7 Ways to Pay Less for Custom, High-End Homeowners Insurance
When people talk about purchasing high-value property, what usually comes with it is getting homeowners insurance for protection. And when we talk about protection, itâs not just about being able to have your home fixed in case of unforeseen events such as natural disasters or accidents. Weâre also talking about financial protection for you, as the homeowner, so that you are not hit by financial expenses you are not prepared forâor worse, expenses you wonât be able to afford when an unexpected situation presents itself.
What people sometimes forget to consider is that there are ways to pay less for high-value homeowners insurance and weâre not talking about just $50 or $100 each year.
If youâre researching ways to save money on your high-value home insurance because youâre planning on purchasing your very first home, then youâre certainly at the right place at the right time. And if youâre not a first-time homeowner, you might find yourself wondering why you didnât do your research sooner. But hey, whatâs important is that after a few minutes of having read this article, youâll realize you could be saving a few hundred dollarsâ if not thousandsâsooner than later.
Get Things Right from the Start
Why is it important to get things right from the start? Did you know that the type of home you buy, where it is located, what safety features it has, among others, can affect how much your homeowners policy premium is going to be? Here are some factors that insurance companies look at when gauging the risks involved in regards to insuring your home:
Location - Is your home located in an area prone to earthquakes, floods, or other natural disasters? Is your home located in an area that has a history of theft and violence? Are there fire hydrants or a fire station near your property? These are a few things you need to consider before deciding which home youâre going to buy because itâs not just about your safety, itâs also about the lifetime costs involved.
Safety and Security - It is definitely important to consider what safety features your home has at the time you get your homeowners policy, as well as safety risks that your home might have. For example, having a smoke, fire alarms and fire extinguishers near wood-burning stoves and fireplaces are plus points, including CCTV cameras or a monitoring system. On the other hand, swimming pools and trampolines are examples of safety hazards that will cause your homeowners insurance premium to go up. Your homeowners insurance will be paying for personal liability and this includes accidents that happen in your home or property. It is therefore understandable that insurance companies will not disregard safety hazards in any way.
Age - If you plan on buying a pre-owned home instead of a newly built one, it is important to consider when the property was actually built. Your insurance company most certainly will. Why? Because as time goes by, parts of a home such as a roof and plumbing naturally deteriorate. And as they do, susceptibility to damage and even more deterioration increases thereby increasing the insurance providerâs risks as well. In other words, the older the home, the higher the cents per hundred dollars will be in terms of your premiums.
In addition, when you start with a higher premium and increases are based on percentages, then youâre always going to pay more because you started with a higher dollar value. For example, if your home is insured for $5,000,000 and after having considered the risks involved, you start with an annual premium of $12,500 and rate increases are around 2% each year, your premium the following year would increase by $250; whereas if you started with a premium of $10,000, next yearâs premium would only cost $200 more and you pay $10,200 instead of $12,750. This effectively frees up $2,550âwhich would be around the price of two iPhones or two MacBooks you can give your kids or valued employees.
Research and Compare Prices
Whether you are looking to purchase your very first homeowners insurance or wanting to check market prices, it is always best to do some smart shopping. What do we mean by smart shopping? Donât just go asking your best friend or nextdoor neighbor about your homeowners insurance. Remember that your needs may be different from theirs. Their property portfolio may be different from yours. And even if they were insurance agents, donât settle for just one quotation. Get 3 or 4, or better yet, speak to independent brokers who can suggest a couple of companies based on your requirements. They can help you answer your questions and compare the benefits you get from each company.
When considering getting high-value home insurance, you should also look into the company that you will choose to underwrite your policy. Here are a few things to consider:
The number of years the company has been in the market. You are purchasing homeowners insurance to ensure finances wonât be an issue should there be loss or damage due to any reason covered by the policy. Naturally, you would want to make sure that the company with which you are entrusting your home would still be around if and when you should need their assistance in the future.
