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Home insurance discounts can save you hundreds

home-insurance-discountsThere are few things more gratifying than owning a home, and also few things more demanding of your time and money. One vital piece of owning a home is homeowners insurance. One way to keep down your costs is home insurance discounts. 

A savvy shopper can save hundreds from a home insurance policy. 

Loretta Worters, spokesperson for the Insurance Information Institute, said discounts vary by company and state. You can add up multiple discounts and save. 

"There are discounts such as bundling of policies, or security systems. If you're 55 years old (or older) and retired, or you modernize your plumbing or electrical systems, you may qualify for a price break, too. Of course, the most important factor in deciding which company to select shouldn't be based just on discounts, but on the financial well-being of a company (a rating of A- or better by a rating agency) and the service they provide."

 

How do home insurance discounts work?

It's not unlike your car insurance; house insurers base your rate on three factors.

  • Base rate: The base rate takes into account factors, such as where your property’s location, the materials used to build your home and the home’s age.
  • Surcharges: Do you have a certain breed of dog or a pool? Home insurance companies devise your rate based on these kinds of factors. Bad credit is also a factor in most states’ insurance rates. 
  • Discounts: This is the area where you can peel away at your overall cost by applying multiple discounts.

 

How much can you save on home insurance discounts?

The discounts that reduce the cost of your house insurance include factors that relate to building materials, the roof's condition, the home's age, security systems and the way you pay.

The biggest home insurance discount you’ll likely find is if you buy a newly-built home. Insurers provide an average 35% discount to new homebuyers. That's a savings of $547 on average.

A common way to save is by bundling your policies. Having the insurer provide both home and auto insurance gets you an average savings of 19.16%. That would cut your bill by an average of $284.

The third biggest way to save on your house insurance is related to construction type. Fire-resistant or superior building materials get an average rate cut of about 11%. Masonry leads to an average 6% discount. 

 

What are the most common types of home insurance discounts?

There are several ways to chip away at the home insurance glacier, taking your icepick to get at the discounts, from the most generous to the relatively-piddly ones. They all count, so gobble them all up.

Sandra Watts, project coordinator at United Policyholders, said one way to save is to have a centrally-monitored security or fire alarm systems. 

Worters provided these tips as ways to reduce your rates. 

"Improve your credit score, maintain your home (roof, electrical, plumbing), install smoke/fire and burglary alarm systems, quit smoking (for your health as well)... The type of home you have affects your insurance cost. For example, if you live in an earthquake-prone part of the country and you have a brick house, it costs you far more than a wood home. However, take those two homes and put them in a hurricane-prone part of the country and a brick house will be less expensive to insure than a wood-framed home. If you have a new home, it will likely be less expensive to insure because it has all updated electrical, plumbing systems."

Sticking with a company may also save you. A loyalty discount is for customers who have stayed with the same insurance company for a specific period. The average discount for remaining with a company for five years is about 4% on average. Ten years or more? That’s 5.73% on average. 

"A few companies offer small loyalty discounts. Aside from that, most ‘discounts' are actually endorsements that are reductions in coverage,” Watts said. 

On the flip side, insurance companies love signing up new customers. You can get a discount for changing insurers. You’ll want to see how much you save in loyalty discounts with your existing insurer and compare it to new customer discounts with a potentially new insurer. 

Home insurance companies also like when you protect your home. No, your doberman isn't going to count as a security system. However, if you're lowering the chances of a break-in with a monitored security system, thus avoiding a claim of theft, your company is going to appreciate that. A security system can reduce your bill by $20 on average. 

Similarly, if you have a monitored fire alarm system and take other safety measures against a fire in your home, that could earn you about an $11 discount. Make sure you report that you have a smoke detector for another $7 off on average. Installing a sprinkler system can earn you a decent discount of a little more than 5 percent on average.

Security can also come in the form of living in a gated community or one with an established neighborhood watch group. These situations reduce the change of a burglary. Ask about this one if it applies to you; it's not quite as common.

