How to Lower Your Homeowners Insurance Premium

Reduce your homeowners insurance premium without losing benefits

A homeowner looks over her home insurance policy.

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Purchasing a home can provide benefits to the owner, but the investment must be protected with homeowners insurance. The premiums of this necessary insurance coverage, like the property taxes charged by your local community, are expenses that will continue as long as you own the structure. While there are not many actions you can take to reduce your tax obligation, there are ways to lower the premium you pay for homeowners insurance.

Reasons Behind Rising Costs

In most cases, both your annual property tax and your yearly insurance coverage will increase each year. Taxing authorities do this to provide for and improve things like roads, sewage systems, libraries, and schools. Insurance providers raise the cost of coverage to keep up with the increasing cost to repair or replace your home—due to inflation.

The age of your home will also affect the price of your coverage. Older homes have a greater need for repair and maintenance. The absence of security and safety features, like lights and smoke detectors, can impact your premium. Any claims you have filed may increase the cost of your coverage as your insurance risk profile changes. Even if you have not filed a claim, if you live in an area where the insurer has had to pay for damages that others have sustained, the company might raise rates to all homeowners.

Increase Homeowners Deductible

Your deductible is the amount of risk you agree to accept before the insurance company starts paying on a claim. As the cost of your policy increases, it may no longer make sense to let the insurance company assume all the risk.

For example, if you have a low deductible of $500 or $1,000, consider raising it. You could save a significant amount of money on your monthly premium costs by assuming more financial risk of your own. The biggest consideration is objectively considering how much cash you'd have on hand to pay the deductible in the event of an emergency, like a full roof replacement.

Be aware that insurance companies will penalize customers who file one or more small claims each year or year after year. A larger deductible helps prevent the filing of smaller claims. A history of claims can result in the policyholder losing discounts, major premium increases, and possible policy cancellation. A long claims history will follow you from insurer to insurer, which will cost you when you shop around.

Buy Coverage From One Provider

Consider buying your homeowners and auto insurance policies from a company that offers both and bundling them together. Some companies offer discounts ranging from 5% to 15% if you buy both types of coverage from them. Check around and make sure the price is lower than buying the two policies from two different companies before making this move.

Discounts From Home Features

Some home insurance companies offer discounts to homeowners for good behavior, such as performing regular maintenance on the structure. There may also be discounts for safety features within the home. For example, most providers offer discounts for centrally monitored smoke and fire detectors that notify emergency services outside of the home. Companies will vary on the items and the amount of discount they will give for other items like deadbolt locks and security camera systems.

Other Homeowners Discounts

Some companies offer longevity discounts if you've been with them for several years. Typical discounts are 5% if you've been with the company for three to five years, and 10% for six years or more.

Finally, if you're over 55 and retired or disabled, you may qualify for additional discounts.

Become a Better Insurance Risk

Risk plays a big part in determining your insurance costs. The riskier a person or property is to insure, the higher the price tag for insurance climbs. Ask your insurance agent what you can do to make your home less expensive to insure. Making changes that reduce the risk of damage in windstorms and other natural disasters is one example. Another is updating old wiring or heating systems, which may reduce your risk of fires, therefore, reducing your premiums.

Insurers shy away from some risks. For instance, owning certain types of dogs such as Rottweilers, Doberman pinschers, and pit bulls can limit or void your policy. Owning a swimming pool or a trampoline can increase your cost of coverage. Read the fine print in your policy under the "Conditions and Coverages" sections, so you know all the things that are excluded from coverage. You may opt to buy additional coverage to protect yourself from certain exposures.

Improve Your Credit Score

Depending on where you live, your credit score could have an impact on the rates you pay for homeowners insurance. If you want to get your credit in shape, stick to practicing good credit habits. Don't have too many open credit accounts, don't charge close to the limits on your credit cards, and pay all your bills on time to keep your credit score healthy.

Shop Around for Homeowners Insurance

Shop around for homeowners insurance rates, but keep in mind that you may be receiving a longevity discount. Get quotes from three agents and compare prices. Make sure you are not shopping too far into the bargain basement. Check that the provider is highly rated when it comes to serving customers filing claims. Your state insurance department may have rate comparison information available for your state.

Understand Your Homeowners Insurance Policy

Your home is your biggest investment. Make sure it's adequately protected from risks you cannot afford to cover yourself. Providers will send several explanatory pages with your policy. Take the time to review these pages. Use the internet to search for any terms or coverage you don't understand. Of course, if all else fails, call your agent and ask them what the coverage items or listed deductible mean. This annual review will help you understand where you are and are not protected.

Also, check to see what supplemental coverage you may need. This review is especially important if you live in an area that experiences severe weather situations, such as tornadoes, hurricanes, earthquakes, sinkholes, wildfires, or floods. Some items like wood privacy fences, pool or patio screen enclosures, and freestanding sheds may not be covered in the event of a loss. If you made substantial improvements or major purchases, make sure you have enough coverage to offset replacing those items.

Once a year, before your homeowners insurance policy is due to renew, dig out the current policy, read through all the details, and call your insurance agent to discuss any changes in your situation that occurred during the year. Make sure you're addressing any new insurance needs and removing any coverage that's no longer necessary. 

It makes no sense to buy insurance to protect yourself against risks you are unlikely to encounter. For example, earthquake coverage in a non-earthquake zone, or a jewelry floater to your policy if you don't own expensive jewelry.

Frequently Asked Questions (FAQs)

What is the average cost of homeowners insurance?

Homeowners insurance costs vary significantly, depending on your home's location, value, and construction type, and the specifics of your policy. According to a 2020 report from the National Association of Insurance Commissioners, the average U.S. premium for the most common type of homeowners policy covering a home worth $200,000 to $300,000 is $1,114 per year.

How much will a new roof lower my homeowners insurance?

An old roof can significantly increase your chances of water leaks and damage. That is why some insurers offer significant premium discounts for installing a new roof on your home. These discounts vary by state and insurer, so ask your agent what your policy offers.

When can I drop my homeowners insurance?

Your lender will usually require you to have homeowners insurance as long as you have a mortgage of any kind on your property. Even when you fully pay off your loan, however, you should think twice before canceling your home insurance policy. Consider whether you would be able to pay for major repairs—or even completely rebuilding your home—in the event of a disaster. If not, then opting for a higher deductible will lower your premium and increase your out-of-pocket costs for repairs without fully exposing you to the risk of a disaster.

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