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Smart Ways to Reduce Your Insurance Premiums

Want to pay less for your home insurance? With home insurance premiums averaging $1,200 annually, lowering those costs could go a long way toward stretching your budget.

Reducing your premiums could be as easy as contacting your insurance company or agent and asking for a different contract with a higher deductible. You save money – but only until something goes wrong. Obviously, the higher the premium, the less your ultimate settlement is after a loss (since it will be offset by the amount you have to put out-of-pocket first). 

The fact of the matter is that two-thirds of homes in North America are already underinsured by an average of 20%. If a serious loss were to occur, these homeowners have to pay out of pocket because their coverage didn’t cover enough.

#1 Can You Afford to Reduce Your Premiums?

For many homeowners, this can sound like a bit of a backwards question. Isn’t the idea behind reducing your premiums making more room in your monthly budget? Yes, but only if you have the money to pay for it when something happens.

Reducing your premiums comes at the cost of either raising your deductible or reducing your coverage limits. Should something damage your home like a flood or fire, you would then have to pay more money out of pocket for the repairs. Even with the help of home insurance claims lawyers, you may not get enough out of your settlement if you make drastic cuts to your policy in favor of a slightly lower deductible.

Ask yourself two questions before reducing your insurance payments:

A) Are you already underinsured? Should you actually be looking at getting more insurance?

B) Do you have enough money in your emergency fund if you experienced a total loss?

#2 Home Improvements that Lower Your Insurance

When you make home improvements, it can often mean that your insurance goes up. You’ve updated the materials of your home or added square footage, and that increases the repair and replacement value of your home.

But you can reduce your insurance through home improvements too. These are some of the best home improvements you can make to lower your risks (and therefore lower your insurance premiums):

  • Adding a new roof with stronger materials. More fire-resistant materials go a long way, as do newer materials for handling heavy snow and rain. A roof that’s older than 10 years is an increased risk and comes with high premiums.
  • New electrical and plumbing systems to reduce the risk of fire or water damage.
  • Adding a new security system can reduce the risks of theft.

#3 Buy a Home in an Area at Low Risk for Floods

What you might consider to be generic “flood insurance” is not covered by most basic home insurance packages. If you’re thinking of a “flood” as water entering your home from an overland source, you might find that you’re not covered. If your home is in an area at high risk for flood damage, your mortgage lender may require you to get it.

The fact is that flood risks are rising everywhere, and insurance coverage is getting more expensive due to changes in the way risks are calculated. Nevertheless, moving out of a coastal or river flood plain to somewhere with lower flood risks will save you on premiums. 

It is possible to reduce the premiums you pay for your policy, but with the prevalence of underinsurance already a widespread problem, you have to be careful. Check your policy and decide if you can afford to reduce your premiums by raising your deductible, or consider making some home improvements that lead to reduced risks and longer-lasting savings.

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