When you purchase a home using a mortgage loan, your lender will require a homeowners insurance policy to protect their interest in the home. After all, the lender will probably have a bigger investment in the property, compared to your initial investment. So it only makes sense that they want to protect that investment.
But this policy protects your investment in the home, as well. It gives you peace of mind that, in the event of a major loss, you will be covered to some degree. So you should make sure you get solid coverage from a reputable insurance provider.
While the quality of the coverage is most important, it’s always nice to save money when possible. And that’s what we are going to talk about in this lesson. Here are some ways to lower the overall cost of a homeowners insurance policy.
Compare Insurance Companies
When you compare one provider to another, you are doing two important things at once. First, and most obvious, you are finding out who offers the lowest rates for a comparable level of coverage. Secondly, you are learning about the different types of coverage these companies provide, including the many components that make up a policy. Both of these items are important when trying to lower the cost you pay out of pocket.
Save Time by Using the Internet
The good news is that you can conduct much of the above-mentioned research fairly easily, just by using the internet. In the past, you had to make a lot of phone calls (or even office visits) to compare insurance companies and policies. Today, there are many big insurance websites that allow you to compare quotes online.
Another benefit to getting a home insurance quote online is the speed factor. Using the internet, you can accomplish in a few hours what used to take a few days or even weeks.
Improve Your Credit Score
These days, a lot of insurers are using consumer credit scores when setting premiums. This kind of “risk-based pricing” is similar to the way mortgage lenders use credit scores when assigning interest rates. In short, a lower score could result in a higher premium on your homeowners policy.
According to Carrie Van Brunt-Wiley, editor of the HomeInsurance.com blog: “Once an insurance company has your credit score, they use it … to assign you an ‘insurance score.’ This score reflects your potential risk to the insurer. The insurance carrier then takes your risk potential and calculates your premiums. The more risk you pose, the higher your premiums will most likely be.”
So you could potentially reduce the cost of your homeowners policy by keeping a good score.
Raise Deductible to Lower the Costs
The deductible is the money you would pay toward a loss, before your insurance policy would cover the rest. If you have coverage on your car, you are probably familiar with the concept of deductibles. It’s the same basic concept with a homeowners policy.
You can lower your annual premium by raising your deductible. Many financial experts recommend this strategy as a way of lowering premium costs. The logic is that you know for certain that you’ll pay the premium on your policy, but there’s only a small statistical chance of suffering a loss and having to file an actual claim. The goal here is to lower the amount you know you’re going to pay (the premium) by increasing the amount you might never have to pay (the deductible).
Purchasing insurance for your home can be a balance between cost and coverage. You want to control the former without sacrificing the latter. I hope this article has given you the knowledge and confidence you need to accomplish these goals.