Wednesday, February 29, 2012

Saving on Homeowner's Insurance

We woke up this morning to find that the wind had done some damage in our neighborhood overnight!

Here's what we found in our yard:
The backside of our upside-down shed

Where our shed was, before it got blown across the yard

The front side of our upside-down shed

Here's our neighbor's yard:
The backside of our neighbor's upside-down shed

The front side of the neighbor's upside-down shed

I can't speak for our neighbor but we definitely won't be making an insurance claim on the damage. The reason for this is because there are four main things we do to save money on home owner's insurance:

1. Fix things ourselves and don't file a claim, whenever possible. Every claim we make can potentially raise our rates so we will just set the shed upright ourselves.

2. Have a high deductible. Another way we save money on insurance is to carry a higher deductible. Our home owner's insurance deductible is currently $2,000. Having a high deductible means having lower rates. In order for a higher deductible to work for you, you'll need to have an emergency fund of at least six months expenses. Otherwise, a higher deductible could put you in a bad financial situation.

3. Pay by the year. I know I've mentioned this before, but we Bushmans also save money by buying our home insurance policy by the year and not by the month. If you are paying by the month, you are probably paying a fee for the privilege of doing so. Our homeowner's insurance is only $238/year, but even when we had a big house and our home owner's insurance was much higher, we still paid by the year to save money. (I want to mention, that if you do not have enough equity in your house--20% usually, then you might not have the option to pay home owner's insurance by the year, rather you may be forced to use an escrow account. This is just one more reason to pay that mortgage down!)

4. Pay our other bills on time. I'm no insurance expert, but I do know that there is a formula they use to figure your premiums. That formula has something to do with your credit score and/or whether you pay your bills on time. This makes sense when you think that the insurance company is looking for indicators that you are a responsible person who won't have a lot of accidents.

What do you do to save on homeowner's or renter's insurance? Do you use these same tactics to save on auto insurance?

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