If you’re a homeowner in New York, after seeing your latest rate increase, you’re probably pretty interested in finding ways to save money on your home insurance.
Not only have home insurance rates increased sharply this year as inflation has caused higher claim payouts for historically similar incidents, but there are also carriers that have been leaving the market altogether.
“Insurance policies have inflationary prices built in that can be anywhere between 2-4% per year, but recently, replacement costs have shot through the roof — the costs are extremely high,” said Alex Anderson, agency owner of The Anderson Agency in Rockville Centre. “When a client or prospective client comes to my office asking for lower rates on home insurance, I have a mental checklist that we’ll run through to see if there’s a way we can help.”
Anderson shared with the Long Island Herald ways he helps clients and prospective clients save money on home insurance. Here are the five things he walks through with them.
What it is: One of the first items which Anderson looks at is the policyholder’s deductible. Your deductible is your financial responsibility toward a claim; essentially your out-of-pocket expense. If a home sustains damage, the insurance company will provide an assessment of the cost of damage. After coverage is determined, and once the repair amounts are agreed upon, your insurance company will send you a check for the remaining amount to repair the claim over and above your deductible.
“Most of the time, your deductible is usually going to be a fixed dollar amount, however some companies will also let you choose a percentage of the amount of your home’s coverage, known as the dwelling limit.,” Anderson explained. “Just be careful, because as your coverage increases over time, so will your deductible! I normally recommend just sticking with a fixed dollar amount when possible.”
How it works: Common deductibles range around $1,000 to $2,500, sometimes going up to $5,000 or more. Anderson suggested that there could be significant savings associated with increasing your deductible — but that it all depends on the deal you’re getting.
“If you were to change your deductible from $1,000 to $2,500, there might be significant savings associated with that jump that might make it worth it,” he explained. “Some companies, if you raise your home insurance deductible from $1,000 to $2,500, they might give you $400 off per year, which most likely might make it worth it. Some companies, however, going from $1,000 to $2,500 might give you $10 or $30 off. So, you’re taking on another $1,500 out of your pocket and saving only $30 — it’s not even close to being worth it, in my opinion.”
Did you know? Many homeowners downstate (Westchester and below) likely also have a separate Hurricane Deductible, which is a percentage of your total amount of coverage (Coverage A-Dwelling). Most larger companies have a fixed 5% deductible, meaning the policyholder would be responsible for 5% of their Coverage A before their company would pay towards a loss. If your home has a Dwelling Limit of $500,000, then that would be $25,000.
Some companies, however, do give policyholders the flexibility to pay more into their premium to drive that deductible down to 2-4% of your ‘Coverage A’ amount.That could bring your out-of-pocket down from $25,000 to $10,000 if you had a loss from a declared hurricane.
What it is: By now, you’ve seen plenty of commercials about the benefits of bundling your home and auto insurance, but is it worth it? Anderson said, overwhelmingly, yes.
“For example, my main carrier will do approximately a 35% discount if you have your homeowners policy with me and then opt to bring your auto insurance over,” he said. “Most companies will offer around 10-20%.”
Did you know? If your homeowner insurance is tied to your mortgage, you may also see significant savings when switching your policies.
“Banks will normally do an escrow analysis once a year. If you have significant savings on your home insurance, you can request your bank do an updated escrow analysis to see if it will lower your payments,” he explained.
What it is: If you have made significant improvements to your home, it’s possible you’ll qualify for credits to lower your rate. If your home has central station alarm systems or a newly replaced roof, for example, you can see some discounts.
Did you know? “Some older homes may have sprinkler systems — you don’t see it too often, but it could qualify for savings, Anderson said. “More commonly, construction credits may very well come in handy too. A lot of companies will give nice discounts for roofs that have been replaced within the last 10 years because it significantly reduces the risk of water damage due to events such as driving rains, ice damming, and windstorms. Newer construction will also experience more competitive pricing, without a doubt.”
When it comes to credits, they can vary by company, so Anderson finds it’s best to just have a conversation with the client to see what credits may be available.
“I like to try to get an idea of the situation. The more we can have an open conversation and talk about things that a client or prospective client has going on, the better I can do my job because there are little breadcrumbs of information that come out, and some things may really help,” he said.
What it is: Running your consumer reports, which is essentially, in part, a soft credit profile is another way to lower your rate by getting re-tiered. According to the New York Department of Financial Services, based upon their underwriting guidelines, insurers assign policyowners to rating "tiers" with others who have similar characteristics.
Did you know? Some insurers use “multi-tier” rating programs, in which more than one rate level is established within the same company. At the end of their policy period, periodically, policyholders may request to be re-evaluated to determine if they qualify to move to a different tier.
What it is: Just like he does with auto insurance, Anderson suggests shopping for different policies to find the best fit for you. Premiums charged for homeowners insurance can vary widely from company to company, and can depend on a variety of factors including the location, age and type of building, the proximity of fire protection services and more.
“It’s good to check your coverage from time to time. Obviously everybody wants the cheapest rate,” Anderson said.
Did you know? Anderson said this is another area where communication with policyholders is critical. By working with a qualified licensed agent, homeowners can get help when evaluating policy costs to find ways to catch a financial break.