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The Motley Fool's Fiscal Fitness Boot Camp is in session! Every weekday this month, we'll walk you through a fresh money-saving/money-making tip as we work toward finding $2,000 in savings you didn't know you had.
Paying for something you hope to never use is not how most people like to spend their money. But every year we shell out hundreds (even thousands) on just such a product: insurance.
The only thing that makes the scenario worse, is over-paying for insurance you hope you never use. Which is why today's Fiscal Fitness Boot Camp task -- like Monday's, where we went over simple ways to save hundreds on your car insurance -- revisits the topic. Only this time we're going to cut the cost of covering your home.
Many of the same strategies we used to save money on auto insurance premiums can be used to cut the cost of covering your home, too (e.g., increasing your deductible, making safety improvements, or combining policies).
The payoff is similar as well: Just a few simple tweaks could net you an instant 30% break on one of your biggest bills. With the average homeowner paying about $800 for coverage, according to a J.D. Power and Associates study, that translates to $240 or more in savings without sacrificing your level of coverage.
3 moves to put $240-plus back in your pocket
Ready to save some cash? Here are three moves that will pay off the most. If you went through the car insurance cost-cutting drill, these will be familiar:
1. Raise your deductible and save up to 25%: According to the Insurance Information Institute, raising your deductible to $1,000 (from $250) can lower your annual premium by as much as 25%. (One note on homeowner's insurance deductibles: If you live in a disaster-prone area, your policy may require separate deductibles for windstorm, hail, and earthquake damage.)
2. Purchase all your insurance from the same company and save 5% to 15%: Combining all your insurance business with one company can earn you a volume discount. Travelers (NYSE: TRV ) , Allstate (NYSE: ALL ) , and Mercury General (NYSE: MCY ) all offer discounts when you buy two or more types of insurance. If you insure your car with a different company or have an umbrella liability policy elsewhere, ask what kind of deal you can strike by giving your home insurer all your business. Wondering if you have the right kind of coverage? Here's our take on the six types of essential insurance.
3. Cover small claims on your own and save 5% to 35%: Obviously you can't control the whims of Mother Nature. However, if damage is done to your abode -- whether it's from weather or from man-made annoyances, like letting the bathtub overflow -- footing the bill on your own instead of filing a claim can be the prudent way to go for several reasons. Since claims go on your insurance record (similar to your credit report), the size and type of the claim can affect your future premiums and even put your insurability at risk.
On a more tangible level, a claim-free record can earn you dollars off your premiums. Making no claims over a three- or five-year period can qualify you for a 5% discount for each year thereafter, typically maxing out at 25% to 35%. That's $40 to $280 off on an $800-a-year premium, according to Kimberly Lankford's The Insurance Maze.
5 more ways to whittle down your insurance bill
For extra credit -- and extra cash -- here are other tactics to trim your homeowners insurance premiums:
1. Reinforce your Fort Knox: Things like deadbolts, smoke alarms, fire extinguishers, and burglar alarm systems from companies like Broadview Security (NYSE: CFL ) or Tyco International's (NYSE: TYC ) ADT Security don't just help you keep your home safe. They can also net you discounts of 5% (for standard fare) and as much as 20% (for a sprinkler system and alarm that automatically calls the police), according to the Insurance Information Institute.
2. Upgrade your infrastructure: Improvements to your plumbing or electrical systems may qualify for discounts. When you make improvements, be sure to inform your insurer and see if they'll give you a break. This is also helpful if insurability is an issue. So ask if making a few fixes (e.g. installing a new roof or replacing an old boiler) will help.
3. Weatherproof your home: Punch your zip code into the search engine at disastersafety.org for suggestions on how to shore up your home against the elements in your locale. Adding things like storm shutters, shatterproof glass, and reinforcing your roof may earn you breaks on your premiums. Moreover, home-improvement companies like Home Depot (NYSE: HD ) and Lowe's (NYSE: LOW ) make it easier, with guides to installation and even instructor-led classes. Here's more on figuring out what risks your home faces.
4. Kick butts: Quitting smoking is good for you in many ways, one of which is that some insurance companies will trim the cost of premiums for customers insuring a home where no one smokes.
5. Check to see if you're really still insuring that: If it's been a while since you reviewed your coverage, you may be paying top dollar to insure no-longer-priceless stuff. Your once-new computer equipment is probably worth a lot less years later. Also, if you've gotten divorced or sent your kids off to college, there's less stuff to cover. Let your insurer know that.
Warning: Don't dump your insurer on a whim
It might be tempting to jump ship to save a few bucks. Think twice -- thrice, even -- before doing so.
Loyalty has its rewards -- and moving your business may mean sacrificing good-customer discounts you've earned over the years. Plus, insurers looking to trim their portfolios will often start with newer, more uncertain customers. For more, here are the home insurance gotchas to avoid at all costs.