Homeowner insurance is a must if you own property. This isn’t just a luxury. It’s a necessity that protects your home and your possessions against theft, damage, and more. In addition, all mortgage lenders require their borrowers to have insurance coverage for the full or fair value of the home. However, home insurance comes at a cost that can stress your monthly budget.
With the cost of owning a home already going up, you shouldn’t pay more than you need to for home insurance. Not only can you shop around for the right home insurance policy for you, but you can also take steps to reduce your home insurance costs overall. In this guide, we’ll share how to find budget home insurance to suit your needs.
How Does Home Insurance Work?
First, it’s important to understand how home insurance works. Whether you rent or own, home insurance is a way to make sure your possessions and property are taken care of. Knowing that your belongings will be repaired or replaced if something happens can give you much-needed peace of mind.
To begin, there are different types of home insurance to be familiar with. These types of household insurance cover different areas, such as:
- Home insurance: This is what most people are familiar with. It covers all financial losses associated with damage or loss of a property you own.
- Contents insurance: On the other hand, contents insurance covers the contents of your home. If your possessions are stolen or damaged, it covers the financial loss.
- Home and content: This type of home insurance covers both your home and the items in it.
- Renters insurance: Also known as tenant’s insurance, this is a low-cost policy specifically for renters. It covers events like theft and fire.
- Landlord’s insurance: If you’re a landlord, this type of insurance covers all of the unique risks of renting your property.
Whether you own or rent your property, home insurance covers you for damage. It also protects you against legal liability. If you have a home loan, you’re required by your lender to have active home insurance. You might also hear home insurance called property insurance, home building insurance, or homeowners insurance.
What your specific policy covers depends on your unique risks. If you live in a flood-prone area, for example, you’ll want a policy that covers this. In Australia, you need to consider your risk of flood, storms, cyclones, and bush fires. If your home is damaged or robbed, your insurance matches the replacement cost of your property plus any supplementary costs.
Tips for Lowering Your Home Insurance Costs
With that in mind, how can you lower the cost of your home insurance? Budget home insurance isn’t as difficult to find as you might think. A bit of planning goes a long way, and these simple tips below help you get the best coverage at the lowest price
1. Compare rates with multiple insurance providers.
First, never feel pressured to take the first insurance rate you find. When you shop around, you’re more likely to find a budget home insurance plan that works for you. The policy details change between companies, so always read the fine print. Lower premiums could be a sign of lesser coverage.
You can always check different home insurance rates yearly, or even more frequently. If you experience any major life event (marriage, children, etc), it’s a good idea to see if you qualify for a new policy. Before choosing a provider, check with insurance reviews and ratings.
2. Pay for only the coverage you need.
When you review your coverage, make sure you’re not paying for more than you need. Not all policies provide the same coverage. You might be paying for something that you don’t need. For example, if you don’t live in a bushfire risk area, you might not need to pay extra for this coverage. This saves you money in the long run.
3. Choose a higher deductible.
Similarly, check your deductible. You can always increase your deductible which is the amount you have to pay out of pocket before the policy goes into effect. The higher the deductible, the cheaper your monthly premium will be. It’s a good rule-of-thumb to keep them as high as you can reasonably allow within your budget.
However, it’s risky to choose the plan with the lowest premium and the highest deductible. You don’t want to find yourself struggling to afford an expensive deductible if you experience an emergency or household disaster.
4. Only submit claims when you need to.
It can be tempting to submit home insurance claims whenever you have a repair, but this could end up costing you more in the long run. When you submit claims, you appear as a higher risk in the eyes of your home insurance provider. If you submit multiple claims, you could experience a rise in your premium costs. Before submitting a claim, consider the cost vs. paying out of pocket.
5. Prepare your home for emergencies.
Next, always make sure your home is disaster ready. Emergencies can happen no matter where you live. Being prepared is the best way to protect your home and your family. Even minor weather can cause damage to your home that leads to an insurance claim.
To prepare, make sure your home is in good shape. Always take care of your outdoor spaces, maintaining your lawn to avoid any damage outdoors. You can reinforce your roof, add storm shutters, and more to reduce your home insurance costs.
6. Boost your credit score.
Did you know your home insurance cost is dependent on your credit score? If you maintain a good credit score, you can cut your insurance costs. The best way to get a budget home insurance policy is by making sure you have the best possible credit score. If you have a bad rating, it’s time to make some changes to see if you can qualify for a discount.
7. Avoid home add-ons.
Additionally, adding fun things to your home might be exciting, but they can also be costly. Pools, hot tubs, and trampolines are seen as safety hazards in the eyes of insurance providers. Before you add any of these to your home, check how they’ll affect your insurance costs. This is also something to consider when shopping for a home or rental.
8. Increase your security features.
On the other hand, investing in security features goes a long way with your budget home insurance. The more protected your home is against fires, burglars, and other claims, the better. You can install deadbolts, home security systems, and fire sprinklers.
This is a safe way to keep your family protected, and it also helps your home. Installing these security features doesn’t have to be expensive, and it pays off with peace of mind. When increasing safety features, consider where you store your unique or high-value items. Things like jewellery, fine art, and so on should always be kept somewhere safe in your home and out of sight.
9. Pay your bill on time.
It’s always a good habit to pay your bill on time, but this can also save you money. If possible, you can pay your entire billing cycle in full vs. monthly payments. While this might be a large chunk of change, it’s more affordable to pay in advance.
Similarly, if you pay on time, you won’t face any unexpected late fees. Since your home insurance protects your safety, you want to make sure there are no lapses in coverage. If you can’t pay in full upfront, turn on auto-pay to never miss a payment.
10. Choose a multi-policy.
Lastly, if you want to save money on all of your insurance, stay loyal to the same company. If you’re able to create policies with the same company for several things (home insurance, car insurance, etc), you’re more likely to get a bundled rate. This is a low-cost budget home insurance option that also makes your life simpler.
Over time, many insurance providers also provide loyalty discounts. The longer you stay with the same provider in good standing, the more likely they’ll offer a discount for your support. While you should always switch if you find a better offer, there can be value in sticking around for the right service.
Find Home Insurance You Can Afford
Ultimately, home insurance is a cost you can’t avoid if you own a home. Even if you rent your property, it’s a good idea to protect your assets with a renter policy. However, this doesn’t have to break the bank. Things like location, home features, and region can make a huge impact on the cost of your policy. By taking the time to find the right plan for you, it’s possible to save big.
Do you need help planning your home insurance policy or home budget? You don’t have to make these plans alone. Talk to a skilled financial professional at Debt Busters on 1300 368 322. Together, we’ll create a budget that works for you.