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What Can You Do to Save Insurance Dollars?
Purchasing a home is the largest, single investment that
most people will make in a lifetime. Adequately insuring your
home is one of the most important decisions that you can make
to safeguard your investment. Property insurance is
designed to insure your home and its contents. In addition,
you can purchase insurance to cover special items or situations
that you have.
The price you pay for insurance is called the premium.
The premium cost is based on several factors including: 1)
which risks you choose to insure against, 2) how much insurance
you purchase, 3) where your home is located, 4) the value
of your home, and 5) from which insurance company you buy
the insurance. Additional factors can affect your premium
such as security devices in your home and how your home is
built. All other things being equal, it costs more to insure
an all-wood home than a home made of brick or stone.
Renter’s Insurance
If you live in an apartment or other single-family dwelling
which you don’t own, then renter’s insurance
(also called contents insurance) is designed to fit
your needs. Renter’s insurance insures your personal
belongings, but not the building structure. It also provides
some liability protection.
Renter’s insurance is less expensive than homeowner’s
insurance. However, most of the factors that determine homeowner’s
insurance costs also affect the cost of renter’s insurance.
When deciding where to rent, consider the building’s
location, safety features, and construction materials.
Tips for Saving Premium Dollars
- Smart consumers make the best use of their insurance dollars.
Use these tips to help you save on premium costs.
- Pay your premium annually or allow automatic deduction
from your checking account to save finance charges. Usually
the less bookkeeping a company has to do, the lower the
premium will be.
- Take the highest deductible you can afford. A deductible
clause in an insurance policy means that a policyholder
is responsible for all losses up to the "deductible"
amount.
- Install safety devices, such as a burglar alarm, sprinkler
system, smoke detector, fire extinguisher, or dead bolt
lock to reduce your premium. Check with your insurance agent
to see which devices qualify for a discount.
- Ask your insurance company about other discounts. For
example, you may receive a discount if you buy your home
and auto insurance from the same company. Retirees and nonsmokers
may be eligible for a discount.
- Before you buy, compare companies and policies. Although
state insurance departments closely monitor insurance rates,
this doesn’t mean that companies have to offer identical
policies at the same price.
- Each year review and update your coverage with your agent’s
assistance. Drop floaters you purchased to cover specific
items that you no longer need or own.
- Take time to select an insurance agent. Look for someone
who is knowledgeable and professional, and someone who shows
concern for your well being. Your premium dollars should
buy service as well as an insurance policy.
Where You Live Affects Your Insurance Cost
When buying a home or choosing a place to rent, consider
location. A house or apartment near a fire station and/or
a fire hydrant is less expensive to insure than one several
miles away from fire protection. Insurance costs are lower
for homes in low-crime areas.
Many insurers offer lower premiums to owners of new homes.
New homes have fewer insurance claims because of the newness
of construction and wiring and safety features. Also, when
you’re purchasing or building a home, consider one built
of fire-resistant materials such as brick; insuring it will
cost less.
Written by Ellen Burton, Consumer and Family Economics Extension
Educator, University of Illinois Extension, August 2000.
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