We hear and read about it in the news every day: Rising interest rates are punishing home owners that participated in the adjustable-rate home loan phenomenon over the past half-decade. According to a study performed by USAToday, almost 25% of mortgages (10 million) carry adjustable interest rates. Attracting consumers with low down payments, and interest-only payment options, adjustable-rate loans afforded millions of borrowers the opportunity to refinance their existing homes at historically low rates, and even qualified them for homes that were otherwise beyond their financial means.
In the struggle to escape foreclosure, some will make simple adjustments in their daily lives by conserving energy and vacationing closer to home. Others, unfortunately, will be forced to sacrifice on grocery spending -- going as far as surrendering essential healthcare expenditures just to make ends meet. Surprisingly, homeowners insurance policies are a common bill that many borrowers fail to save on; instead accepting insurance as just another cost of owning a home.
As far as many new home borrowers have been concerned, their homeowners insurance policies are bundled into their mortgage payment. Satisfying the lender's prerequisite that the premium be paid for the first year at closing, shopping around for the best rate may not have been a reasonable option at the time. Given the current state of rising interest rates though, the opportunity for shopping for a new homeowners insurance policy has never been more reasonable. It's easier than shopping for a mortgage and there are dozens of ways homeowners can save, easing the pinch created by skyrocketing mortgages.
Homeowners insurance rates can vary by hundreds of dollars from company to company, therefore, homeowners should shop for insurance the same way they would shop for any other product. Homeowners should compare prices, policy coverage and conditions, and even consumer complaint reports.
Look for Multi-Policy Insurance
Most insurance companies that sell insurance products other than homeowners insurance will offer consumers discounts for buying more than one product from them. For example, if your auto insurance company also sells homeowners insurance, you might get a discount of up to 15% off your premium for buying both products.
Only Buy the Homeowners Coverage You Need
Homeowners insurance policy limits should be revisited every year to reevaluate any major purchases and additions. On the other hand, many of the possessions that homeowners insure depreciate significantly over the course of a year. Homeowners should update their home inventory, and reevaluate policy limits for possible savings. Further, homeowners shouldn't spend money for coverage they don't need. For example, if you don't live in a flood-prone area, you may not need costly flood insurance.
Consider Raising Your Deductible
Increasing your deductible by just a few hundred dollars can make a significant difference to your premium. Most deductibles start at $250, therefore, if you raise your deductible from that to $1,000, you may to save nearly 25% on your premium.
Look For Discounts That May Apply to You
There are a myriad of homeowners discounts that go unrecognized by many consumers. For example, even though they seem ordinary, you may be able get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters or fire retardant roofing material.
Other common homeowners insurance discounts include:
• A new home's electrical, heating and plumbing systems and overall structure are likely to be in better shape than those of an older home, therefore new homes are usually charged lower rates than older homes in the same price range.
• Seniors often enjoy discounts on their homeowners insurance if they are over 55 and retired, or if they've been a long-term customer.
• Strong home security in the form of security systems, alarms, gated communities, double locks on both doors, etc. often afford you lower rates.
• Non-smokers usually get reduced rates on their homeowners insurance policy. If you were a smoker when you bought your house, but have subsequently quit, many insurers may lower your rates. Smoking accounts for over 20,000 residential fires in the U.S. a year, so insurers often charge lower premiums to smoke-free households.
Insure Your House, Not the Land Under It
Consumers often overpay for homeowners insurance by including the value of the land that their home resides. Remember that you only need to insure the home itself and your possessions, not the land. Should something unfortunate occur, the land will most likely remain. If you do not subtract the value of the land when deciding how much homeowners insurance to buy, you will most likely pay more than you should.