Another way to protect your home is by keeping tabs on your roof. A new, impact-resistant roof can save you an average of $80. Making any improvements on the structure will likely garner savings, as well. If you, for instance, put in new wiring, a sump pump, plumbing or an air-conditioning system, your insurance company may give you a small discount. 

Even being retired can save you. Retired people spend more time at home than someone with a full-time job. Most residential burglaries happen during the day. Also, retired folks who are home have a much better eye on potential problems, such as a fire or water leak, and can call for help.

Some house insurance companies may offer a discount if you are widowed or married. While it’s generally not a big discount, it can’t hurt to ask about it.

Insurance companies sometimes will also lower your rate if you don't file a home insurance claim for a certain amount of time. This is more a matter of happenstance but still could work in your favor. 

And, as always, it pays to pay…in full. If you've got the means to cover the annual bill in one payment for your homeowner's insurance, it'll get you a discount. Plus, you get it out of the way and the company doesn't have to "bug" you with those monthly bills.

Here are the average annual percent savings you can get for typical discounts, based on rate analysis:

Discount categoryDiscountAvg.  rateAvg. rate after home insurance discountAvg. $ decreaseAvg. % decrease
New HomeNew Construction$1,482$934($547)-35.50%
BundleHome And Auto$1,482$1,198($284)-19.16%
Construction typeFire Resistive$1,482$1,293($189)-11.53%
Construction typeSuperior$1,482$1,294($188)-11.49%
Construction typeMasonry$1,482$1,372($110)-6.17%
Loyalty10+ Years Renewal$1,482$1,388($93)-5.73%
Roof UpgradeRoof Upgrade$1,482$1,401($80)-4.82%
SprinklersSprinklers$1,482$1,404($77)-5.34%
Loyalty5 Years Renewal$1,482$1,414($68)-4.02%
Fire AlarmCentral Station$1,482$1,425($57)-4.02%
Burglar AlarmCentral Station$1,482$1,431($50)-3.53%
Fire AlarmFire Department$1,482$1,435($46)-3.13%
Loyalty3 Years Renewal$1,482$1,438($44)-2.49%
Burglar AlarmPolice Department$1,482$1,440($42)-2.82%
Advance Purchase10+ Days Advance Purchase$1,482$1,458($24)-1.82%
Burglar AlarmLocal$1,482$1,462($20)-1.44%
Advance Purchase7 Days Advance Purchase$1,482$1,463($19)-1.48%
Paid in FullPaid in Full$1,482$1,464($18)-1.26%
Electrical UpgradeElectrical Upgrade$1,482$1,468($13)-0.85%
Fire AlarmLocal$1,482$1,470($11)-0.88%
Automatic paymentsElectronic Fund Transfer$1,482$1,473($9)-0.59%
Plumbing UpgradePlumbing Upgrade$1,482$1,473($8)-0.60%
Smoke DetectorSmoke Detector$1,482$1,474($7)-0.49%
Heating UpgradeHeating Upgrade$1,482$1,475($6)-0.40%
Water Safety SystemWater Leak Detection - Shut Off And Alarm$1,482$1,476($5)-0.48%
Claims Free5 Year Claims Free$1,482$1,477($5)-0.29%
Claims Free10+ Year Claims Free$1,482$1,477($5)-0.30%
Hail Resistant RoofHail Resistant Roof$1,482$1,477($5)-0.29%
Water Safety SystemWater Leak Detection - Shut Off$1,482$1,478($4)-0.39%
Water Safety SystemWater Leak Detection - Alarm$1,482$1,478($3)-0.29%
DeadboltDeadbolt$1,482$1,480($2)-0.12%

Here are some explanations of the discount categories in the chart above:

  • Homes are classified by insurers as frame, masonry or superior. You get a bigger discount for a "superior" classification because the floors, roof and exterior walls are made of metal, concrete or other noncombustible material.
  • Fire resistive materials are those that don't allow electrical currents to pass through, so are favored by insurers.
  • Burglar and fire alarms are also classified. A system with central monitoring in place is called "central station." These systems are equipped with central monitoring staff who will take action by alerting the police and fire departments and by calling the homeowner to verify the incident. Fire department/police department systems directly alert police and fire departments. "Local" alarms are systems with audible alarms and other features that only alert the homeowner -- there is no auto-response so someone would have to call the police or the fire department.

