September 28th, 2015
Homeowners insurance is important for every homeowner to have. It will save you money when you really need it, like after a major theft or damage from a storm. In some cases, even if something is damaged away from home, like in a student's dorm room at college or in a car, homeowners insurance will still come through.
Even though homeowners insurance helps ward off financial anxiety in times of distress, the payments can still cause stress. Insurance is a necessary form of protection, but it is also crucial to make sure you're paying the right amount for it. If your insurance seems like it might be too high, there are some ways to lower the cost.
According to Realtor.com, one way to save money on homeowners insurance is to get rid of cosmetic damage coverage. Since 2010, 40 percent of home insurance claims have been related to damage caused by hail or wind. Insurance.com reported that in the last seven years, 4.5 million claims related to hail alone have been filed in the U.S. However, oftentimes, this damage is not detrimental to the home's functionality.
"People could save up to $200 or more by excluding cosmetic damage coverage."
Realtor.com explained that, sometimes, contractors will make damage sound worse than it actually is in an effort to secure a job. This leads to homeowners filing unnecessary claims, often after a storm that has caused slight damage to homes.
When many claims of the same sort are filed in one region, homeowners insurance rates can go up in that area. This affects everyone with insurance - not just those who filed claims. Because of this, the American Association of Insurance Services decided to create the Cosmetic Damage Exclusion.
"We came up with this exclusion as an alternative to insurance companies raising rates on everyone," Joseph Harrington, director of corporate communications for AAIS, told Insurance.com.
Without cosmetic damage coverage, homeowners will have to pay for any repairs they want to make themselves. However, the savings on insurance could be worth it. According to Realtor.com, people could save up to $200 or more by excluding the coverage.
Of course, if a storm causes serious damage to a home, it will be covered by the homeowners insurance policy.
"No one would have to decide whether something is functional damage or only cosmetic because the insurance would cover all the damage if the roof leaked or something like that," Harrington stated.
Take control of your credit score
Insurance costs are usually determined on a variety of factors, such as the home's location or what types of pets live in the house. However, many people have discovered that their credit score is likely a big factor in prices. According to The Dallas Morning News, homeowners in the Dallas area noticed considerably higher insurance premiums if they had poor credit scores. In fact, people with low credit scores had premiums 2.5 times as high as those with good scores.
The best way to take control of this situation is to repair your credit score. There are several things people can do to achieve this. According to the Motley Fool, credit scores are calculated using five pieces of information: payment history, how much money is owed, age of credit history, whether you have any new credit and type of credit you have used.
The biggest factor is payment history, contributing 35 percent to the final credit score. It makes sense, then, that making sure all bills are paid on time will begin to bring credit back up. Keeping a calendar to stay on top of payments is a good way to be organized about payments. Bad credit takes some time to reverse. However, being sure to be timely with your payments will keep your credit score from falling back down.
Another important part of taking control of your credit score is to pay off all debts as soon as you can.
"In most cases, paying down revolving unsecured debt provides a positive impact on the credit scores, especially on files that have a high utilization ratio, thus allowing borrowers to obtain a better rate on their mortgage," Michael McNamara, regional vice president at Pennsylvania-based United One Resources, a company that gives customers lending information, told Motley Fool.
Tell the truth
While there are good ways to lower your homeowners insurance rates, there are also wrong ways to achieve this goal as well. For instance, it might be tempting to deny owning a dog, especially if it's a breed most insurers might raise premiums for. However, according to Nasdaq, if that dog causes any injuries, the insurer could find out. Not only will the homeowner have to take care of the medical expenses, but the insurance will probably end up rising.
Withholding the truth about other things, like new pools or renovations, could result in the policyholder paying for medical expenses or damages in the event of an accident. Homeowners are generally better off disclosing this information with their insurance provider.
Another way to make sure you're not overpaying for homeowners insurance is by shopping around. Compare insurance rates online at CoverHound.com to make sure you have the best policy for your home.