Four ways to save money on home insurance as rates rise

BY Veronica Dagher | UPDATED DEC 02, 2022 07:06 AM EST

Premiums jumped 9.3% since 2021, but there are ways to trim your bill

Homeowners had to shell out more money for mortgage payments, routine maintenance and heating costs this year as quickening inflation and rising interest rates strained monthly budgets. One more bigger bill to add to that list: home insurance.

Home insurance premium rates rose 9.3% from Jan. 1, 2021, through Nov. 25 on average nationwide, according to S&P Global Market Intelligence data. The Insurance Information Institute, an industry trade group, also known as Triple-I, said premiums are likely to rise further in 2023.

A standard policy typically covers the cost of replacement of the home and some of its contents in the event of damage or theft. Premiums are up in part due to inflation, supply-chain issues and labor shortages, which drove up the cost of home repairs and replacement, said Loretta Worters, a vice president at Triple-I. Damage from tornadoes, hurricanes, severe storms, wildfires, and other natural disasters are also boosting premiums over the long haul, she said. Companies pass along on the cost of these higher prices and risks to consumers.

The average home-insurance premium cost $1,784 a year, according to a recent analysis by NerdWallet Inc., though rates vary widely across the country. The most expensive states for homeowners insurance are Nebraska, where people pay $4,004 a year on average, Oklahoma ($3,830) and Kansas ($3,347), according to NerdWallet. The cheapest states are Hawaii ($458), Delaware ($796) and New Hampshire ($816).

Insurance experts and consumer advocates say costs can also be reduced by careful comparison shopping and modifying coverage. Here are four options to consider:

Raise your deductible

One way to cut your annual premium is to increase your deductible, the amount paid out of pocket for repairs before insurance coverage kicks in, said Ms. Worters at Triple-I. The typical minimum deductible is $500 or $1,000.

How much you can save after raising the deductible depends in part on where you live and what your state insurance department allows, she said.

If you live in a disaster-prone area, your insurance policy might have a separate deductible for damage from major disasters. If this is the case, make sure you have enough money saved to absorb the cost of both deductibles, said Ms. Worters.

Consider eliminating some coverage

Raising your home-insurance deductible might not be practical advice for coastal-area residents, since so many policies already contain special wind, hurricane, or named-storm deductibles.

“Homeowners in coastal and wildfire prone areas are getting squeezed very hard right now on home insurance costs and coverage,” said Amy Bach, executive director at United Policyholders, a national nonprofit insurance consumer-advocacy group.

One strategy she recommends is reducing or eliminating the “other structures” bucket of coverage if you don’t have a free-standing garage, shed, retaining wall, pool or other items that would fall under that category. Call your insurer and ask if it will reduce or eliminate that coverage, she said.

Consumers could shave 1% to 10% off their premium with this move depending on their insurer and if they will let you cut out that category, said Ms. Bach.

Ask for hidden discounts

Find out when your insurance is scheduled to renew and make some calls before that date. Switching policies every year might sound painful, but it can save you money.

For instance, Farmers Insurance offers a 1% to 5% discount to homeowners who get a quote and switch to Farmers at least seven days before their old policy expires. At Allstate, you can save up to 10% on your homeowner’s premium when you switch from another insurer.

There are other discounts as well. Owners might be eligible for discounts if they make upgrades such as installing hurricane shutters, said Karen Collins, assistant vice president for the American Property Insurance Association.

There also can be discounts for installing water-use sensors that can turn off your water in case of a leak, said Tim Henry, head of property product for Farmers Insurance. With USAA, owners can get up to 5% off their homeowners insurance when they have a monitored fire alarm or monitored home security system.

If you’re over 55 you can often get discounts on your homeowners insurance, said Ms. Worters at Triple-I. The reason being people are usually home more often so it deters burglars, and residents might be there should a fire start, she said.

Bundle your policies

Bundling auto and home insurance coverage can help you tighten your budget.

Robert Kinsey’s home-insurance premium for his roughly 4,000-square-foot colonial home in Great Falls, Va., recently rose about 20% to $5,486 a year. When the retiree shopped around for a better rate, he was told by several insurers that due to rising home replacement costs, he should expect to pay more. He eventually decided to bundle his home and auto insurance, raise his deductible and drop his jewelry coverage. He is now paying about $3,482 a year.

“Resist the urge to put renewal on autopilot—proactively contact your insurer to determine if you’ve implemented any changes that would warrant a lower premium,” said Emily Irwin, senior director of advice at Wells Fargo.