Insurance is mostly seen as an expense that is required by law or lenders. As a result, many consumers buy generic policies with little regard for their unique needs. This includes homeowners insurance, which protects what will likely be the biggest purchase of your lifetime.
Do you know the deductible of your homeowner’ policy and what is covered? If you had to think twice, a quick review can yield big savings on premiums.
Here are some things to consider:
A low deductible minimizes out of pocket expenses in cases of property loss or damage. However, you will higher rates that can exceed these costs over time. You should consider the time value of money (TVM) when choosing a deductible. A dollar or pound is more valuable today than in the future, which underlies inflation and economic concepts.
Would lower home insurance rates give you disposable income to invest, slash debt or put aside cash for emergencies? The better cash flow is leverage to improve your finances. Conversely, a low deductible protects against events that may never occur. Consider the TMV of money to choose a sensible deductible that protects the home and also maximizes your budget.
- Check your current deductible and go up in $500 increments. Compare the savings and stay within your comfort level.
- Have a plan for how the savings will be used ahead of time. This prevents frivolous spending. For instance, you may earmark the money to slash principal balances on credit card debt or contribute to an IRA.
- Does your policy also include land value in the replacement cost? Unless you use the property for farming or some sort of income; there is little need to insure the land. Your policy should focus on replacing the home and possessions.
Bundle Separate Policies:
We rarely buy insurable items at the same time. Your car salesman, friends and family all have insurance agents they recommend when buying homes, cars or even pets. The result may be numerous carriers, which minimizes the benefit of bundling polices under one umbrella.
- You should evaluate what company/agent provides the best service and rates. Have your car insurance claims been handled well? Is your agent responsive? Focus on the carrier that gives the best support for a single policy when deciding where to bundle.
- Make sure the insurance company offers coverage for all your policies. Some carriers may not offer particular lines of coverage. You should consider the company that can cover the most policies at the best value.
- Own a business? Don’t forget about your commercial insurance. Consumers and businesses benefit from bundling. Companies often insure different locations through one carrier. In the summer of 2013, Film Financier Elliott Broidy managed risk for separate filming locations of two movies.
Check for Loyalty and Lifestyle Discounts:
Carriers rarely offer proactive discounts. You may qualify for loyalty discounts after being with the company for a year or more. Are you a non-smoker? Have you since married? Insurance companies have risk models that show certain behaviors are lower risk than others.
Simply becoming older may have discounts. Discuss with your agent how life changes can be parlayed into savings.
Security features and improvements are often added after you buy a home. Your coverage may not reflect a new alarm system, roof replacement or security doors. Talk to your agent about upgrades that lower premiums.
You can protect against risk and save money with little compromise. You should use online tools and work with an agent to make informed decisions.