Most people don’t realize it, but homeowner’s insurance is one of the best deals the insurance industry offers. It is such a good deal in fact, that many insurers actually lose money writing it, but write it anyway to attract the auto and liability policies that are their real bread and butter. People like to have all their insurance policies at one company. It’s convenient and it’s easy to remember. So home insurance is often an industry “loss leader”; that is, something the insurance company makes available to get your auto and life business, in the same way big box retail companies offer very low prices on small electronics to get you into the store so you’ll buy other items with a decent profit margin.
With this in mind, cutting the premiums on your homeowner’s insurance should not really be your first priority. Think about it. You need your home. And you need more than just what you owe on the mortgage in the event that it is completely destroyed. You’ll need to insure it for enough to easily rebuild and refurnish it, and you’ll need money and a place to stay while it’s being rebuilt. Though we all count on never needing to use home insurance, when you do need to file a claim on your policy, it’s a lot like when you find you need a lawyer or a surgeon. You don’t want the cheapest lawyer or surgeon. You want the best lawyer or surgeon. The same is true for your homeowner’s insurance.
That said, when reviewing your homeowner’s policy, it is worth knowing that some parts are better parts to scrimp on than others. For instance, a low deductible can cost you hundreds more per year than a deductible of $1000 or more. Take the highest deductible you can afford before you cut anything else. It will save you the most money and chances are you won’t be filing any small claims anyway.
Which brings me to the second way to save money on your homeowner’s policy: Don’t file small claims. The 50s are over. Remember the overweight insurance agent in the bad polyester suit who was your Dad’s sort-of friend in high school and used to come to the house to review the policies with your folks? That guy no longer exists. That guy is retired now, and he is busy grumbling about call centers and instant quotes and how things aren’t like they used to be, and he’s doing this in between fishing trips and Alaskan cruises, the thing is, he’s right. Things are not like they used to be. Complaining will not bring back the old days. File more than one small claim and you’ll see your premiums skyrocket faster than you can Katrina backwards. Keep your house in good repair and save the insurance policy for natural disasters.
Last but by no means least, think about those natural disasters and do a little research before you buy your home in the first place. Want to live on the Florida coast or at the edge of a beautiful California forest? Then add another zero to the $800 you expect to pay in home insurance. Maybe you would be just as happy spending that extra $7200 on a lovely painting of the Florida coast, or an occasional hike amongst the redwoods, instead of dishing out teh same dough year after year and counting the days until it breaks the five figure mark.
Read your policy and ask lots of questions. Liability insurance is included on every policy, but what most people don’t realize is that they can double their amount of liability coverage, protecting them from all manner of lawsuits and maimed mailmen, for only a couple of extra dollars a month. Ask about auto, life and home package deals, and about discounts for professional associations, burglar and fire alarm systems, and time with the company. Then sit back and enjoy your home, free of fear and confident that you are one savvy, forward-thinking financial wizard. Because you know what? You are!