Personal Finance > Your Home
Save on homeowners insurance
Try these simple strategies to slash your bill without reducing your coverage.
March 6, 2002: 11:04 a.m. ET
By Leslie Haggin Geary

graphic NEW YORK (CNN/Money) - Owning your own home may be a pivotal part of the American Dream, but it's also an expensive proposition. Beyond your monthly mortgage, there are maintenance costs, utility bills and property taxes to consider. And then, of course, there is homeowner's insurance.

In the past year alone, homeowners' annual premiums have increased 7 percent to an average of $567.

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Costs, of course, vary by hundreds of dollars per year depending on the location, value, and age of your home. Texas residents, for example, pay the highest rates in the country -- $861 a year on average; Wisconsin residents pay the least at $266 annually, according to the National Association of Insurance Commissioners.

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  graphic Do you have enough insurance coverage for your home?

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Still, you shouldn't have to pack up and move in order to save. In fact, experts agree there are a slew of strategies you can use today to cut your premium by up to 25 percent, saving you hundreds of dollars per year.

Here's how:

Step one: Raise your deductible.

When it comes to paring insurance costs, the name of the game is accepting more risk. Agreeing to pay more out of pocket before your insurance kicks in is one of the easiest ways to reduce your premium. Boosting your deductible from $500 to $1,000, for example, can shave 15 percent off your annual premium. If you can afford a $5,000 deductible, you can trim costs by 25 percent.

Step two: Compare prices.

You've got to shop around. That may sound obvious, but many homeowners automatically sign up with an agent who was recommended by their bank or mortgage lender, said Madelyn H. Flannagan, of the Independent Insurance Agents of America. As a result, some people "never look at their mortgage" to compare prices or look for discounts, she added.

The best place to get started is your state insurance department, where you can obtain a list of insurance providers in your area. You can reach your state contact, as well as links to a variety of insurance companies, through the Insurance Information Institute Web site.

You can also, of course, go directly to an agent, but make sure he or she represents many insurance companies. The other options are to find an insurance company that sells directly to consumers or to obtain quotes over the Internet.

But be aware that electronic services may only provide you with quotes from a handful or even just one provider in your area. Another problem? Some require you to submit personal information before calling you with a quote -- and, presumably, a sales pitch to buy their product.

Step three: Bundle insurance costs.

It's fairly standard for insurers to offer discounts between 5 and 15 percent to customers who buy more than one policy -- say, automobile insurance and homeowners coverage. Before you give all your business to one provider, though, compare the cost of buying bundled policies with different insurers.

Step four: Install home warning systems and other safety devices.

Insurers pay out $700 million per month in claims, and they're understandably eager to reduce claims. As such, most reward customers who minimize risk by using safety devices such as fire alarms. Even simple devices can reap healthy savings. A deadbolt, for example, can cut 5 percent from your policy. Sophisticated alarm systems that link to a third party, say, a smoke alarm that's connected to your local fire department, may save as much as 25 percent. And don't forget about less obvious ways to trim costs. For example, some insurance companies give discounts of about 4 percent to residents who live in gated communities.

Step five: Be loyal.

If you've been with the same insurance company for years, make sure you ask for a loyalty discount. Insurers often will trim premiums by 5 percent if you've been a client between three and five years, according to the III. Stick around for six years or more and you could save 10 percent.

Step six: Pamper your home.

No, we're not talking about planting rose bushes or hanging spiffy new wallpaper. The kind of love and attention we've got in mind involves more prosaic upgrades. How old is your wiring or plumbing? When was the last time you replaced that saggy, old roof or your windows? Homeowners who have plumbing, heating and cooling, and electrical systems that are older than 10 years tend to pay higher insurance rates because they put a home at risk for fire and other disasters, said Flannagan.

Step seven: Quit smoking -- and ask about other discounts.

Smokers are bound to be sick of this advice, but kicking that habit is not just good for their health. It's also good for their insurance policy. In fact, insurers often cut costs by 5 percent for smoke-free households. As for other discounts? Residents who are older than 55 and retired may find discounts. Homes that aren't occupied full-time are pricier to insure than those you live in year-round. If you have a vacation home, but can document that you employ a housekeeper or someone to keep an eye on it, you may be able avoid higher fees, Flannagan said.

Step eight: Don't insure your land.

Unless you've got some frenzied flower fanatic lurking in your neighborhood, your land isn't going to be robbed of peonies and pine trees. That said, make sure the value of your insurance policy isn't based on what you paid for your property but on the home itself. The most extensive coverage you can buy is a Homeowner 3 (or HO-3) policy. But make sure you steer clear of so-called "cash-value" policies that only cover the depreciated value of your home, which will likely leave you short of cash if you need to rebuild. The cost of home repairs is rising at a 7 percent clip annually, so it's best to buy an HO-3 policy with a "guaranteed replacement clause," which pays for the cost of rebuilding your home.

Step nine: Join a group.

If your employer offers group insurance, take a look. You may get cheaper rates than buying a policy on your own. You may find a deal through your job, through your alumni organization or with professional groups. For example, the AARP has group insurance for its members through The Hartford that may be less expensive than individual insurance.

Step ten: Review your policy.

It's great to be happy with your insurer, but don't assume that you're always getting the lowest rate possible. "Try to keep your claims to a minimum and periodically ask for other quotes," said Gorman. "It's a very competitive industry. You're company may offer you a discount just to keep you." You also should make sure to apprise your insurer of any changes you've made to your home -- such as a new alarm system -- that could affect what you pay.

One final note: While it's nice to save money, price should not be your only consideration when purchasing insurance. You also want to do business with a company that's going to pay quickly if you ever have to file a claim. That's why you should choose a financially strong provider that's received top grades from rating agencies like A.M. Best ( or 908 439-2200) or Standard & Poors (

You'll also want to check up on an insurer's customer-service record. The National Association of Insurance Commissioners has a new online service that lets you check on an insurer's complaint record. Go to and click on the "Consumer Information Source" link from the homepage to obtain free reports. Or contact your state insurance department, which will have records of any consumer complaints or disciplinary actions, before you sign on the dotted line. graphic


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