Fiscal Fitness '09: Trim $240 From Your Home Insurance Tab

Today's tip is part of our Fiscal Fitness '09 series. Every weekday this month, you'll get help getting fiscally fit as we work toward our goal of saving $2,000 to invest in three stocks!

On Monday, we went over simple ways to save $400 on your car insurance premiums. If you were paying attention, today's money-saving task should be a breeze.

Many of the same strategies for slashing auto insurance premiums -- such as increasing your deductible and making safety improvements -- can be used to cut the cost of covering your home, too.

The payoff is similar as well: Just a few simple tweaks could instantly trim your premium by $240 or more without sacrificing your level of coverage. With the average homeowner paying about $800 for coverage, according to a J.D. Power and Associates study, we're talking a 30% break on one of your biggest bills.

Three moves to $240-plus back in your pocket
Again, the following tips will sound familiar if you've already tackled our car insurance cost-cutting drill.

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 homeowners 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.

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.

Every percentage savings counts
For extra credit -- and extra cash -- here are other tactics to trim your homeowners insurance premiums:

  • Reinforce your Fort Knox: Things like deadbolts, smoke alarms, fire extinguishers, and burglar alarm systems offered by companies like ADT and Brink's Home Security (NYSE: CFL  ) 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).
  • 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.
  • Weather-proof 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 and 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.
  • 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.
  • 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.

More ways to save ...

  • Don't get shortchanged if disaster strikes: Surveys show that more than half of U.S. homes are underinsured by an average of 22%. Coverage based on generic formulas ($65 to $150 per square foot) won't cut it if you've renovated or failed to account for rising building costs. For $7.95, accucoverage.com will calculate your home's replacement costs. Also missing from many policies are flood insurance (assess risk and find providers at floodsmart.gov), sewage backup coverage, and adequate liability coverage, which run as little as $250, $50, and $25 a year, respectively, according to Kimberly Lankford's The Insurance Maze.
  • Check your risk reputation: If you've made all the right improvements but still feel like you're paying too much for insurance, there may be something in your claims history that's spooking insurers. Premiums and eligibility are based on the five-year claims history in your home and auto insurance files. Your personal claims history and your property's history will be on file if you have one. In some states, your credit history plays a factor in setting rates. ChoicePoint (an Equifax (NYSE: EFX  ) spinoff) is the dominant insurance records bureau. If you have a personal or property claims file (not everyone does), choicetrust.com allows you one free look a year at your C.L.U.E. (Comprehensive Loss Underwriting Exchange) report. So does ISO Insurance's A-PLUS (Automobile-Property Loss Underwriting Service), which shows your car and property claims history through the eyes of an insurance underwriter. (Call 800-709-8842 to see yours for free.) If you really need your insurance score (similar to a FICO score), ChoiceTrust offers home and auto insurance scores for $12.95 each, including an Equifax credit report.

Read the latest from Fiscal Fitness '09: 1 Month, 2 Grand, 3 Stocks to get our other money-saving tips. You can also keep up with our tips through our daily Foolwatch email. Share your frugal insights and experiences through our Fiscal Fitness '09 discussion board, or leave a comment below.

Fiscal Fitness boot camp instructor Dayana Yochim owns none of the companies mentioned in this article. Home Depot is a Motley Fool Inside Value pick. Try any of our Foolish newsletters today, free for 30 days. The Fool has a disclosure policy.


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  • Report this Comment On February 04, 2009, at 10:38 AM, MomtoMadsandSam wrote:

    Don't forget to consider Protection One as a security provider! They offer a cool service that allows you to control and monitor your system using your cellphone or laptop. I've found this saves money and time. As a mom, this is critical. They are on the Web at www.ProtectionOne.com.

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