Premium advice

I just received my home insurance bill and my premium has gone way up. How can I reduce my bill?
By Gail Vaz-Oxlade
You're not alone: premiums are going up, up, up. Some say it's because the home insurance market hasn't raised its rates in eons. Others say that insurance companies are trying to recover from the recent massive payouts caused by terrorism. Whatever the reason, here are some ways to cut your house insurance costs:
Shop around
The cost of home insurance can vary by hundreds of dollars depending on where you buy your policy. An independent insurance agent (check the Yellow Pages under "Insurance Brokers") can provide rate quotes from a variety of companies. Make sure you're comparing prices for the same kinds of coverage. If you find a better rate, wait for your renewal date to switch companies or you could end up paying a penalty. Remember to inform your old insurer in writing; don't just ignore the renewal notice. And keep in mind that the company with the cheapest price may not be the best one to deal with when it comes time to file a claim.

On the flip side, if you've kept your coverage with a company for several years, ask your insurer if it offers a loyalty discount. Such discounts typically range from five to 10 per cent.

Do some fine tuning
Consider raising your deductible, which is the amount of money you have to pay toward a loss before your insurance kicks in. Home insurance deductibles start at about $250. But no one in her right mind would make a claim for less than $500, especially when any claim may cause premiums to go up. Choose a higher deductible and watch your premium fall. And if you stay claims-free for three years or more, you could save 10 to 15 per cent.

While your home and its contents are at risk from fire, theft and other perils, the land your home sits on is not. So, don't include the value of the land when deciding how much home insurance you need to buy. (You won't have much choice if you have a big mortgage, since lenders want the full amount of the home insured. Once you pay off your mortgage, make sure you apply for the mortgage-free discount of five to 10 per cent.) An insurance broker can help you figure out the replacement value of the building.

Look for discounts
Find out about discounts. If you buy both home and auto coverage from the same company (not broker), you may get a multi-line rate that saves you between five and 15 per cent. Large employers and alumni and business associations often make insurance deals that result in bargains for employees and members.

Smoking accidents account for thousands of residential fires every year. If no one in your household smokes, make sure you tell your broker so you'll get the non-smoker's discount (as much as 15 per cent).

Choosing a newer home could help you save five to 15 per cent. Insurance companies also look at the home's proximity to emergency services such as a fire hydrant or fire station, as well as the type of building material used. Deadbolt locks, burglar alarms and smoke detectors also bring discounts. Install a home security system and you could be looking at five to 15 per cent off. Check with your insurer first to see which systems it recognizes.

Since you want your policy to always reflect the value of your home and belongings, review it every year and make sure it remains current with your present holdings.

Financial expert Gail Vaz-Oxlade's latest book is Dead Cat Bounce: The Skinny on e-Vesting (Prentice Hall).


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