A home is the largest purchase most consumers will make in their lifetimes. While protecting your house and assets are important, many homeowners overpay for home insurance with excess coverage or overlaps.
Thankfully, you can sensibly insure your home with a few practical steps. By doing so, you may also gain insight into trimming expenses from other essentials, such as car insurance or medical coverage.
Below are some things to consider when reviewing you home insurance policy:
Raise Your Deductible:
Upping your policy’s deductible will result in month over month savings that pays for itself. New homeowners in particular may prefer lower deductibles out of concern for their properties. However, raising deductibles even slightly provides added cash flow for debt reduction, starting an emergency fund or investing.
The savings on interest expense from credit cards or compounding investment returns can exceed the out of pocket costs on home insurance claims. Elliott Broidy and other investment managers often leverage this concept, known as the’ time value of money’.
What is the time value of money? In basic terms, a dollar is more valuable today than at some date in the future. The monthly savings from a higher deductible are leverage to start investing now or begin putting a dent in principal on credit cards. Money’s time value underpins economic concepts such as inflation, but the concept has everyday value, as well.
You can speak with an agent to discuss the impact of raising deductibles on premiums. A sensible deductible protects homes against damage and leverages savings to improve personal finances.
Identify Excess Coverage:
Many policies may insure land and the home. Unless you use the land as a source of income, such as farming, it is not necessary to insure beyond a home. Even in the instance of a fire or other disaster, land is typically not affected to large degrees.
Also, take inventory of your assets and compare to your liability coverage. At the onset, excess liability coverage may seem like a wise choice. However, it is money that will not be recouped even in the instance of claims. Home insurance premiums are inflated unless your assets are valued near liability limits.
Bundle Coverage for Discounts:
Major purchases such as homes, cars and life insurance rarely occur together. As a result, many homeowners have various policies at different carriers.
Reviewing your current coverage and getting quotes to consolidate can rack up fast savings. This also makes it easier to manage your policies and identifies redundancies.
Use Updated Home Features for Savings:
Home improvements that include security features such as security systems, roof renovations and even non-smoking can offer discounts. Insurance companies continually update discount incentives to retain and attract customers.
A brief conversation with your agent can reveal overlooked savings from home upgrades made after policies were signed.
Improve Your Cash Flow and Personal Finances:
Cutting costs beyond the obvious can be difficult. While certain expenses are essential, there are simple ways to economize these recurring costs. Periodic review of your home insurance and other policies helps quickly improve your personal balance sheet.