Insurance May Be a Necessity, But You Really Can Save Money!

Many folks think that when they purchase homeowners insurance, they are protecting what could be their single largest investment - their home.  While this may be true, you don't have to blindly pay exactly what your insurance company presents to you without questioning the cost of your premium.  Home ownership can be expensive enough as it is, so don't let the cost of insuring your home go over and above what you really should be paying.

Review Your Current Policy

The first step to take when you want to truly save money on your homeowners insurance is to periodically review your policy.  It is often too easy to continue to pay the yearly premiums (or let your mortgage company pay the premiums from your escrow) and never think twice about taking a look to see if you are properly insured (or over-insured).

Assuming that your insurance agent is reasonably honest, he or she will craft a policy for you based on certain information (total square footage, location, etc.).  Most of the time, these figures that are used to insure your home are fairly accurate.

What happens over time is that the original amount of your insured value for your home increases as property values increase.  If you let this go for several years without reviewing the policy, you may come to find that your insured value has gone way above what you would assume the replacement cost would be to rebuild your home in the event of a total loss.

Do a Little Shopping

Now that you have reviewed your policy and have the data in front of you, you will want to do a little comparison shopping.  There are two general ways of doing this. 

First, you can use that grand tool known as the Internet to plug in some values and get rates from several competing insurance companies.  This process will normally ask for an e-mail address, so be prepared for a few more messages in your inbox than usual.  If you are serious about finding the best rates, you should be okay with the temporary bombardment.

The second method is to go through an independent insurance agent.  These folks are not affiliated with just one particular insurance company, so they are able to gather several options from several companies for you to choose from in order to search for the best fit at the best price.  I think that this is a smart way of shopping for insurance since you are going through an individual with the best resources at hand who already knows the ins and outs of comparison shopping for insurance.

Regardless of the method that you choose, you will want to make sure that you keep your own list of preferences as you move forward in this process.  Especially in the case where you have someone comparison shopping for you, that individual may be a little overzealous in getting you to sign up quickly in order to turn their time spent researching insurance products for you into realized profit for them.  Having your own personal master list keeps you in the driver's seat and also allows you to ask questions since you are the one who will be ultimately making the decision in the end.

Don't Believe the Gecko or That Crazy Cat Lady

In all fairness, Flo (the Progressive mascot) isn't technically a crazy cat lady (at least not that I'm aware of).  Perhaps it really isn't her fault, but I think out of all of the cheesy insurance commercials, Flo is at the top of the list on the annoying scale.  A close second is the humanized gecko.  We get the correlation; Geico sounds like gecko.  Personally, I think they probably should have stuck with one or two commercials featuring the humanized gecko and moved on to something else rather than making it the primary spokesgecko. 

A Real GeckoCredit:

Not so charming now, are we, Mr. Gecko?  Yes, I have digressed. 

Getting back on track here, the real cost savings comes from you doing your homework or having others do the research for you.  Once you have built your list and have all of your geckos in a row, it's time to knock that insurance bill back by looking over the key components of what really makes up your homeowners insurance premium.

On most homeowners insurance policies, you will find coverage amounts for the following: dwelling, dwelling extension, personal property, personal liability, medical payments to others, jewelry and furs, and possibly a few other categories.

It may seem a little daunting at first, but going through each category and digging a little deeper may end up saving you quite a bit of money on your premium.

Tackling the Big Stuff First

The primary goal in all of this is to get the best insurance coverage while paying the lowest premium.  The first category that we'll take a look at is the dwelling category.  This is the total value of what the insurance company will pay in the event of a total loss.  This includes construction, contractors, materials - pretty much anything that would be involved in the home-building process.  This number shouldn't be astronomically high since the land would more than likely not be involved in the event of a total loss (unless a bomb dropped on your property!), so you'll only be paying to rebuild your home on the same parcel of land.  It is based on square footage, so you'll want to make sure that you are insured for a home replacement that takes into account the proper square footage for living space.  

The dwelling extension is an automatic amount (likely 10% of the dwelling amount) which will insure against any structure outside of the main home, such as a shed.  This isn't normally an amount that can be modified by itself since it is typically a percentage of the dwelling coverage.

I would also look into the coverage amounts for jewelry and furs.  Make sure that the coverage in this category is appropriate for what you own, and while you're at it, walk through your house with a video camera (or your smartphone) and document everything that you have insured.

Finally, consider raising the amount of your deductible.  If you have a healthy amount of money in your savings account, you can raise the amount of the deductible considerably.  This will save the amount that you pay on your premium, further lowering the overall cost of homeowners insurance.

In Conclusion

While it is easy to treat insurance as a "set it and forget it" tool, it is wiser to set it and revisit it once a year.  Most folks pay their insurance premium through their mortgage company, but you should still receive a paper statement in the mail or have an electronic statement e-mailed to you.  This is the time that you will want to look over your coverages, deductible, and other items that could save you money on your yearly premium.

Don't be afraid to shop insurance.  It's easy to stick with the same company, especially when you have been with the same company for many years.  However, the insurance landscape changes from time to time, and different companies have different offers and incentives that will benefit you.  You just need to look around and do some comparison shopping on your own or through an independent insurance agent.  I have personally saved over twenty percent on my homeowners insurance following these guidelines, which is more than that gecko in the commercial is promising!  How much can you save?