lender has specific requirements about how much homeowners insurance they require you to have. This requirement is usually based on the mortgage amount. As the amount you owe goes down, you may be able to lower your home insurance premiums as well.

Your Household Headcount Changes

Your home insurance takes other inhabitants into consideration because the coverage for medical bills would apply to anyone who gets hurt on the property. As you can imagine, the risk decreases when fewer people reside in your home. If a child has left the nest make sure to update your information with your agent so you can get a break on your insurance premiums.

Raise Your Deductible

If you're having a hard time paying your current premium amount but have already shopped around and know you're paying the least for the best insurance, you may want to consider raising your deductible. What that means is that you'll have to pay more upfront if you do end up filing a claim. You always have to pay a deductible on home insurance before the carrier picks up the tab. An increase from $500 to $1,000 could save up to 25% on your premium payments.

Your Home's Value Is What You Need To Insure

If you included the value of the land your house is situated on, you're probably paying too much for insurance. The reason is that you don't need to protect land from natural disasters and fire. The reason behind having home insurance is to pay for rebuilding your home if something were to go wrong. You would not need to do anything to the land. Don't include the land value when deciding how much home insurance to buy and your rate should go down immediately.

Improve Your Credit Rating

Many insurers use credit scores to determine risk, so you may be getting higher-than-average quotes if you have a poor credit score. Check to see if this is the case by monitoring your credit, where you'll see what is bringing down your score. After you take care of any delinquent accounts and your score improves, you should let SmartFinancial do some thorough comparison shopping for both you.

What's Mortgage Insurance?

Homeowners insurance covers your losses in case of any damage to your residence or furnishings from causes like fire, wind, etc. Homeowners insurance also provides liability coverage against accidents on your property. Mortgage insurance, on the other hand, is for your lender's protection. It is usually required if your down payment is less than 2o% of your home's purchase price, and it pays out to your lender if you default on your mortgage payments.

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