The total cost of a home goes far beyond the list price. Besides the interest on your home loan, you'll also have to pay for utilities, property taxes, and home insurance. For the latter, premiums have skyrocketed in recent years due to various factors like extreme weather, Alberta floods and Ontario ice storms.
Even if you've never made a claim, as a homeowner, your premiums will increase over time to account for more frequent claims made by other policyholders. With home insurance premiums expected to continue rising, here are some simple ways to help save on this ongoing expense.
1. Shop around.
Searching for home insurance is a lot like shopping for your mortgage; your provider may offer you a premium rate that seems fair, but you won't know until you've seen what else is out there.
Take the time to shop around at renewal, too. Today you can receive a home insurance quote from the comfort of your home through online on insurance comparison websites, and if you prefer to deal with human beings, you can call up an independent insurance broker who will shop the market on your behalf. Insurance policies can be complicated and difficult to compare, so it doesn't hurt to have the knowledge of a broker on your side.
2. Raise your deductible.
Home insurance companies will often set your deductible at the minimum $500, but you can often increase it to as high as $1,000 or $2,000, and this can be one of the most effective ways to reduce your insurance premiums.
The deductible is the portion of the home repair cost that you pay out of your own pocket if you make a claim. If you raise your deductible, you'll have to pay more if you ever make a claim, but since a higher deductible translates to less risk for the insurance company, your premiums will go down.
If you do decide to raise your deductible, it's important to self-insure. An emergency fund of at least three months' living expenses, which is very useful in all kinds of scenarios, will also provide some assistance if you're faced with an unexpected event that requires you to pay that deductible.
3. Bundle with your auto insurance.
Insurance companies often provide you with a discount if you take out both your home and auto insurance with them. It's not uncommon to get 10% or more off the cost of your home insurance if it's bundled with car insurance.
Be sure to carefully review your coverage before signing up for auto insurance, as you would with any other policy. The cost break may not be worth the difference in coverage from your current policy.
4. Pay annually.
Home insurance companies often give you the option of paying your premiums monthly or yearly. Although it may be easier from a cash flow perspective to pay monthly, you may have to pay administrative charges, which can really add up. By paying your home insurance as a lump sum payment once a year, you'll avoid any extra charges and pay less overall.
If you find it difficult coming up with a lump sum payment all at once, start planning in advance. If your annual home insurance premium is, say, $1,200, save $100 per month in a high-interest savings account ahead of time. Because you'll earn interest while reducing your insurance costs, this approach can be doubly efficient.
5. Don't needlessly file claims.
If you know damage to your house won't be covered under your home insurance policy, don't file a claim.
My roof was recently damaged in a windstorm, and my deductible is the high side: $5,000. The insurance adjustor indicated that the cost to repair the damage would be under $2,000. I decided not to file a claim, because if I did, not only would I not receive any money from the insurance company to help cover the costs, my premiums would most likely go up. Don't make this mistake.
It's a good idea to withdraw your claim if you know you're not going to get a payout, or if the payout will be minor relative to the price of the repair and the long-term costs of higher insurance premiums.
6. Put in a home security system.
Not only will putting in a home security system reduce the likelihood of your home being broken into, most home insurance companies will offer you a discount as a result. Depending on the size of your discount, the home security system could at least pay for itself.
7. Update your electricity and heating.
Insurance companies perceive less risk in wiring and heating systems that have the latest safety and efficiency features, so if these systems are newly updated, or you're purchasing a recently-built home, it could help you save on your home insurance premiums.
This may also make you think twice before buying a home with dated wiring or an antiquated heating system, as you'll likely have to pay more in premiums to insure it.
8. Look at your coverage.
There are three basic types of home insurance policies: basic, broad and comprehensive. Of the three, the comprehensive option offers the most coverage, but it also costs the most.
Make sure you ask your insurance advisor what's covered under your plan to make sure you aren't paying for coverage that you don't need.
9. Quit smoking.
We all know that smoking is bad for your health, but did you know this it could also cost you more in home insurance premiums?
This is because smoking inside your home can hurt its value (it's been suggested that it can lower the value of a home by as much as 30%), and because of the risk that a lit cigarette could cause fire damage or even burn down the house.
Don't forget to ask your home insurance provider if you'll get a discount for being a non-smoker.
10. Look into other discounts.
Different home insurance companies offer different discounts, and some may be for reasons you haven't considered. If you've paid off your mortgage, purchased a newly built home, if you're a retiree, or you've owned your home for a certain number of years – all these details could earn you discounts.
Similarly, if you're a university grad or you're part of a professional association, it doesn't hurt to ask about discounts or go to your alumni or professional association's website to see if there's any discount offered on group or individual policies.
As you can see, there are many ways to reduce the cost of your home insurance policy, and as a homeowner, every little bit helps. First and foremost, make sure you're choosing the right type of policy. Once you've got that figured out, then you can look for additional ways to save.