Every year during hurricane season, we see that many of you have questions about how to lower the cost of homeowners insurance. And we get it — it’s so difficult to know which policies are right for your specific property. We’ve all heard horror stories of someone who had hurricane insurance but didn’t also have flood insurance, which meant their damage wasn’t fully covered. And none of us want to find ourselves in a situation where we’re underinsured. Likewise, there’s no point in wasting money being overinsured.
Ben Keys, the Rowan Family Foundation Professor of Real Estate and Finance at the University of Pennsylvania’s Wharton School found that climate change is driving homeowner’s insurance rates higher — but not always in the parts of the country that are at the greatest risk. It’s not all doom and gloom, though. There are always things we can control.
Keys shares the top three ways to lower the cost of your homeowner’s insurance right now.
SHOP AROUND
In a recent survey of 14,000 homeowners and renters, only about 7% are actually shopping for another policy. So, if you’ve never shopped around to lower the cost of your homeowners insurance you’re not alone. Keys says we tend to look at homeowner’s insurance as a “set it and forget it” task, when we could be saving a ton of money by simply making a few calls to other carriers.
“It becomes a very automatic renewal process,” Keys says. “You shop around at the time when you might be buying a house, or when you’re refinancing the mortgage, but usually you’re going to stick with the same insurance provider year after year.”
He also points out that if you are making renovations to your home or filling it up with new furniture, you should adjust your policy based on the new value of the home. “The amount of coverage that you’ve [previously] contractually negotiated is going to stay fixed, even as the value of your home might change,” Keys says. “So you want to make sure that you’re keeping up in terms of the amount of coverage to cover the value of the structure and the value of the contents.”
LET YOUR INSURER KNOW IF YOUR CREDIT SCORE HAS INCREASED
Credit score on the rise? We love to see it! And your homeowner’s insurance companies do, too. Surprisingly, a good credit score is one of the best ways to lower the cost of homeowners insurance.
“Your credit score is a really important driver of the cost of homeowners insurance in a lot of states,” Keys says. “If you’ve had a big improvement in your credit score, you’ve been working hard to move up to a higher creditworthiness standard, your insurance costs are going to fall dramatically.”
So, give yourself a pat on the back for making payments on time, and call up a few insurance providers for quotes.
“HARDEN” YOUR HOME
If you live in an area of the country where it’s increasingly more difficult to find affordable homeowners insurance, there are still things you can do to lower your costs. You and your neighbors may want to team up and ask your insurers if there’s anything your community can do to make your homes more resilient.
“Suppose that you live in a wildfire-prone area. Insurers are going to offer you a better deal if you and your community are clearing brush around properties, using more fire-resistant materials, and so on,” Keys says. “There are a number of programs around the country that are trying to tie the cost of insurance more tightly to actual resiliency investments.”
BOTTOM LINE
While the cost of homeowners insurance is on the rise across the country, there are ways to lower your premiums and control what you can. While we, unfortunately, can’t control if we’re in a flood plane or in the path of a hurricane, we can reassess our homeowner’s insurance policies, make our homes more resilient, and understand how factors like credit scores can impact our premiums.
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