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How to Find Cheap Homeowners Insurance in 2021
Though several factors that determine your home insurance rates are beyond your control, there are strategies that will help you find cheap home insurance.
Tip: Actual cash value is the least expensive and guaranteed replacement is typically the most expensive.
The 4 best cheap home insurance companies of 2021
- Cheapest for First-Time Buyers and Seniors – Allstate
- Cheapest for Tiered Coverage – Farmers
- Cheapest for A La Carte Options – Geico
- Cheapest for Discounts – Liberty Mutual
|Discounts||Additional Coverage Options||J.D. Power Score||SimpleScore|
Welcome and loyalty
55 and retired
Identity Restoration Coverage
Impact resistance roofing
|Geico||Bundling with other policies|
Fire alarm/smoke detectors
Home security system
Insured to value
Water backup and sump pump overflow
The 4 best cheap home insurance companies
9 tips to find cheap homeowners insurance
“How can I get cheap home insurance?” is one of the most commonly asked questions among homeowners looking to save on their insurance. However, several factors influence your home insurance rates. The most obvious include your home’s location, age and construction type. Newer homes in areas with low risk of natural disasters or crime are the cheapest to insure. Unfortunately, these things are often beyond your control. But there are still several strategies you can use to reduce your home insurance bill. Use the following nine tips to nab cheap homeowners insurance.
1. Shop around
You’ll need to shop around to find the cheapest home insurance. Online quote tools can help you save a lot of time over calling individual insurers, and some even allow you to compare quotes from several companies at once. Don’t assume a certain provider will be the cheapest home insurance company because it was for your family or friends. Your home and circumstances are different, and your bill will be different too.
2. Don’t over-insure
Insure for what it would cost to rebuild your home, not to rebuy it. This is an important distinction because market value takes into account the location of your home and the value of your land. Your homeowners policy doesn’t pay for any damage to your land.
When it comes to personal property, experts emphasize the importance of taking a home inventory to determine the value of your belongings. You can do this online with the Insurance Information Institute’s free Know Your Stuff inventory tool. You may want to think twice before opting for actual cash value over replacement cost policies. While going with actual cost value will save you money on your premium, it could cost you a lot more in the event of a claim. For example, think about how quickly your new TV depreciates. If you cover it for actual cash value, you may only get a few hundred dollars, if that, to replace it when comparable models are well over $1,000 in stores.
3. Bundle your policies
Your insurer would love to have all of your business. Check to see whether you’ll get a discount for having multiple policies — for instance, home, auto and life — with the same company. Compare whether you’ll actually be paying less overall with the same company than you would with policies elsewhere.
[ Next: The Best Home and Auto Insurance Bundles ]
4. Consider a higher deductible
As with most types of insurance, the higher your deductible, the lower your monthly bill. When you make a claim, your deductible is the amount you agree to pay your insurance company before your coverage kicks in. Going as high as you can comfortably afford in the event of a claim can mean major savings. Homeowners who raise their deductible from $500 to $2,500 can save an average of $260 each year. Remember that raising your deductible only makes sense if you have savings to pay the higher amount in the event of a claim. If you save money by raising your deductible amount, put that extra cash into a savings account so that you’ll be prepared for emergencies.
5. Rethink certain risky choices
You can’t move your home out of tornado alley or a crime-ridden city, but you can rethink certain things insurance companies frown upon:
- Swimming pools: Adding a swimming pool will almost certainly boost your bill because of injury and drowning risks.
- Certain types of dogs: Insurers charge more if you own certain breeds they perceive as a potential risk to others, including pit bulls and rottweilers.
- Trampolines: Your kids may adore their trampoline, but your insurance company does not — they will raise your rate to guard against your liability if a neighbor’s child falls off and is injured.
6. Add safety features
The lower your risk of claims, the more you’ll save. Protect your home from fire damage and theft with small improvements. Standard safety features such as deadbolts, smoke detectors, carbon monoxide detectors and fire extinguishers may earn you a small discount. A security system can let you save even more, depending on your insurer. Fortunately, most of these upgrades are simple DIY tasks.
If your home is in a disaster-prone area, check for special modifications you can make to further reduce your premiums. Adding features such as storm shutters, storm-resistant garage doors, stronger roofs and shatter-proof windows can help you save.
7. Maintain good credit
Unless you live in the few states that prohibit it (California, Maryland and Massachusetts), most insurers consider your credit score when calculating your premium. According to the Federal Trade Commission, your credit score can affect your home insurance rates, sometimes dramatically.
Here’s the reasoning: If you have excellent credit, you’re less likely to file a claim and are rewarded with lower premiums.
If you have bad credit, you’re seen as a greater risk, and that can send your bills higher.
Unfortunately, building good credit can take time, and it won’t be something you can do at the last minute before you buy insurance. However, given the range of financial dealings your credit can impact, it’s worth it for the long haul. Monitor your credit score and don’t wait for your policy to renew in a year if you see a positive change. Ask your insurer to re-evaluate your policy to account for the credit score improvement.
