Home Insurance

How To Save a Boatload Of Money on Home Insurance

| August 16, 2019
home insurance

These days home insurance is anything but cheap. Actually, let me correct that by saying the word insurance in general directly correlates to expensive. Car insurance is expensive. Home insurance is expensive. Life insurance is expensive. Maybe insurance advisory boards, policy makers and insurance companies as a whole should simply replace the word insurance for a more suitable word; expensive.

I do apologize for my little rant. Seriously though, insurance is expensive. I used to pay $1300 annually for my home insurance on a 950 sq foot condo. That worked out to $112.50 for home insurance every month. For my budget it’s a lot of dough to part with every month.

Rather than keep bitching, I decided to do something about it. I could have cancelled my home insurance policy as a whole. It would save me over $100 per month. My other option was to reduce my home insurance policy premium. I like the added protection behind home insurance, especially because I live above someone else, so opted to the better of the two.

I embarked on a mission to reduce my home insurance policy, and I was quite successful in doing so.

Here’s a quick synopsis of how I reduced my home insurance premium.

Simplicity

I decided to make a few phone calls, and do some heavy duty searching online to compare different home insurance premiums. You’d be pretty surprised at how easy it is to compare different premiums. Making a few phone calls, and comparing quotes online, you can easily identify an insurer who’s offering a better deal.

Most of us know the old trick to reduce your car insurance premiums is to simply choose a higher deductible. The same principle applies to home insurance policies. Your home insurance premium will go down if you choose a higher deductible. The standard deductible on a home insurance policy  is $500.

Now think about this for a second. How likely will you make a home insurance claim for $500? The correct answer is highly unlikely. Since you’re unlikely to make a claim for a small amount, raise that sucker (deductible) on your policy.

I raised my deductible to $1,500 on my new policy, and if that emergency ever arose, and I needed the $1,500 for my deductible, it will be funded directly from my emergency fund. That’s why emergency fund’s are created.

Bundle it together

Another way to save on your home insurance policy and car insurance is by bundling it all together. Ask your existing insurer to bundle your auto and home insurance, and don’t forget to ask for the discount. Most of the time you can get a nice discount, and in other instances it simply doesn’t pay to bundle.

In my case it was not worth for me to bundle with my current auto provider. The home insurance premium was expensive to start with, hence why I decided to look elsewhere.

Extra discounts

If you have a home security system, reducing the likelihood of theft or vandalism, you can get even more of a discount on your premium. A typical home security system (monitoring) will run you roughly $450 per year. Check if its worth it, before you go ahead, and install a new home security system.

If you live in a condo, like my self, you’ll be asked if you have a 24/7 concierge and security camera’s installed in the condo building. I have one of the two, so I got another small discount.

If you are a non-smokers, that could save you money.  Also having  a mortgage-free home or a home that’s less than 10 years old can save you a few more bucks.

To put the icing on the cake I paid the whole premium upfront. This gave me roughly another 7% discount on my total annual premium. After all was said and done,  I managed to save $520 on my home insurance premium. My new premium will cost me $830 annually or $69.10 per month if I paid monthly.

Check around, make some calls, and don’t be afraid to haggle. You’ve got nothing to lose, and a lot to gain.

How To Save Money On Home Insurance

Insurance is quite a confusing area and if you’re not asking the right questions, reading the fine print and picking the right coverage, you may be left for dry when the time comes to file a claim. Like any other business, insurance companies are in the business to make money. If you have home insurance or auto insurance, the primary goal of the insurance company is to collect as much premium from you, in hopes of not giving any of it back in return. Fortunately, everyone has a choice to choose between mandatory and non-mandatory insurance.  Not a lot of of choice, but some is better than none. Auto insurance is mandatory in Ontario, while home insurance is non-mandatory.

When I purchased my first home in 2009. My realtor was certain that I needed home insurance, simply because the bank was going to ask for it prior to closing. And it made sense, at least briefly. Bank provides me a loan (mortgage) for the home, technically they own the home and wan’t some security in their investment  in case of a disaster. End result was different – I didn’t need my own insurance. Since I live  in a condo, the condo board provided basic insurance on all units, in case of fire or a major flood.

Regardless if you need or want home insurance, it’s wise to have have insurance. It’s simply peace of mind. You protect your self and your contents against the worst.

You have to choose what kind of coverage you will need. The replacement value of your house and its contents play a major deciding factor, together with what location of your home within the city. Coverage for such points as floods, tornadoes, and earthquakes are all regarded as extra coverage.

Pay close attention to  the different types of coverage options. For example, if you live in a primarily brick house or older condo (which is mostly brick), your home is prone less damage in case of a massive fire versus someone who lives in a newer home, where mostly everything is out of drywall.

Furthermore, don’t be surprised if you have to answer a long questionnaire. Most of the questions seem simple, but each answer to the questions determines your final liability. For example, if you own a condo, you will be asked if you have 24/7 security concierge or cameras at the front and rear of the building. Why? The more security you have, the less chance of major damage or someone breaking into your home, the less liability the insurance company has to take on and in return the savings are passed back to you.

Another way to potentially save money on homeowners insurance is to raise the deductible. The deductible is the amount of money that the homeowner pays before the insurance company starts paying. Many homeowners have a low deductible so that if they need to use their insurance, they don’t have to pay a large portion of out-of-pocket themselves. The insurance is less expensive monthly or annually if the homeowner raises the deductible. However, the homeowner would have to pay more in the event they wanted to report a claim to the insurance company, but the annual cost of the insurance would decrease, and for most people who rarely use their homeowners insurance this is a safe way to decrease the cost of the insurance on a month to month basis.

Like I said above, insurance is confusing and insurance companies definitely don’t make it easy for you to understand with their jargon. For example, if the homeowner files a claim through home insurance for stolen or damaged items you’d expected to be reimbursed for replacing the items at today’s prices. This is only true if you have the magic words replacement value are in your policy. If so, you will get enough to purchase something equivalent at today’s prices. On the other hand, if you have a standard home policy you will only get the value of your contents less depreciation.

If you’re into antiques, art, collectibles or jewellery and your home is broken into and they are stolen, you may have difficulty establishing the value unless you have a professional appraisal.

Let’s take it up another notch.  Homeowner owns a condo and has personal belongings stored downstairs in the building locker room and some other contents are stored in a self-storage unit, half a block away. There is a break-in at the self-storage unit. Homeowners home insurance policy would cover the theft, right?

Not so fast. A condo policy would cover theft only in the building a locker-room by the homeowners insurance policy, while the contents located in a self-storage unit and on a different property would not be covered. The key word here is different property, which results in no coverage.

Keep in mind the clauses you might run into along the way, if you ever put a claim through. Some of the more familiar clauses might be:

  • Certain contents are covered for only 30 days
  • This policy does not cover contents with a value grater than “X” amount
  • You will be reimbursed only 50% of the total value per item
  • Insurance policy holder pays the deductible first

For example, if the value of your stolen contents is $700 and the deductible is $500, it may not be worthwhile to file a claim, simply because homeowner would be paying 71% out of his pocket. And more than likely, the value of the contents is less than the deductible in most cases.

In today’s economy, saving money is of interest to everyone. Shopping around for homeowner’s insurance is not something to take lightly, there are ways to make certain that everything that is spent on insurance is necessary, and therefore the homeowner might be able to save some much needed money. All you have to do is ask the right questions.