The insurance companyâs ratings. Companies such as AM Best and Standard & Poorâs provide the public with some insight into how well a particular insurance company is doing by giving them ratings that correspond to certain factors such as financial strength and long-term/short-term issuer ratings.
Customer service and claims experience reviews. There are websites out there where other people rate and leave comments about their personal experiences with a particular insurance company. You might also have family or friends you know recently made a claimâit wonât hurt to ask about their experience.
Bundle Discounts - Most companies would offer discounts when you get both your homeowners and auto insurance with them. Just remember that having been given a discount already means youâve been given the best deal in the market. Shop around and compare your total out-of-pocket. For example, you can get individual policy prices and bundled policy prices, and then take the lowest individual prices and see if the total amount would be less than the bundled rates. Of course, note that you should be comparing apples to apples. Make sure that the insurance policies that you are comparing have the same coverage and limits.
Home Improvement / Renovation Credits - Some people are more particular about maintaining their home and making sure that itâs in a good condition. So, if youâve upgraded your homeâs security features or youâve had a new roof installed since you last paid for your policy, then you should let them know of any upgrades because they might give you credits for the upgrade, which will result in a lower premium. The same goes for having removed amenities or structures that are considered safety hazards such swimming pools or trampolines. If at the time you got your policy you had a trampoline at home, it would have been a factor that meant a higher rate for your homeowners insurance. Now that youâve disposed of it, it might be worth the time and effort to let your agent know and see if would mean a lower premium for you.
Loyalty or Renewal Discounts - Every year, before renewing your policy, check if any renewal discount would be applicable. You can let your agent know that you check market rates once a year and would like to know their best price before you shop around. Some companies would also give long-time clients loyalty discounts.
Gated Community or Homeowners Associations - If your neighborhood recently established a homeowners association and has increased the level of security in your community, then this is worth letting your insurance company know about. When your home is located in a more secure location, it means less risk for the insurance company and they will certainly take that into consideration when it comes to computing your premium.
Additional Safety and Security Measures - this would include high-tech sensors or smart homes, impact resistant roofing, water protection devices, thicker glass windows that would be more resistant to breakage, and the likeâanything that would mean your home is at less risk of being broken into or damaged due to accidents or natural calamities such as hailstorms.
Discounts Based on Your Personal Profile - some may find this surprising, but you might actually get a discount depending on your profileâwhether or not you smoke, what your occupation is, whether youâre a retiree or a senior, whether youâre single or married, or even whether you have kids or not. If you donât have a mortgage, then you might get a mortgage-free credit.
Not all companies would offer discounts for all the same things, but guess what? Most of the time, you wonât know what discount you can get unless you ask. Remember, thereâs no shame in wanting to get the most value for your money. As they sayâŠmoney doesnât grow on trees.
Maintain a Good Credit Score
Insurance is essentially risk management. So, it wouldnât be surprising that insurance providers take it into account and treat you favorably when you have a good credit score. For them, it shows you are capable of handling your finances well, which makes you a potential long-term client. To add to that, over time, data has shown a direct relation between credit score and claims incidence. The better the credit score is, the lower the number of claims incidence is.
What are deductibles? A deductible, in simple terms, is the amount you would be paying out-of-pocket in the event of a claim before the company starts paying you for a covered loss. Note that homeowners deductibles are on a âper claimâ basis. This means that if youâd ever have to file a claim three times in a year (yes, that would be very unfortunate but not exactly impossible), then youâd have to pay the deductible three times that year.
How does raising my deductible help? The higher your deductible, the lower your premiumâthis is how it goes. So, if you live in a relatively safe neighborhood, for example, and history tells you that your area isnât prone to natural calamities, then it would seem that the risk of having to make a claim is rather small, and the savings you get from the lower premium, could be set aside to add to your emergency funds.  However, if you live in an area where thereâs at least 1 earthquake or flood in a year, or robbery is common, it might not be worth the risk. If you could, ask for your new homeâs claims history, if any. Bottom line is, whatever you decide, itâs important that you would be able to afford your deductible should the time come that youâd need to make a claim.
