The amount that you pay for homeowners insurance can vary considerable from state to state and from house to house. The Insurance Information Institute found that in 2009 homeowners insurance policy premiums across the United States ranged from $491 to $1,534. This variation occurs because the exact rate you pay depends on a variety of factors – from the type of coverage you require, to weather conditions in your state to your credit history.
Type of Coverage
One factor affecting the cost of your homeowners insurance is the type of coverage that you have. The most common insurance policy, called the HO-3, covers any direct damage to the property unless the peril is specifically excluded. However, it only covers losses to personal property for named perils. Policies that cover personal property for all perils, older homes whose replacement cost is higher than the market rate or specific perils may be more expensive than the basic HO-3 policy. Keep in mind that mortgage lenders may also require you to carry extra insurance against specific perils. For example, if you live in a flood-prone area, your mortgage lender may require you to have flood insurance, and this could raise your premiums.
Increase your Deductible
The deductible is the amount of money that you need to pay before the insurance company pays out on a claim. For example, if you have a deductible of $500, and your house has $1000 worth of damages, your insurance company will only pay out $500 on the claim. The Federal Citizen Information Center suggests that you may be able to lower your homeowners insurance premiums by as much as 25 percent by agreeing to a higher deductible. You should keep in mind that some policies have separate deductibles for certain perils. For example, if you live in an area where storms are common, you may have a separate storm deductible on your policy.
The characteristics of your home can have a big impact on your insurance premiums, and making improvements can sometimes lower your premiums. For example, If you live in an area prone to storms, adding storm shutters and reinforcing your roof may lead to lower premiums. Some insurance companies will lower your premiums if you have a burglar alarm or install a sprinkler system or fire-monitoring system. Modernizing your plumbing or electrical systems can also sometimes lead to lower premiums. Similarly, houses with swimming pools, gyms or trampolines may attract higher premiums. Some companies also charge higher premiums if you own certain types of dog.
Insurance companies also take the owner's personal characteristics into account when setting homeowners premiums. Homeowners with good credit ratings tend to pay lower homeowners insurance premiums, as do retired people. If you have made previous claims on your homeowners insurance, especially large claims, you may be charged more. Many people carry additional insurance, called a floater, for items such as computers, jewelry and artworks. Revalue any personal possessions you carry a floater on every few years. For example, if you own a fur coat that has decreased in value, you can reduce or cancel your floater and save some money.
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