When you see how home insurance has gone up in recent years, it can be tempting to downgrade your coverage or shop around for a better deal. There may be good reasons for premiums going up, but who doesn’t want to spend less on insurance? The good news is you can! Here are a few reasons why home insurance rates are on the rise, and 13 tips to help you pay less.
Why home insurance premiums are going up
There are several reasons why your premiums go up when you renew your home insurance.
- Your insurance amount generally increases by a certain percentage at each renewal to cover inflation (the cost of materials and labour) as well as new purchases you’re likely to have made.
- Payouts on home insurance claims are increasing at an alarming rate (up 20% between 2009 and 2013, and 300% since 1990).
- Payouts for natural disasters have increased six-fold since the 1990s.
So the two main reasons are that there are more claims, and those claims are more and more costly.
“But I haven’t made a claim!” That’s true, but remember that home insurance is like group insurance. You pay to protect other people’s property as well as your own. The premiums that you and other policyholders pay are pooled to pay for any losses incurred, which tend to cost a lot more than your monthly premium.
As a result, the more claims there are, the more you have to pay.
If you have made a claim yourself, there’s a good chance that your insurance will go up at your next renewal. Insurance is there to cover you in case of a loss, but making a low-value claim is not always in your best interest.
Is paying more inevitable?
Not at all! There are a few simple things that can help reduce the cost of your home insurance. They may not cut your premiums in half, but every dollar helps, right?
How to lower your home insurance premium (13 tips to pay less)
- Save on your monthly payments
Some insurers charge fees if you pay your premium in monthly instalments. If this is your case, you have two choices: keep paying the fees, or pay your premium in a lump sum. If you pay your premium in a single payment, it’s more difficult to take advantage of our second tip (the two-year policy). So, how can you save money?
By choosing an insurance company that doesn’t charge fees for monthly payments, you can save a few dollars right away. Another tip: pay with a credit card with a rewards program, so you can earn points or cashback while making an essential purchase!
- Opt for a two-year policy
If your insurer gives you the option, choose a two-year policy. In most cases it will be better value, and you will be protected from price increases for the duration of the policy, even if you have to make a claim.
- Consolidate your insurance needs
Perhaps you insure your cottage with one insurance company, your house or apartment with a second and your car with a third, while your spouse’s car is covered by yet another insurance company. The easiest way to save money is by using the same insurer for all your needs. Most companies will give you a discount when you bundle your home and car insurance. Often, the more things you insure with the same company, the more you will save.
- Protect yourself with an alarm system
Insurers are always happy when insured premises are protected by an alarm system, especially when it’s connected to a central monitoring station. An alarm system can warn you in the event of burglary, fire, and even water damage!
How does this lead to savings? In the event of a loss, the amount claimed is likely to be less. For example, a fire that is detected early can be subdued more quickly and easily, so it will cause less damage.
Will you get a discount for having smoke detectors? Maybe. Sometimes insurers will reduce your premium slightly, but in other cases they simply require you to have them.
- Let your insurer know about any repairs to your home
Have you replaced your balconies? Updated your home’s electrical or heating system? Have you had your roof re-covered or replaced your windows? Be sure to tell your insurer. Quite often, they will reward your efforts with an additional discount.
This is because a well-maintained house is less of a risk. A new roof is less likely to leak than an old roof with missing shingles!
- Increase your deductible
It’s simple: the higher your deductible, the lower your premium will be. On the other hand, a bigger deductible also means a smaller payout in the event of a claim… usually. Not many people know that most home insurance policies contain a clause that cancels the deductible in the event of a total loss, or when the claim exceeds a certain amount. In addition, you never have to pay a deductible for a civil liability claim.
It’s important to decide what purpose insurance serves for you. Is it to compensate you for every loss (even small ones) or just for major disasters?
Which brings us to our next piece of advice…
- Choose the right coverage for your needs
Some people just want civil liability coverage, others want coverage against fire or theft, while still others want to be covered against anything that could possibly go wrong.
It’s important to talk to your insurer about your needs. Only you know what matters most to you. Your insurer will usually be able to offer you coverage that is suitable for your situation.
Do you need replacement cost coverage? Do you have certain belongings that need more coverage, or is a basic level of protection enough for you? An insurance advisor is best placed to guide you through your coverage options. Sometimes reducing your home insurance premium can be as simple as choosing only the coverage you need.
- Quit smoking!
Smoking-related fires are still far too common and cost insurance companies a lot of money. This is why insurers tend to offer better rates to non-smokers.
Even if you never smoke inside the house, or smoke only occasionally, you are still considered a smoker by your insurance company. As a general rule, insurers will class you as a non-smoker if you haven’t used tobacco for at least 12 months.
Quitting smoking is good for your health, good for your wallet, and could even save you money when you come to buy life insurance!
- Are you a graduate or a professional?
You might be able to save some money simply by letting your insurer know that you are a graduate or a member of a professional body. Insurers sometimes offer discounts to members of certain associations, and sometimes they will offer you a discount based on your level of education.
If you’re still a student, there’s a good chance that your insurer has a discount for you too!
- Rethink your secondary heating sources
It’s hard to beat the smell and heat of a wood-burning stove, but insurers are often wary when you use a secondary source of heating in your home. Do you use it often? Is it an essential or more of a luxury? Even if you use it only occasionally, it might be costing you more than you think.
Ask your insurer how much your home insurance would cost if you didn’t use this secondary heating source. And if you only plan to use it if your main heating system breaks down, you should mention that too. Your insurer may decide not to take this heating source into account when calculating your premium if you only use it as a last resort.
- Have you paid off your mortgage?
Once you’ve paid off your mortgage and received your discharge document, contact your insurer: the difference it makes to your premium may surprise you! Not all policies take this factor into account, however, so it may not make a difference in your case.
- Is your home fire-resistant?
If you live in a fire-resistant building, it’s in your interest to let your insurer know. Buildings with fire-resistant doors, sprinklers or floors separated by concrete are less likely to go up in flames in the event of fire, which limits the amount that the insurer might have to pay out.
- Ask your insurer how you can reduce your premium
Your insurance advisor is the best person to advise you, because he understands the factors that influence your premium. However, he will usually calculate your premium based on your actual situation, rather than a best-case scenario. Take advantage of your advisor’s knowledge and expertise by asking him to find ways to lower your premium. Chances are that he’ll be only too happy to help.
Your advisor should always explain the context and inform you of the consequences of your choices. If you downgrade your coverage or increase your deductible, he should explain what that actually means for you if you ever have to make a claim.
Let’s be honest—insurance is essential, but we all hope we’ll never need to use it. Fortunately, you don’t need to spend a fortune to get peace of mind.
To learn more about home insurance pricing, visit the Infoinsurance website.
