Most people pay for their homeowners insurance from an escrow fund managed by their mortgage servicer. It's part of their monthly house payment and they probably don't think much about it.
But they should. Insurance costs will vary significantly, depending on where you live, what kind of policy you have and how much your home is worth. Here are some ways insurance industry experts suggest keeping your rates as low as possible:
1. Shop around
It may seem obvious that getting more than one insurance quote would be helpful in getting the best price, but a surprising number of homeowners don't bother. They go with a particular agent or company without doing any price comparison.
Actually, shopping isn't all that hard. According to the Insurance Information Institute, states often make information available on typical rates charged by major insurers and many states provide the frequency of consumer complaints by company. When comparing prices, however, make sure you're comparing policies that provide the same coverage.
2. Increase your deductible
Insurance is something to cover you in the unlikely event you suffer major damage to your home. But some homeowners want a policy that covers them 100 percent, so that they have no out of pocket expense for any kind of damage.
That's very expensive insurance. By raising your deductible as much as you can and paying for minor repairs out of pocket, you'll save hundreds of dollars each year, more than enough to handle the minor repairs. If your home suffers a disaster, yes you will pay more out of pocket but the odds are your home isn't going to suffer a disaster. By assuming some of the risk, you save money.
3. Insure it for the right amount
How much would it cost to rebuild your house if it burned to the ground? Knowing that number is critical to not over- or under-insuring your home. In this market many new homeowners bought distressed properties for much less than what it cost to build an identical house. They should consider the replacement cost, not the purchase cost. By the same token, remember that part of the cost of your home is the land, which doesn't need to be insured.
If you have done all of the above, you will still want to get the best rate possible from your insurer. While a lot of factors go into setting rates for insurance, most companies will provide some kind of discount if you insure your automobiles as well as your home with them. Some discounts can be as much as 15 percent. Just be sure that the combined price is lower than if you bought different coverages from different companies.
5. Protect your credit score
Insurance companies are increasingly using credit information to price homeowners insurance policies. To protect your credit standing, pay your bills on time, don't take more credit than you need and keep your credit balances as low as possible. Check your credit record on a regular basis and have any errors corrected promptly so that your record remains accurate.