Homeowners Insurance Discounts and Savings

You can save money on your home insurance policy in three ways: compare quotes to find the best, least-expensive insurance company in your area, choose only the coverage types and deductibles you need, or qualify for discounts offered by insurance companies to policyholders. Following these steps could save you anywhere from 20% to 40% on your homeowners insurance premiums. Here are more details on how to save money on your insurance policy and the discounts you may be eligible for.

How to qualify for home insurance discounts

Some homeowners insurance discounts are applied when you purchase your policy for the first time. For example, if your home is relatively new, it may require fewer repairs, such as a new roof, than older homes. Insurance companies take your lower risk into account when calculating your rates, so you may be eligible for policy discounts.

Other discounts may be available if you upgrade your home or achieve certain milestones, such as paying off your mortgage. However, it's critical to understand your home insurance company's discount policy. Homeowners insurance companies calculate premiums and discounts differently, and some limit the number of discounts a policyholder can receive.

AIG, for example, caps their "protection credit" at 15% of the total policy premium. If you've reached that threshold, you may be unable to receive any further discounts. The following are some common homeowner's insurance policy discounts.

Bundle your home and auto insurance policies

Most insurance companies give policyholders a discount if they combine their home and auto insurance policies.

While most people combine their home and auto insurance policies, you can combine other types of insurance policies as well.

• AIG, for example, provides discounts to policyholders who combine floater policies for private property, such as artwork, with their home insurance policies. If the annual property-specific premium exceeds $12,000, homeowners who bundle AIG policies are eligible for a discount of up to 12%.

Ask about a loyalty discount

Long-term customers are frequently rewarded with loyalty discounts by home insurance companies. As long as a policyholder maintains good standing and does not file a claim, most insurers will reduce the cost of their premiums each year. To a point, the longer you go without filing a claim, the greater your discount.

• State Farm, for example, offers a discount of up to 24 percent to customers who are claim free and have been with the company for at least nine years, provided the customer was also claim free in the five years preceding becoming a policyholder.

If you notice that your homeowners insurance premiums have gradually increased, this does not imply that you are no longer eligible for the discount. Your policy's rates may rise over time as your home ages and the likelihood of a claim rises. Your loyalty discount, however, may still be applied to those rates. Inquire with your insurance agent if you are unsure whether the discount is being applied.

Ask if you qualify for an impact-resistant roof discount

Hail and other falling objects can cause significant damage to your roof, which will be costly to repair for your insurance company. As a result, insurance companies frequently provide discounts to policyholders whose homes have hail-resistant roofs.

However, not all impact-resistant materials are eligible for the same reduction. Materials must be tested and rated from class 1 to class 4, with class 4 receiving the highest discount. If your home has impact-resistant roof shingles or a metal roof, ask your insurance agent if you qualify for a discount.

• Currently, homeowners in 27 states may be eligible for discounts on impact-resistant roofs. For example, if you own a home in certain parts of Texas with a class 4 impact-resistant roof, you could receive a discount of up to 35% off your homeowners insurance policy.

Improve your credit score

In most states, homeowners insurance companies are permitted to consider your credit score when determining the rates for your policy. Your credit score is affected by the amount and type of debt you carry, as well as the timeliness of your payments, among other factors. Revolving debt (such as credit card debt) and high credit utilization (using the majority of available credit) have a negative impact on your credit score.

Mortgage debt, on the other hand, has no negative impact on your credit score as long as you make your payments on time. It is difficult to improve your credit score in the short term, but paying off your revolving debt and other loans on time can help you improve your credit score, which may lead to lower home insurance rates in the long run.

Install smart smoke alarms

The majority of people fail to check their smoke alarms on a regular basis. As a result, smart smoke alarm systems like the Nest Protect will communicate with your insurance company via wi-fi to notify them that the system is operational. As a result, insurance companies may offer you a 5% discount on your annual premiums if you install a smart smoke alarm system.

Assuming a $1,000 annual policy, your smart smoke alarm could pay for itself in as little as three years while improving your home's fire protection. You may be eligible for a discount if you also install fire extinguishers in your home.

Notify your insurance company if you install a fire sprinkler system

Installing a fire sprinkler system will cost more than the home insurance discounts you would receive, at least for the next six decades. According to the National Fire Protection Association, the average cost of installing a fire sprinkler system is $1.35 per square foot covered, or $6,026 per system installed. Your costs may be higher if you are retrofitting an existing home with a sprinkler system.

Sprinkler systems, on the other hand, can prevent the loss of life and property, so you may want to have one installed anyway. Alternatively, you may have recently purchased a home that already had a system installed. If you have a fire sprinkler system in your home, notify your insurance agent and request a discount. You could save up to 10% on your annual insurance policy.

A common fear among those unfamiliar with residential fire sprinkler systems is that once the system is activated, all of the sprinklers in the house will activate, drenching the home and all of the personal property inside. This is not true. Sprinkler systems activate on their own when temperatures between 135 and 165 degrees Fahrenheit are detected.

Quit smoking

The weight that different insurers place on smoking-related risk varies. If you or someone in your household smokes, your insurance company may view your home as having a higher risk of fire. Unattended cigarettes may pose a risk, but children are more likely to have access to matches when there is a smoker in the house.

