As a new homeowner, I recently bought a home insurance policy. And as a finance writer, I tried to carefully analyse all points and stick to my advice— “shop around”.
Honestly, it was a painstaking process, but all’s well that ends well—I successfully bought a comprehensive home insurance policy. In the entire exercise of buying a home insurance, I also learnt that there are various ways through which one can keep a check on premium rates. So, if you’re exploring the market to buy a home insurance policy, here are some ways to ensure you get the right deal:
- Raise deductible: Indeed, it is a great way to save money and lower insurance premium. The deductible is the amount that an individual is required to pay before the insurer kicks in. Mainly, there are two types of deductibles:
- Compulsory Deductible: As the name signifies, it is the mandatory amount that you have to pay in case of loss or damage, while the balance will be paid by the insurer.
- Voluntary Deductible: It is a deductible amount which is voluntarily opted by the policyholder.
By raising your deductible limit, you can save more money on your insurance premium. However, it is imperative to decide the deductible limit wisely. The amount should not be more than what you can afford otherwise you would have to face problems during the claim settlement.
- Make your house “Fire Marshall” proof: Portrayed by actor Jim Carrey, Fire Marshall Bill was one of the most popular characters in a comedy show, “In Living Color”. The character was in the habit of doing unsafe activities which finally lead to accidents, like fire and explosions.
Now, “Fire Marshall Bill” is a term used for people who showcase risky behavior.
So, make sure your house is “Fire Marshall” proof. This can be done by installing safety equipments in your house. These measures will not only enhance the safety of your house but also lower your home insurance premium. Because your house is less likely to be burglarized or it is secured from theft, the insurer rewards you with easy premium rates. In addition, consider modernizing your heating, plumbing and electrical systems to minimise premium.
- Don’t go for smaller claims: Though, insurance is meant to secure you against unforeseen losses or damages, it is important to restrict the number of visits to the insurer. When you approach the insurer even for smaller claims, it makes you a risky customer, and it can escalate your premium rates as well. So, don’t be penny-wise, pound-foolish and approach the insurer only when it is required. For instance, in the case of any damage, consider the total cost of repair and weigh them against the possibility of a rise in the premium amount. Then decide if it is worth approaching the insurance company?
- Be loyal to the insurer: In today’s age when trust and loyalty are hard to find, insurance companies reward those policyholders who exhibit these attributes. It means, if you stick to the same insurance company for a longer duration, say three or four years, the insurer may reward you for your loyalty. In certain cases, insurers cut premium rates by 5%-10%.
- Don’t be over-insured: Being under-insured can lead to a serious problem especially if a disaster strikes. However, being over-insured means you are wasting your hard-earned moolah. So, the ideal situation is to go for a realistic home insurance coverage. Many homeowners make the mistake of covering the price of the land on which the house is built. Irrespective of how adverse the calamity is, the land will always remain intact. In fact, you will never be able to get a claim on it, regardless of what happens to the building. Therefore, include only the value of the property and leave out the value of the land from the policy. Also, review your policy cover annually whenever it is up for renewal. It includes reviewing floaters, which are like extra insurance covers for items which are not covered under a standalone policy. For example, avoid insuring your ten-year-old toaster at a higher price even if it is in a working condition. Similarly, if you no longer own an electronic item, jewellery or any other precious items, it is advised to cancel them so as to reduce the price of the cover.
- Opt for a long-term insurance policy: By opting for a long-term home insurance policy, you can get a discount on premium rates. Many insurers offer discounts on the own damage part of the premium of a long-term policy. Long-term policies are useful in trimming administrative, and other costs, and these savings are then passed on to policyholders in the form of low premium rates. In addition to that, by opting for a long-term policy, you can enjoy the following benefits:
- Convenience: By opting for a long-term policy, you can save yourself from the hassles of renewing the policy every year. It is daunting to keep track of annual policy and its renewal date, especially for an individual who has more than one policy. Moreover, even if someone remembers the renewal date, he/she might face a problem in renewing the insurance policy due to lack of time. However, this can be taken care of if you have a long-term policy.
- Free from policy-renewal related risks: A policyholder is exposed to various types of risks in case of a lapsed policy. For instance, if a loss or damage occurs when the policy has lapsed, the owner has to bear the entire loss. However, it can easily be rectified if you have a long-term insurance policy.
- Premium rates are frozen: As the premium is decided by IRDAI, the apex insurance body, you can shield yourself from any annual hike. Further, on the basis of their claim experience, policy coverage, and other parameters, the insurer can increase premium rates. However, if you have a long-term policy, you are protected from this hike.
- Buy online: Purchasing insurance online is easy, fast and will cost you less. Since you buy insurance directly from the insurer, you can save the cost of commission. Moreover, as the entire process takes place in the virtual world, it is paperless, thus curtailing further cost. The insurer happily passes on this saving to the customer in the form of low premium rates. By buying home insurance online, you can cut down on the premium amount.
Buying and living in ‘own’ house is a dream of most of the people. It is only natural to be protective about your assets, which is why home insurance policy is a necessity. It is the most practical and wonderful way of safeguarding your house. Moreover, when there are various factors to reduce your premium outgo, there is no reason to ignore the cover. Therefore, consider all the above options and find the exact insurance coverage you need and save money.
Byron Simpson is a qualified business/finance writer expert in investment, debt, credit cards, Passive income, financial updates. He advises in his blog finance cent.