When Is Lowering Your Homeowner’s Insurance Costs Too Risky?

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When insurance premiums increase, it’s natural to try to determine if and how you can lower costs. In some cases, switching plans or opting for higher deductibles can help manage costs. But, these strategies do not make sense for everyone, and it’s a balance. Although there are ways to lower insurance costs, it’s essential that you do not lose necessary coverage or take on too much risk in doing so. With home insurance premiums on the rise, when is lowering your homeowner’s insurance costs too risky? Here’s what to consider:

1. Can You Change Plans Without Losing Essential Coverage?

It’s important to regularly review your homeowner’s insurance to make sure you have sufficient coverage and limits for your home. As things change, your insurance needs change as well, and your coverage and coverage limits may need to be adjusted to meet those changes. Updates to your home, multi-policy credits, insurance trends, and more are all factors that affect homeowner’s insurance rates. Updating coverage may be necessary for you to sufficiently cover new additions or updates to your home and property. Switching plans and changing coverage can be a way to lower your homeowner’s insurance costs. However, doing so can be too risky if getting cost savings means less insurance coverage when you need it or if switching plans means losing valuable multi-policy discounts or bundling incentives. If you end up with insufficient limits, you could end up underinsured on your home, which means you won’t be covered for the full cost of repairs in the event of a claim. If you drop necessary coverage or endorsements, you may not have coverage at all for certain types of structures or perils. This leaves you open to significant loss and financial strain if your home sustains damage.

2. Are You Able to Handle Paying Higher Deductibles If Something Happens?

Another strategy people are using to lower home insurance costs is increasing deductibles on their home insurance policies. Higher deductibles can typically lower insurance premiums, but they also mean that you are opting to take on more of the financial risk yourself in the event of a claim. With a higher deductible on a home insurance policy, a homeowner will have to pay more out-of-pocket when filing a claim before their insurance policy steps in to cover costs. Unlike deductibles in health insurance, there is also no out-of-pocket limit or maximum that a policyholder will pay in one year. The deductible a homeowner pays in the event of a claim depends on the details of their policy (you can find this information on your insurance policy declarations page), whether the deductible is standard or percentage-based, and the amount of each claim. If you file a claim and the cost to repair exceeds the home insurance deductible, the homeowner pays the deductible, and then the insurance company covers the rest. If you file a claim and the cost to repair is within your deductible, you are responsible for the entire cost. In the case of percentage deductibles, this can result in extensive financial responsibilities for homeowners, depending on the type of claim, that cost far more than any savings gained from lowering premiums in this way. If you are not in a position to be able to self-insure for these types of risks, then attempting to lower your homeowner’s insurance costs in this way is too risky. Before making any risky moves that you may regret later, talk to your insurance agent. There may be other discounts for personal lines available, or home improvement projects you can do to lower your risk as an insured and lower your home insurance costs.

3. Do You Risk Losing Discounts and Incentives If You Switch Carriers?

Attempting to switch insurance carriers is another method people use to lower insurance costs. Although this may have worked well in the past, it can be too risky in current landscapes. More severe weather, higher risks, and more have all caused corresponding insurance trends like more underwriting restrictions, more limited monoline policies, and more. Not only can this mean that you may not be able to get a quote unless you are bundling multiple policies, but it can also mean that you limit the discounts and incentives you do have available. In addition, a history of switching carriers can also carry the risk of making you seem like a riskier insured, which can also affect the options available to you. Switching insurance providers can still make sense in some cases, but it is not a straightforward strategy that works for everyone. When is lowering your homeowner's insurance costs too risky in this case? If you will be losing out on valuable discounts or unable to get the coverage you need through a new carrier, it's likely too risky to try to lower costs via switching insurers. It’s important that you realistically evaluate the potential benefits and potential risks for your specific situation before deciding on this route. Your insurance agent can help you navigate the risks associated and work through the pros and cons to help you make the best decision for you.

Make Sure You Have Sufficient Homeowner’s Insurance Coverage

When evaluating your insurance costs and ways to lower them, it’s important to consider the consequences and risks. With home insurance policies, it’s important to ask, “When is lowering your homeowner’s insurance costs too risky?” You can reduce costs by reducing coverage or opting for higher deductibles, provided you have the means to self-insure for the coverage you are forgoing. There may also be other ways to lower homeowner’s insurance via available discounts or incentives. If you are concerned about insurance costs and have questions about whether certain types of coverages, additional endorsements, limits or deductibles, and more are still what you need, talk to your insurance agent. They’ll be able to evaluate your current coverage within the context of your specific situation and offer guidance based on your needs and goals. These types of personalized advice and insights are some of the biggest benefits of working with an independent insurance agent. If you have questions about your current insurance coverage, contact Ruhl Insurance, a Division of Horst Insurance, at 717-665-2283 or 800-537-6880.