A home is often considered to be one of the largest investments a person will ever make, so it only makes sense that insuring it properly is one of the most important tasks a homeowner must complete. Any consumer that fails to realize the true necessity of an appropriate homeowners insurance is at risk of virtual financial disaster. Although there are a lot of companies that may claim to have the lowest premiums, the quest for the cheapest homeowners insurance is really more about being knowledgeable in the various cost factors and discounts available.
Homeowners coverage, just like any other insurance, is priced based on the potential risk of the insurer. Certain consumers have been statistically found to pose less of a risk to the insurance companies, so it only stands to reason that these are considered to be preferred clients and will receive more favorable rates. Low risk consumers often have a very strong credit rating and have never filed a substantial claim with an insurance company. Few people realize that there is a loss and claim reporting system that allows the various insurers to check the claim history of virtually any consumer. While it may not seem fair to an individual who has suffered a loss in the past, insurance companies often reason that past claims may be indicative of a higher chance of a future claim. Because of this pricing strategy, many informed consumers will often utilize their homeowners insurance for large losses that could otherwise not easily be paid for out of pocket.
Most homeowners insurers will offer substantial loyalty discounts to consumers that qualify for them. A recent study showed that the average discount given to an individual that maintained both a homeowners and automobile policy with the same company was nearly 15% applied to all associated premiums. As a result, many consumers find that the best way to obtain the cheapest homeowners insurance is to establish a relationship with one particular insurer. Additional discounts may be available to certain clients that have policies from other product lines such as life insurance, business liability insurance, disability insurance, or various other property and casualty coverages.
The specific characteristics of a home may either increase or decrease the cost of homeowners insurance. Features such as burglar alarms (particularly monitored systems) and deadbolt locks often will provide a 5-10% reduction in the cost of insurance. As previously mentioned, insurance companies base their premiums on risk and any components in a home that may decrease the possibility of loss should be emphasized. Some newer construction homes actually incorporate the use of a residential sprinkler system that can help save the home in the event of a fire, and this is a perfect example of a feature that should be explained to the insurer. Older homes are often assessed with higher premiums due to the fact that the electrical system and plumbing may pose a higher risk of an undesirable event. If upgrades have been made that would decrease this risk, the insurance company must be made aware in order to receive the cheapest homeowners insurance possible.
Many consumers find that tweaking deductibles may be an appropriate way to drastically decrease the cost of homeowners insurance. The difference between a $500 and $1000 deductible may be as much as 20%. With a premium of $1,000 annually, this may actually save the consumer $200 every single year. Statistics show that the average homeowner files some sort of claim every 14 years, so this could add up to $2800 in savings (more than enough to pay the extra $500).
It’s important to note that the cheapest homeowners insurance does not necessarily indicate an inferior product or coverage. By being aware of the above cost factors and discounts, an individual can take the necessary steps to adequately protect their biggest investment without spending too much.