When you buy a home, there are a ton of things to get sorted out. One of those things is insurance. Without the right homeowners insurance policy, you are at risk of losing your most valuable asset. A fire could wipe a home worth hundreds of thousands of dollars, along with all of your possessions, from the map.
Because homeowners insurance is so urgent, many buyers choose not to overthink it. They take the advice of an agent or insurance professional to get the policy in place as soon as possible. For this reason, many homeowners end up paying significantly more for their insurance policy than is necessary.
How do you find out if you’re overpaying for your homeowner’s insurance? Here are some of the steps you should take.
Check your deductible
Deductibles are a frustrating aspect of insurance in the US. They exist to prevent insurance fraud and to maintain some accountability for policyholders, but no one likes having to pay part of their own claim. When you chose your homeowner’s insurance policy, you may have been attracted by a low deductible.
If so, chances are you are paying far too much for your insurance. As you lower your deductible, the cost of your premium rises sharply. You end up paying far more due to the higher premiums over time than you would have paid for a higher deductible. Check your deductible. If it seems on the low side, ask for a quote for a lower option.
Comb through your policy to see what it covers
Homeowners’ insurance should always cover every potential risk. However, not every risk necessarily applies to your home. There are certain issues that may not be relevant due to the low likelihood of natural disasters in the area you live in. There are others that may simply have very little impact on your home due to its structure or features.
Go through your policy with a fine-toothed comb to determine whether each instance covered is actually a risk for you. If not, you should go to your broker and negotiate a new policy.
Consider the changes you have made to your home
It is possible that you got an expensive homeowners insurance policy that was completely in order at the time. It covered instances that really were risks to your brand new home. However, over time you have eliminated those risks in one way or another.
Consider what kind of changes you made to your home. Perhaps you added security gates or other safety features that lower the risk of theft. Maybe you decided the cost of a pool was not worth it and filled it in, lowering the risk of injury. If so, your insurance policy should be adjusted to reflect the new reality.
You may find that you have actually increased certain risks on your property. If your instinct is to keep that to yourself, ignore it. The fact is that while not notifying your insurer about new risks will keep your premium down, it will also allow your insurer to deny claims caused by those factors. They may even deny claims covered in the initial policy if you voided your policy by withholding information.
Check your credit score and claims history
Insurers use credit scores and claims histories as factors when determining your premium. If you had bad credit or had made many past insurance claims at the time you got your policy, you may be paying high rates. If your credit score has since improved and you have not made claims in the years since you may be able to get a better premium today. If your current insurer will not give you a new premium, compare prices with other insurers.
The above steps will help you determine if you’re paying too much for your homeowner’s insurance, whether because of mistakes you made when getting the policy or changes you have made in the time since. Always remember that insurance premiums are not static, and don’t settle for less based on factors that are no longer relevant.
