Home insurance costs have gone up by 9.3% since 2021, but there are ways to reduce your expenses.
This year, homeowners had to pay more for mortgages, regular maintenance, and heating due to increasing inflation and higher interest rates, putting a strain on their monthly budgets. On top of that, home insurance rates have also risen.
Based on data from S&P Global Market Intelligence, home insurance premiums increased by an average of 9.3% from January 1, 2021, to November 25. The Insurance Information Institute (Triple-I) predicts that premiums will continue to rise in 2023.
A standard home insurance policy typically covers the cost of replacing the home and some belongings in case of damage or theft. The increase in premiums is partly due to inflation, supply-chain problems, and labor shortages, which have raised the cost of home repairs and replacements. Natural disasters like tornadoes, hurricanes, storms, and wildfires are also contributing to higher premiums in the long term. Insurance companies are passing on these higher costs and risks to consumers.
On average nationwide, the annual home insurance premium costs $1,784, according to NerdWallet Inc.’s recent analysis. However, rates vary significantly across the country. The most expensive states for homeowners insurance are Nebraska, where the average cost is $4,004 per year, followed by Oklahoma ($3,830) and Kansas ($3,347). On the other hand, the cheapest states for home insurance are Hawaii ($458), Delaware ($796), and New Hampshire ($816).
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4 Ways to Save Money on Home Insurance as Rates Rise
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
According to Ms. Worters from Triple-I, one way to reduce your annual premium is to increase your deductible, which is the amount you pay out of pocket for repairs before your insurance coverage starts. The typical minimum deductible is $500 or $1,000.
The amount of money you can save by raising the deductible depends partly on your location and the regulations set by your state insurance department, she explained.
In areas prone to disasters, your insurance policy might have a separate deductible specifically for damage caused by major disasters. If this applies to your policy, it’s important to ensure that you have enough money saved to cover both deductibles, Ms. Worters advised.
Consider Eliminating Some Coverage
Increasing the home insurance deductible may not be practical advice for residents living in coastal areas, as many policies already include special deductibles for wind, hurricanes, or named storms.
Amy Bach, the executive director at United Policyholders, a national nonprofit insurance consumer-advocacy group, points out that homeowners in coastal and wildfire-prone regions are facing significant challenges with rising home insurance costs and coverage limitations.
Instead, she suggests a strategy of reducing or eliminating coverage for “other structures” if you don’t have any free-standing garage, shed, retaining wall, pool, or similar items falling under that category. You can contact your insurer and inquire if it’s possible to reduce or remove this coverage.
By making this adjustment, consumers could potentially lower their premium by 1% to 10%, depending on the insurer and whether they allow such modifications, according to Ms. Bach.
Ask for Hidden Discounts
To save money on your home insurance, it’s a good idea to find out when your policy is set to renew and make some calls before that date. While switching policies every year might seem like a hassle, it can lead to cost savings.
For example, Farmers Insurance offers a 1% to 5% discount to homeowners who obtain a quote and switch to Farmers at least seven days before their old policy expires. Allstate provides an opportunity to save up to 10% on homeowner’s premiums when switching from another insurer.
Additionally, there are various other discounts available. Homeowners might be eligible for discounts if they make certain upgrades, such as installing hurricane shutters, as mentioned by Karen Collins, assistant vice president for the American Property Insurance Association. Installing water-use sensors that can turn off the water in case of a leak can also qualify for discounts, according to Tim Henry, head of property products for Farmers Insurance. USAA offers up to a 5% discount on homeowners insurance when homeowners have a monitored fire alarm or monitored home security system.
If you are over 55 years old, you may also be eligible for discounts on your homeowner’s insurance, as highlighted by Ms. Worters at Triple-I. This is because people in this age group are usually at home more often, deterring potential burglars, and they may be present in case of a fire, making it a safer prospect for insurers.
Bundle your Policies
Bundling your auto and home insurance coverage can be a helpful way to manage your budget.
For example, Robert Kinsey, who owns a roughly 4,000-square-foot colonial home in Great Falls, Va., saw his home insurance premium increase by about 20% to $5,486 per year. When he looked for better rates, he found that several insurers were attributing the increase to rising home replacement costs, indicating that he should expect to pay more. To find a more affordable option, he decided to bundle his home and auto insurance, raised his deductible, and removed his jewelry coverage. As a result, he is now paying approximately $3,482 per year.
Emily Irwin, senior director of advice at Wells Fargo, advises homeowners not to automatically renew their policies. Instead, she recommends reaching out proactively to your insurer to see if any changes you’ve made might qualify you for a lower premium. This way, you can take control of your insurance costs and potentially find better deals.
