“How to Save on Homeowners Insurance: 9 Mistakes to Avoid”

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The Rising Cost of Homeowners Insurance

Homeowners insurance rates have been on the rise, with some insurers increasing rates by nearly 15% in 2023, according to S&P Global Market Intelligence. Making the wrong decisions when purchasing homeowners insurance could cost you even more. Here are nine common mistakes to avoid.

1. Underestimating Your Insurance Needs

Homeowners insurance typically covers your dwelling, personal property, additional living expenses, and liability. However, standard coverage amounts may not offer the protection you need. Ensure your dwelling coverage equals your home’s replacement cost value, not its market value or mortgage balance. Consider additional coverage to protect against rising construction costs.

2. Not Understanding Exclusions

Home insurance generally doesn’t cover damage from earthquakes, floods, sinkholes, landslides, or water backup. You can purchase standalone policies for these risks. Always read your policy carefully and ask for explanations of any exclusions you don’t understand.

3. Setting Your Deductible Too High or Too Low

Your deductible affects your insurance premiums and out-of-pocket costs when filing a claim. A lower deductible means higher premiums but less out-of-pocket expense during a claim. Conversely, a higher deductible lowers your premiums but increases your out-of-pocket costs. Balance your deductible with your budget and savings.

4. Not Shopping Around

If you haven’t switched your homeowners insurance in years, you might be missing out on savings. Shop around every year or two, or whenever your premiums increase. Use online marketplaces to compare quotes from multiple providers easily.

5. Not Checking for Discounts

Regularly check with insurers for discounts. You might qualify for discounts for loyalty, being retired, or going claim-free. Making home improvements that reduce risk, such as adding a security system, can also lower your rates. Bundling multiple policies with the same carrier can provide additional savings.

6. Buying Home Insurance Based Solely on Price

Low-priced insurance isn’t a good deal if you can’t get assistance for a claim. Read customer service ratings and reviews, and check the National Association of Insurance Commissioners for complaints. Evaluate the company’s financial stability through ratings from A.M. Best, Moody’s, and S&P.

7. Not Informing Your Insurer of Major Renovations

Major home renovations can affect your insurance needs. Inform your insurer about updates like adding square footage, installing a pool, or upgrading materials. Some renovations might increase your rates, while others, like upgrading heating systems, could lower them.

8. Filing Too Many Insurance Claims

Filing claims can increase your premiums. Insurers review the Comprehensive Loss Underwriting Exchange (CLUE) for past claims. Only file claims for major losses to avoid higher rates and losing claim-free discounts.

9. Dropping Coverage Once Your Home Is Paid Off

Even after paying off your mortgage, maintaining homeowners insurance is crucial. Without it, you could face significant costs if disaster strikes. Ensure you have adequate coverage to protect your investment.

The Bottom Line

Avoiding common home insurance mistakes can help reduce costs while protecting your home. Good credit can also lower your insurance rates. Insurance companies may review your credit-based insurance score, which is similar to your regular credit score. Maintaining low credit utilization and paying bills on time can improve your scores and potentially lower your insurance costs.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you find the best coverage for your home.

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