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Five Ways to Save on Your Home Insurance

Home insurance can be a substantial expense item in your annual budget. If you have a home you will need home insurance. There is not way to avoid it - nor should you want to. But there are some common sense steps you can take to hold down the cost of home insurance. Here are a few suggestions.

1.  Don't confuse the market value of you home with its insurable replacement value. The land that your house sits on is not at risk from windstorms, fire, theft or other risks that your home owner's policy protects you from. But it does have value. When estimating the amount of insurance you need for rebuilding your home in the case of a catastrophe, don't go by the price you paid for your home or the amount that your house might fetch in the current real estate market. Both of those amounts will include the value of the land your home occupies. Insure only in the amount that will allow you to rebuild or replace your home.

2.  Consider a higher deductible.  The deductible is the amount that you will pay toward a loss before your insurance company makes any contribution. If you can afford to cover a higher deductible in the event of a loss, you can often substantially reduce your premium payments. Insurance companies often recommend a deductible of $500. In some cases, raising the deductible to $1,000, can reduce your premiums by twenty-five percent. Keep in mind that some insurance policies maintain different deductible amounts for different types of losses. This is not an easy determination to make. You will be trading off certain money now - lower premium payments, in exchange for possible pay-outs later - higher deductible payments. Your insurance agent may be able to help you work through your analysis of what is optimal for you.

3.  Buy your home and auto policies from the same insurer.  Some insurance companies will offer a deep discount (from five to fifteen percent) if you buy two or more insurance policies from them. This makes it worth your while to consider placing your home, liability and auto insurance coverage with a single insurer. But be wary. Before you sign up for this kind of multiple coverage, make sure that separate coverage with different insurers won't get you a better overall deal.

4.  Improve your home security.  Many insurers will offer a discount of about five percent if you arm your home with relatively simple security and protection devices such as smoke detectors, security alarms and dead-bolts. Even higher discounts, ranging up to fifteen percent, may be available if you put in more sophisticated and expensive systems such a home sprinkler system or fire and burglary alarms that link directly to fire and police stations. But because these systems can be expensive, make sure you check first with your insurer to make sure that the particular system you are planning to install will qualify you for the discount. In addition, if you are confident that your high-end burglar alarm or sprinkler system will be effective in preventing theft or fire damage, you might be inclined to go with a higher deductible in those areas. See item 2.

5.  Look for private insurance if you are in a government plan.  If you have been buying your insurance through a government plan because you live in a high risk area for coastal storms, fire or crime, and private insurance has not been an option, you should periodically check with an insurance agent to find out whether private insurance has become available in your situation. Insurance markets change from time to time. New insurers may move into a particular market and existing insurers may decide they are willing to cover new risks. Government insurance programs may be fine as a last resort, but private insurers may be more price competitive and almost always offer broader coverages. An insurance agent may be able to help you find out whether you can get coverage and a better deal from a private insurer.

This article has been about how you might be able to reduce the cost of your home owner's insurance. But you should also realize that cost is not the only relevant consideration. Quality - in this case the scope of coverage and the ability and willingness of your insurer to pay on claims - also matters. We all have made the mistake of going with a less expensive product that ended up not performing up to par and perhaps even costing us money in the long run. These are tough but important trade offs. It is often difficult to compare the coverages offered by different insurance companies. If you want to talk through your situation with an insurance agent who is familiar with the insurance market, who can explain to you what your options are, and who can help you wrestle with cost-quality trade offs, please contact me. I am an independent insurance agent and am not employed by any particular insurer, so I can help you consider your requirements and objectively look at a range of insurance options.  

Alex Pfeifer
PFEIFER INSURANCE BROKERS

650 762-7080
alex@pfeiferins.com
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