 

Which states offer the biggest discounts?

House insurance policy costs vary by state. According to an analysis of the data collected on the top three insurance discounts, the top five states offering the most discounts are: 

  • Texas
  • Wyoming
  • California
  • Kansas 
  • Kentucky

You can save more than 40% off your rates on average in Texas. That comes with a caveat. 

The average homeowner's rate in Texas is $2,643. The cowboy-sized discounts bring it down to $1,416. That’s just around the national average. 

Wyoming, however, has an average rate of $1,136, and with all those discounts, it could go down to $540. It's a numbers game and you've got to keep asking and digging.

"Insurance is based on your risk," reminded Worters. "If you live near the coast, or tornado alley, or the wildfires in parts of California, you're going to pay more than other homeowners in less risky areas of the country."

 

Which insurers have the most home discounts?

Whether it's getting the best seats for an upcoming concert, buying a wedding dress, a boat or a new grill, it always pays to comparison shop. It's the most important advice for any consumer for any purchase. It's especially important for insurance.

Sue Chiasson Bicknell, who lives in Massachusetts, knows the power of shopping around. Bicknell had been with the same insurance company for 10 years, for both homeowners and auto. After three people in the family over five years made eight claims, the underwriters "weren't happy" and cut them loose.

"They sent me a letter with a number on the bottom of a broker who would help me secure new insurance," said Bicknell. "They were wonderful. They shopped 14 companies, including the 'Gecko one,' 'the smiley lady one' and 'the dude with the deep voice.' We got the same coverage for less. The broker even canceled my homeowners because I wasn't keeping it with the original insurance company, and he got that same coverage cheaper.”

As we noted, bundling is one of the ways to get the biggest discount. According to our numbers, the three insurance companies that garner the most significant discounts with home and auto are Allstate, Erie and State Farm, all at a 24 percent average discount. Nationwide is close, at 23 percent.

Experts often suggest raising your deductible to lower the cost of your car insurance premium; you can do the same for your homeowners' insurance.

"By simply increasing your deductible from $500 to $1,000, you could save hundreds each year," said Worters.

If you do choose to up your deductible, you should put that deductible money aside if you can, should you be caught by surprise.

 

Tips for shopping for home insurance

You should get quotes from multiple home insurance companies every three years. Doing it annually is even better.
Steve Ka, who owns a home with his wife in Northborough, Massachusetts, has become a master at finding the best insurance - both homeowners and auto - by keeping himself aware of the changing options and getting out his shopping cart.

"I shop for a new quote for both auto and home every couple of years since the rates go up for no reason," said Ka. "DCU gave me the best rate through Travelers for the last three years and no other company came close. However, a couple of weeks ago, Geico was able to beat them by about $100, so I switched. I didn't switch over $100; I switch to see if I can go back next year at a lower rate."

Ka ended up with a home and auto bundle of about $2,800 annually and estimates that it’s roughly $1,700 for the homeowner's insurance.

"I got discounts, such as multi-policy, good driving record, low mileage, home alarm system and an affiliation discount because my wife is a Northeastern University alumni," said Ka.

Ka added that he typically sends his current coverage in a PDF format document to agents so they can gather quotes with the same or better coverage, and also see the discounts that have already been applied.

"Otherwise, an agent may come back with a lower quote, but less coverage," warned Ka. "And I always ask for how much the policies would be if not bundled so I can piece together the best deals."

Home insurance discounts are a way to reduce your rates, but also remember that shopping around for insurance is also an avenue to get cheaper home insurance. 

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