8. Review your coverage every year
Don’t buy a home insurance policy only to forget about it. Take a few minutes to get a couple of online quotes once per year to compare the cost of your current policy to what other insurers are offering. You’ll need to make changes if you make any major purchases or additions that need protection and streamline your coverage if your home or possessions lose value. You should also check for applicable discounts if you make improvements. This will also let you keep tabs on how much your insurance company raises your limits each year because of inflation.
9. Take advantage of other discounts
It’s common for home insurance companies to offer a range of discounts. You may not qualify for all of them, but it never hurts to ask. Seniors, nonsmokers, longtime customers and members of certain alumni or professional associations may qualify for lower premiums. Choosing to receive electronic statements and autopay could knock off at least 5% off your bill. If you don’t see a discount, ask. The insurer may extend it to you.
How much should I be paying for homeowners insurance?
There are many individual factors that influence your home insurance premium. Your rate will be partially dependent on the policy you choose and will be partially fixed based on factors such as:
- Your credit history and insurance score
- Your claims history
- The age of your home and its construction
- Your location
- Your marital status
- Your pets
- Home features such as wood-burning fireplaces and swimming pools
If your home insurance premium is high due to factors outside of your control, you can reduce the cost by raising your deductible, lowering your policy limits, or eliminating unnecessary coverage. However, you shouldn’t sacrifice essential coverage just to get a lower rate.
You might be more inclined to take steps to lower your rate if you live in certain states, since homeowners premiums vary widely by location. For example, the average cost of homeowners insurance in Louisiana is $1,968, while a typical policy in Oregon would cost just $677, according to data from the Insurance Information Institute. The differences are mostly due to the likelihood of natural disasters in the area.
While you can get a cheaper rate by stripping away coverage, this is not recommended for most homeowners. For example, while an HO-1 policy will be significantly less expensive, it won’t cover liability claims, which cost an average of $20,371. On the other hand, adding extra coverage isn’t always worth the cost. There’s no need to cover every single one of your personal belongings. And you may not need additional living expense coverage if you have a second home or family nearby. Consider your individual needs when choosing the type of coverage that’s right for you.
Cheap vs. general coverage
Getting the cheapest policy is going to require some time and effort on your part. With cheap insurance coverage, you have to worry about creating an inventory of all your belongings. It’s well worth it to get a lower rate. On the other hand, if you’re just looking for a straightforward process, any general home insurance policy will do. Just be careful you’re not paying for coverage you don’t need.
The more coverage you add to your policy, the higher the cost. You’ll need to weigh how much coverage to add without blowing your budget for the coverage. It may be nice to pay for an additional rider to insure your valuable sneaker collection, but is the extra annual cost worth it? Crunch the numbers to decide and prioritize how much optional coverage you can afford. A general policy should cover the most important emergencies without the need for additional riders.
What does homeowners insurance cover?
Homeowners insurance covers many of the common situations you might face as a homeowner. This includes damage to the exterior of your home and the belongings inside. It also covers some liability. Here are the main perils that a basic home insurance policy covers:
- Fire or lightning
- Windstorm or hail
- Riot or civil commotion
- Damage caused by aircraft
- Damage caused by vehicles
- Vandalism or malicious mischief
- Volcanic eruption
- Falling objects
- Weight of ice, snow or sleet that causes damage to a building
- Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire-protective sprinkler system or from a household appliance
- Sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system
- Freezing of a plumbing, heating, air conditioning or automatic fire-protective system or of a household appliance
- Sudden and accidental damage from an artificially generated electrical current
One of the reasons why insurance companies limit their coverage is to keep the cost of insurance premiums low. On average, homeowners insurance costs $1,211 per year in the United States. However, the amount that you’ll pay varies by state.
For instance, Louisiana experiences frequent hurricanes and coastal storms, so homeowners in that state will pay significantly more for insurance. A homeowner in Nevada, which does not experience extreme weather, will pay less for their policy.
[ Read: Home Insurance Quotes, Explained ]
There are several types of homeowners insurance, but they all protect your home from perils, which is a fancy way of referring to something bad that damages your property. Homeowners insurance policies are denoted by numbers: HO-1, HO-2, HO-3 and so on.
HO-1 policies are so basic that most insurance companies have stopped selling them. The best option is to get a policy with more protection
The difference between HO-2, also called broad form policies, and HO-3, called special form, is that HO-2 policies specify everything they cover and HO-3 policies don’t. In other words, if you have an HO-2 policy and something happens to your home that isn’t on the list above, you’re out of luck. HO-3 policies, on the other hand, cover everything that could happen to your home except for what they specifically exclude. Standard exclusions include earthquakes, floods, war, nuclear disasters, neglect and pests. HO-3 policies are the most popular.
HO-5 policies are like HO-3 policies but protect your personal belongings too. There are other types of homeowners insurance for special circumstances:
- HO-4 policies protect renters.
- HO-6 policies protect condo owners.
