The Washington Post recently ran an article entitled, "Taking a Risk in Making a Claim," which profiled several people who had lost their homeowners insurance policies because they made three claims within the span of two years.

One such person, Matthew Rouhanian, summed up how most of us feel about this: "You pay [the insurance company] for 20 years, and they never call you and say thank you. But if anything happens, they cancel you. Why do you have insurance anyway?"

That's a good question, and here's the answer: Insurance is meant to cover catastrophic losses, not to make up for every little loss.

I don't mean to let the insurance companies off the hook; it's still a lousy practice. But homeowners would save a lot of money by raising their deductibles and covering small losses themselves, rather than keeping the standard $250 deductible and filing several claims, which could eventually drive up their premiums.

You could save about 10% on your insurance bill by moving the deductible to $500, and perhaps another 10% to 15% by raising it to $1,000.

Here are some other tips for keeping a roof on the costs of insurance:

  • Buying your insurance in bulk, by insuring multiple family members with multiple types of policies (e.g., auto and homeowners) with the same carrier.

  • The most expensive insurance is usually sold by independent agents. Unless you need their guidance, look elsewhere.

  • Inquire about other ways to reduce your premiums, such as installing an alarm system, a smoke detector in every room, and a fire extinguisher, or buying a house made of stuff that's hard to burn, such as brick.

  • You don't have to make a claim for a strike to count against you. Even calling an insurance company with the possibility of a claim might be noted in your records. The Post article quoted J. Robert Hunter, director of insurance for the Consumer Federation of America, as saying, "When you call, don't say you have a claim. Say that you're just doing some research."

While it's smart to keep insurance costs down, you don't want to be under-insured. To learn more about how much coverage you need, visit our Insurance Center.