Homeowners insurance. You don’t need it, until you need it.
I recently reduced my annual homeowners insurance premium from $1,430 to $856.00 by not escrowing and paying annually, renegotiating my policy, and most importantly, raising my deductible. Here’s what went down…
I’m a homeowners insurance newbie. Up until last month I hadn’t had to deal with a regular homeowners insurance policy. We used to only own a townhome, which came with the option to get away with just a cheap condo-type policy (i.e. $350 per year).
But now that I’m a full-fledged full-size homeowner, I have a regular-ole-more-than-a-grand homeowners insurance policy.
We’ve been in the house over a year now. So why am I just now addressing it? Well, to be honest, last year, when we got the policy, we were in the middle of making the home purchase and the last thing I wanted to do was dig into the details of making a smart homeowners insurance purchase.
So, at the time we just rang up Geico (who we have our auto insurance through) and had them dial up a homeowners insurance policy through one of their partners, ASI Lloyds.
Even though we didn’t escrow with our lender, Quicken Loans, we had to show evidence of a homeowners insurance policy and pay it at the closing. I’m assuming we probably could have extracted this from the closing/financing, but I didn’t catch it.
Our First Homeowners Insurance Policy
The policy we ended up with cost us $1,430 and covered our “dwelling” for $275,000 and personal property for $192,000. Additionally, it had general liability coverage of $300,000 and a $1,000 deductible, among other minor things.
A year goes by and I don’t hear anything about my insurance. Turns out I missed a notice about my insurance expiration. So I called up Geico again and asked to reinstate my policy before something bad happened and/or my lender threw a fit for me being uninsured.
The Geico representative was kind enough to compare other company rates and talk me through my deductible options. The options were sounding good, especially when I brought my deductible up to 3%.
Be Sure to Compare Rates
While we were on the phone I found out that the State of Texas (Department of Insurance) provides a free website (HelpInsure.com) which shows you the average insurance rates for different companies in Texas. Pretty handy. If you’re in the hunt for new homeowners insurance I suggest you utilize your state’s tool.
The No-Escrow Difference
One important thing to note here is that because I don’t escrow my insurance and taxes (i.e. pay for them along with my mortgage) I have ultimate flexibility when it comes to which insurance company I work with, when I make my payments, and how much my deductible will be.
Okay, the flexibility in payments is really the only thing that’s a real advantage, but I’m a fan of keeping variable costs separate so that you don’t take them for granted. Had I not been paying my own homeowners insurance, I likely would have not re-checked rates and called to lower my deductible (challenge me on that my escrowing friends).
I guess a counter-argument could be made that I was late in paying my insurance because I’m not escrowing. But I prefer to have the control, and like I said, I think this plays a role in me getting a better deal on homeowners insurance.
The Deductible is the Biggest Way to Save
In my case, not being escrowed made a big difference in the fact that I was flexible with the amount of deductible I was willing to accept on the policy. Going to a 3% deductible means I’ll be roughly $4,500 worse off if a fire takes out my home or a tree falls on the roof than I would have been with the $1,000 deductible. I’m willing to accept this risk.
This move saves me over $500 annually. Seen another way, I can take on a total loss every nine years and still come out ahead.
My advice is to be flexible with any insurance policy with regard to the amount of deductible. But don’t just chase the bottom line on the payment. Look at the overall picture, and certainly never take on a deductible that you don’t have saved up already.
Many states regulate deductibles, so don’t assume you can do 3% like I did.
My final word is that it’s important to get homeowners insurance rate quotes annually and pay in full, if possible. Paying in full means you’ll typically avoid any monthly service fees.
Even if you escrow and pay your insurance each month, stop down annually and make a call to get homeowners insurance quotes. Check rates with Liberty Mutual.
Other Important Notes About Homeowners Insurance
- Look for discounts like multiple policies or security systems.
- As with anything, don’t focus solely on cost. Get adequate insurance coverage.
- Your credit history affects your premiums. Improve your credit.
- Did your home recently gain or lose value? You may not need as much insurance coverage.
What’s been your experience with trying to save money on homeowners insurance? Do you fuss over the annual cost? Do you turn a blind eye to it because it’s in your mortgage payment? Are you meticulous about checking rates each year? How do you save?
Image by JimAnderson1972