According to the National Fire Protection Association (NFPA), fire departments in the United States responded to approximately 90,000 smoking-related fires in 2011. These fires are estimated to have resulted in 540 civilian deaths, 1,640 injuries, and $621 million in property damage. If you smoke, your home insurance premiums may be 1% to 15% higher than those of nonsmokers.

Quitting smoking can also lower your health and life insurance premiums, as well as your weekly spending.

Tell Your Insurance Company if You Install a Central Alarm System

The monthly service fees for a central alarm system—the type that alerts security or emergency agencies during a fire or burglary—are higher than any insurance company discount. You may, however, choose to install an alarm system in order to improve the security of your home. If you do, request a discount from your insurance company. Your annual home insurance premium could be reduced by up to 10%.

Homes with deadbolt locks or local burglar alarm systems—those that only alert those in the immediate vicinity—may or may not qualify for a home insurance discount. It's always a good idea to consult with your agent. They can sometimes use their discretion to offer discounts.

Tell Your Insurance Company if You Install a Lightning Protection System

A bolt of lightning can produce up to 30 million volts of electricity, which can cause a house to catch fire or destroy the electronics and appliances inside. According to the Insurance Information Institute, there were 109,049 lightning claims in the United States in 2016 that were paid at an average of $7,571.90 per claim. Homes with lightning protection systems do receive insurance policy discounts, but the savings may take almost the rest of your life to make up for the cost of installation.

• AIG, for example, provides a 3% discount on a lightning protection system. However, the system installation costs an average of $1,200. Assume your annual premium is $1,000 and you receive a 3% discount for installing a $1,200 lightning protection system. You would save $30 per year, and the savings would take over 40 years to equal the cost of the instalment. If you have already purchased a home with a lightning protection system, you should ask your insurance agent for a discount.

Tell Your Insurance Company if You are Retired

Most burglaries and major hazards, such as fires, occur when no one is home to notice the danger. As a result, working-age families pose a greater risk to insurance companies than retired homeowners, who are frequently present at home. If you have recently retired, inform your home insurance agent, and you will most likely be eligible for a discount.

Choosing the right coverage and deductible

A higher deductible is one of the simplest ways to reduce your monthly homeowners insurance premiums. Your deductible is the amount of money you must pay for a repair before your insurance policy takes effect. This strategy may be appropriate if your home is in good condition and unlikely to face risks in the coming year.

However, if your house is older or in a high-risk area, a high deductible may end up costing you more if you need to file a claim. If you choose a high deductible, make sure it isn't so high that it will put you in financial jeopardy if you need to file a claim. Regardless of the size of your deductible, you should take that potential cost into account when deciding how much money to keep in your savings account.

What should my coverage limits be?

Your homeowners insurance policy will have one of three policy limits based on the total value of your home.

• Actual Cash Value (ACV): Your home's ACV is the market value minus depreciation. For example, if you paid $20,000 to have your roof installed 20 years ago and it is destroyed by a hurricane, your insurance policy will not pay you the full $20,000 to replace it. Because twenty years of wear and tear have reduced the value of your roof, the amount you'd be reimbursed is less than the cost of replacing your roof today. You would pay the difference out of your own pocket. If a lower monthly premium is your priority, a policy with an ACV limit is your cheapest option.
• Replacement Cost Value (RCV): The RCV of your home is the amount it would cost to rebuild the same house today. While more expensive than a policy with an ACV limit, insuring your home's RCV could save you thousands of dollars if your home is completely destroyed by a covered peril, such as a fire.
• Guaranteed Replacement Cost (GRC)/Extended Replacement Cost (ERC): The GRC/ERC limit is the most expensive option for your homeowners insurance policy. It does, however, guarantee that your insurance company will pay a certain percentage of your home's RCV if a localized hazard, such as a hurricane, temporarily raises the cost of labor and materials in your area.

If your current policy is subject to a GRC/ERC limit and you want to reduce your home insurance premiums, you should consider lowering your policy limit to your home's RCV. Homeowners in areas prone to regional disasters, on the other hand, may prefer to pay for the additional coverage.

If they can afford it, we recommend that all homeowners maintain at least RCV coverage.

When is filing a claim the right move?

When you file a claim with your home insurance company, your homeowners insurance policy premiums will most likely increase the next time you renew your policy. This is especially true for claims for damage that you are responsible for. Those who file multiple claims within a few years will see their premiums rise even more. As a result, some repairs may be worth paying for with your own money rather than filing a claim.

• For instance, if you file a $1,250 home insurance claim but your policy has a $1,000 deductible, you will only be reimbursed $250. However, the next time you need to renew your policy, you may find that your rates are 10% higher than the previous year. In this case, your increased premiums would cost you more in the long run than the reimbursement you received.

Homeowners insurance policies are designed to provide a safety net in the event of a disaster, not to cover the routine maintenance that your home requires as it ages. When deciding whether to file a claim, keep deductibles and increased premiums in mind.

How to find an affordable home insurer

Finally, shopping around and comparing quotes from the best insurance companies in your area is one of the most effective ways to save money on your premium. Insurance is a competitive industry, and insurers frequently offer policyholders looking for a new insurance company discounts.

By providing insurers with some basic information about yourself and your home, you can easily obtain insurance quotes online. We recommend that you obtain quotes from at least three insurance companies in order to find the best rates and coverage for you.