Better understanding your home insurance and the costs associated with it could mean big savings for you. So before you’re intimidated by unfamiliar vocabulary or egregious boredom, let me explain some things that could potentially free up several hundred dollars a year.
I recently took it upon myself to find out if we could save money by switching insurance providers. This topic is one I knew literally NOTHING about so I started the best way I knew how: asking questions. Google gave me a very rudimentary understanding of some terms and companies that provided insurance. I began calling for quotes on a new home insurance policy. I answered quite a few questions, while shuffling through a large and disorganized stack of paperwork. Many, many more questions, phone calls, emails, quotes, and a full education in home insurance later, I understand a whole new world of business.
With the help of an independent insurance agent, I found that we could significantly reduce our premium (read: yearly payment). I’ll get into more details on our personal path to savings in a bit, but let me also share with you the other ways you may discover some spare cash!
This is the first and most obvious way to find savings. Home insurance is a competitive market, so chances are you may not have the best rate. Now you’ll want to do your research on the provider and how well they respond to claims and how often they actually pay out, but that is also something you can discuss with your agent.
An independent insurance agent is an individual who does not work for a specific insurance provider, but compares insurance rates from multiple providers to help you find the provider that would give you the coverage you need at the best price. When it comes to insurance, it is like having a personal assistant. They won’t shop for your groceries but they do a darn good job of shopping for the best policy. If you don’t have a gem of an agent, then get a new one! This person should be easy to talk to, intelligent and clearly FOR YOU. If you need a referral, scroll to the bottom of this post.
We had the fortune of hugely benefiting from a flood insurance carrier* that spotted a huge discount we were missing out on. Our previous agent had missed this for the last 7 years. That was 7 years of significant discounts we were missing out on. Needless to say we promptly changed agents and after an enormous amount of phone tag we received over $2,000 dollars in retroactive refunds. Let me remind you: seven frickin’ years. So let another agent crunch some numbers for you and see what they come up with!
Insurance companies will often offer a small discount for people who purchase several different kinds of insurance with them. For example: home, life, auto, flood, valuable personal property, etc. If your insurances are through several companies, call each of them and compare rates. See if you would save money by switching them all to one.
Raise Your Deductible
Proceed with caution here. Your deductible is how much the insurance company requires you to pay out of pocket before they pay for anything. It works just like health insurance. If you have a low deductible (meaning you pay very little in the event of a claim) your premium will be higher. If you have a higher deductible (you pay more out of pocket before the insurance kicks in their part) then you have a lower premium. Either way, they are getting your money. The first scenario means they are getting it yearly in a larger sum, the second scenario means they are getting some of it yearly and the rest when you claim a loss.
If your bank account is sitting pretty and you’ve got a nice nest egg, then you could afford to raise your deductible from say $2,000 to $6,000. In the event of a claim it wouldn’t be too much of a burden for you to cough up $6,000. Then insurance would kick in the rest. Raising your deductible would mean lowering your yearly payment (premium). But if you are scraping by, then of course you want your deductible to be as low as possible because in an emergency you’ll be lucky if you have $1,000. This means your yearly payment (premium) is higher.
Some people raise their deductible even when they can’t realistically afford to pay it out. The risk of setting a higher deductible just to save money on your yearly premium without actually having the money to pay that deductible in the event of a loss is not something I recommend.
Compare Cost vs Savings for Major Updates
We have one thing that is very UN-updated in our home: the roof. Our roof is currently 22 years old. Most insurance companies will not even take a client with a roof that old. Which leads me to this point. We learned that by replacing our roof, we could switch to a different insurance provider and our premium would be cut in HALF. If you do the math on a new roof, we were looking at roughly $6,000. With that new roof on we will be saving roughly $700 a year! The roof will essentially have payed for itself in 8.5 years with what we would save in premiums. And we need a new roof anyway, so it’s a win-win.
Ask your agent about what kinds of discounts you are currently getting and if there are any big ones you are missing that you could potentially “upgrade” to!
Wind Mitigation Test
I also learned that having hurricane straps on your roof is one of those boxes they check for a discount. If you have not replaced your roof since you became homeowner, you may not know whether or not your roof has hurricane straps (visible from the attic). But you can’t just call your insurance provider and say “yep! we’ve got em!” You have to have documentation. This is where the wind mitigation test (WMT) comes in.
A qualified professional assesses the safety of your home in the event of a hurricane. They will check for hurricane straps and many other features. They document all of this officially. This test costs approximately $90. You should ask your insurance agent if they work with a company they recommend. Since we had never had a WMT completed on our home, it occurred to me that we have been missing out on that discount for the last 7 years! WMT’s are included for free with any new roof, so we are going to hold out a few more months and get one with the new roof.
Don’t Get Duped
Lastly, in your pursuit of lower payments, don’t let someone under sell you on the coverage you NEED. Two things you should not compromise on are:
Replacement Costs – in the event of damage to your home, you want insurance to kick in enough money for you to replace all of your old damaged items for NEW items. If you are not careful, you may be presented with a policy that assigns your personal property a USED value (aka: a heck of a lot less than it would cost to buy it again).
Liability Coverage – This is in the event that you were sued for injuries or damages to a 3rd party while on your property. The minimum coverage recommended for this is $300,000. This prevents a potential lawsuit from bringing you to ruins.
If your policy INCLUDES these key things, and has a deductible you can afford, then you know it isn’t too good to be true!
I can’t even begin to tell you what a difference a great agent makes to this whole process! So let me suggest you call Katie Fabrizio at Family First Financial. She is so refreshing in a world of professionals that are in too big of a hurry to actually help the clients they want business from. If you want to learn more about lowering your insurance payment and you live in Florida, call Katie!
or email her at: firstname.lastname@example.org
I’d love to hear how the process goes and how you saved money!
*The flood insurance carrier we switched to is USAA. This is an exclusive banking and insurance company only available to military and family. A regular independent agent would not include USAA rates, as they are a private company that must be contacted directly.