- HO-7 policies are for mobile or manufactured homes.
- HO-8 policies are specifically for older homes.
Knowing these distinctions will help you know what to look for.
The more coverage you add to your policy, the higher the cost. You’ll need to weigh how much coverage to add without blowing your budget for the coverage. It may be nice to pay for an additional rider to insure your valuable sneaker collection, but is the extra annual cost worth it? Crunch the numbers to decide and prioritize how much optional coverage you can afford.
What to look for in cheap homeowners insurance
Cost and budget to replace your home
First, calculate the cost of replacing your home in the event of a total loss. This is the amount it would cost to rebuild your home in the same location using similar materials to what you currently have at prevailing labor costs. This number could be vastly different from your home’s market value. A professional estimate can help if you’re unsure.
Second, you need enough to cover your possessions. A rule of thumb is a dollar amount equal to 50 to 75 percent of what it would cost to replace the structure of your home. So, if you figure on a rebuilding cost of $250,000, you’ll want at least $125,000 to cover your belongings. Conducting a home inventory by listing important items and their values can help you arrive at a more exact number. Expensive possessions such as jewelry and fine art may require add-on coverage.
You’ll need to think about liability — that is, what you’ll be responsible for if someone is hurt on your property. The minimum typically included in a standard policy is $100,000, but experts often recommend $300,000 to $500,000.
Think about special situations, like where you would live if a disaster destroys your home. A standard policy may provide 20 percent of the cost to rebuild for you to use in this situation, but you may have an option to add coverage. Also consider whether your home is at risk for disasters not covered by standard home insurance, such as floods or earthquakes. In these cases, you’ll need separate policies to protect your home.
Even after you’ve determined a dollar amount for coverage, you’ll need to choose between three standard coverage levels for your home insurance policy:
- Actual cash value: This is the least expensive level of home insurance because it factors in the depreciation of your home and belongings, paying for only what these things would be worth today.
- Replacement cost: This type of home insurance doesn’t factor in depreciation, but payouts are subject to policy limits.
- Guaranteed replacement cost: Like replacement-cost insurance, guaranteed replacement doesn’t factor in depreciation. However, it also allows you to exceed your policy limits, paying whatever it takes to replace your home and belongings. These policies are the most expensive and might be hard to find. Some insurers offer extended replacement cost policies instead. These typically pay up to 120 to 125 percent of your coverage amount.
Actual cash value is the least expensive and guaranteed replacement is typically the most expensive.
Cheap vs. general coverage
No matter what kind of homeowners insurance policy you buy, there are some important things to consider. General home insurance is a much easier process than finding the cheapest home insurance provider. With cheap insurance coverage, you also have to worry about creating an inventory of all your belongings. This is obviously time-consuming, but it will be worth it.
By getting a cheap plan and taking the time to itemize, you are making sure you’re not overpaying for your coverage. Although it does take more effort, finding cheap homeowners insurance coverage is usually the best option.
Starting your search
Now that you know what kinds of home insurance providers are out there, how much you need and how to save, it’s time to find a cheap home insurance company. Save time by starting your search online. Our streamlined quote tool can help you get multiple cheap home insurance quotes quickly and painlessly.
How much does homeowners insurance cost?
There are many variables that affect the cost of your homeowners insurance. They include past claims, the age and state of your home, policy limits and the state you live in. The same, basic homeowners insurance policy could vary dramatically from one state to another. There’s a good reason — some states are prone to more natural disasters, such as earthquakes, flooding, tornadoes and hurricanes. Other states may have higher claims of theft or other types of losses.
The Insurance Information Institute (III) ranks Louisiana, followed by Florida, as the most expensive states for homeowners insurance. Annual premiums for these states average $1,968 and $1,951, respectively. If you look back at the recent flooding and hurricanes that have caused widespread damage, it would make sense that homes in the two states are the most expensive to insure.
[ Related: Average Home Insurance Costs ]
Utah and Idaho are the cheapest home insurance states at $692 and $730 in annual premiums. There’s a big difference in price just because of where you live. You could save almost $1,300 per year between the cheapest and most expensive state. If you live on the state line between Florida and Georgia, your home insurance could change by almost $700 depending on which side of the border your home is at — Georgia’s average home insurance cost is $1,267 per year.
How to budget for home insurance
At The Simple Dollar, our mission is to help readers reach financial stability through frugal living. Therefore, we see budgeting as an essential ingredient in a healthy financial life. In order to ensure you have enough money to cover your annual premium, set aside the amount you’ll need monthly into a savings account. You can even set up automatic payments directly from that account so you never miss your renewal date.
You’ll also need to make sure you have enough savings to cover your deductible amount and any costs not covered by your policy. If you’re a new homeowner, this could mean trimming other areas of your budget to account for the new expense. With the right planning, it is possible to financially prepare for the unexpected.
We welcome your feedback on this article and would love to hear about your experience with the home insurance companies we recommend. Contact us at firstname.lastname@example.org with comments or questions.