When do I get paid by the insurance company? Your claim will be paid after youâve paid for the deductible first. So, in a scenario where your policy states that you are covered for upto $5,000,000 for damage to your home, your deductible is $10,000, and you have a claim for $1,000,000, you will have to pay the first $10,000 in expenses and then your company will pay you $990,000 (coverage minus the deductible).
If Iâd have to pay for the deductible each time I file a claim, wouldnât that put me in a bad situation if I couldnât afford the deductible? Yes, it would. In effect, your claim wonât move forward unless you can afford to pay the deductible. This is why itâs very important to make sure that the amount you choose for your deductible is an amount that is readily available at all times.
Maintain Your Home and Improve Your Homeâs Safety and Security
Home and property maintenance can go a long way. If you were to gauge the risk of a claim, wouldnât you say that the risk of a claim is greater where the home was built 15 years ago and its plumbing and electrical system have been the same since, as compared to a house that was built 25 years ago but had recently upgraded its plumbing and electrical system (i.e., pipes and electrical wires checked and replaced with new ones)? The same goes for upgrading safety and security measures. Aside from providing a higher level of safety for yourself and the members of your household, insurance companies will view proper maintenance and improvements in your homeâs safety and security as a lower risk of having to pay a claim. This then translates into lower premiums.
Review Your Policy Coverage, Limits, and Exclusions Once a Year
If you are now looking at ways to pay less for high-value home insurance, for certain, you have been around long enough to know for a fact that a lot of things can happen in a yearâeven in just a month. And some things, you might not even remember unless you intentionally try to recall or do something that would make you remember. So, what are we talking about here when it comes to your high-end homeowners insurance?
Your homeowners insurance has many different aspects to itâthe items covered, how much those items are valued at when it comes to replacement cost, the coverage limit which comes in when itâs time to make a claim, and your deductible, to name a few.Â
In terms of the changes that can happen within 365 days that might affect your coverage and how much you pay for your homeowners insurance policy, letâs go ahead and get into a few examples:
It can be as trivial (or so it might seem) as getting rid of your trampoline because you realized no oneâs using it and it had become a clutter in your home. This affects your policy in two waysâyou have one less item to cover and since that item is considered a safety hazard, your home is now considered to be less of a safety risk that it was when it was last evaluated.
It can involve having sold a million-dollar painting or a twenty-five-thousand-dollar piece of jewelry. You might have given your favorite nephew a bottle or two of vintage wines from your collection as a wedding gift. Doing so would have automatically reduced your personal property coverage requirement.
You might have upgraded your security cameras or replaced your 20-year-old roofâwhich would gain you leverage in asking for a discount from you agent.
If youâve had your home remodeled and decided to add special features that would lessen the risk of damage or loss, or your neighborhood had since established a homeowners association and have implemented safety and security measures, you might be eligible for a discount.
Perhaps youâve set aside additional funds that will allow you to raise your deductibles, then that might also lower your monthly premium or even allow you additional discount if you can make a one-off payment for the annual premium instead of paying monthly installments.
These, and many more, could all affect your total coverage, replacement cost, required limits, etc.  As with any financial matter that involves so many variables, it is always best to keep things current and up-to-date. Not going through the details of your policy each year and not taking into context anything you may have acquired or disposed of after your last policy renewal, could literally cost you thousands in premium payments. Worse, you might already be underinsured without realizing it.
At the end of the day, when it comes to your high-value home insurance, it is best practice to be diligent about things. After all, we are not talking about just a few dollars here and there. Add your policyâs maturity date to your calendar and plan on talking to your agent two to three months ahead so you can also get things well-organized. Otherwise, putting off things might mean being stuck with the same policy for another year, either paying so much more than you have to or being underinsured.
