Key Points

  • Homeowners insurance offers critical financial protection from many common causes of damage and destruction to homes, as well as from claims of injury on your property. 
  • While insurance costs are rising, you can find the best deal by comparing providers, bundling packages, seeking out discounts, and increasing deductibles. 
  • Proactive steps, like improving your credit score and upgrading your home’s systems, can help you earn future savings on homeowners insurance costs. 

Homeowners insurance is not only a common mortgage requirement, but it is also essential for protecting your property and securing your investment when you own a home. Homeowners insurance provides financial compensation for unexpected damages or losses covered by the insurance policy's terms. Commonly covered losses include damage from fire or losses from burglary.[1] This same type of insurance also offers coverage from third-party injury claims. For example, if a neighbor trips on the walkway leading to your front door, your homeowners insurance policy could offer some financial protection.   

Homeowners insurance has become more expensive in recent years, causing many people to seek ways to lower their insurance costs. 

In this article, you’ll learn:

  • Why homeowners insurance is getting more expensive.
  • How to save on homeowners insurance.
  • How to lower homeowners insurance costs in the future by taking proactive action today.

Why Homeowners Insurance Is Getting More Expensive

When you purchase a homeowners insurance policy, you make payments called premiums. You might make these payments monthly, quarterly, bi-annually, or annually. Your mortgage loan servicer might even make the premium payments on your behalf out of a mortgage escrow account that you pay into with your monthly mortgage payment.

These premiums have increased dramatically in recent years. CNBC reported that rates increased by an average of 23% nationwide from January 2023 to February 2024.[2] Here are a few reasons for the increases.   

Increases in Natural Disasters

The United Nations warns that the increase in global surface temperatures has led to a fivefold surge in climate and weather-related disasters over the last 50 years.[3] As temperatures slowly climb, we are likely to see more volatile weather patterns, resulting in more damage done to homes.    

Inflation and Rising Costs for Materials

The pandemic era saw extraordinary rates of inflation, which drove up costs on nearly everything, including construction labor and materials. A Bureau of Labor Statistics (BLS) study published in March 2024 shows a year-to-date increase of 33.9% in residential construction materials.[4] This increased cost makes it more expensive to repair or rebuild homes.  

Changing Demographics and Real Estate Markets

After the initial pandemic-era recession in early 2020, home prices quickly rose due to low supply and high demand.[5] This means real estate is more valuable, making damage and destruction more financially impactful. Furthermore, we’ve seen extreme population growth in vulnerable areas, like parts of Florida, for example, which are prone to Hurricane damage and flooding.  

How to Find the Best Deal on Homeowners Insurance

Despite the increasing cost of homeowners insurance, there are a few actionable ways to find the best deals on insurance policies.

Compare Home Insurance Rates

Different insurance providers offer different rates for coverage. Many insurance providers allow consumers to request a quote online, making it easier to comparison shop. You might also consider contacting an insurance broker. An insurance broker has relationships with many insurance providers and may be able to help you find lower premiums than you could find on your own. 

Understand the Details of Your Insurance Policy

As you shop for homeowners insurance, it’s important to understand what is and is not covered by a policy. In many cases, coverage is limited on items like jewelry, antiques, collectibles, firearms and money.[6] Additionally, standard homeowners insurance policies typically don’t cover damage from earthquakes or floods. You would need to add a special policy for this type of coverage.[1]

Bundle Your Insurance Products

Some insurance providers offer a discount for customers who bundle multiple insurance products. For example, you might receive a discount on your homeowners insurance if you bundle it with your auto insurance, life insurance, or any other insurance policy you may have. 

Seek Out Discounts

To stand out in a competitive market, insurance companies often offer discounts. As you comparison shop, look for discounts that might apply to you. These could include:

  • Military service discounts.
  • Senior discounts.
  • Occupational discounts (perhaps for teachers, doctors or firefighters).
  • Discounts for homeowners with security systems.

Increase the Deductible to Lower the Premiums

A deductible is the amount you must pay out of pocket before the insurance company contributes to your financial protection.[7] For example, if you have a homeowners insurance policy with a $1,000 deductible, you would need to pay the first $1,000 in repairs or replacement. The insurer would then contribute funds as outlined in your policy.

As a general rule, the higher the deductible, the lower your premiums will be.  

Proactive Financial Management

In addition to the methods for getting the best deal on homeowners insurance today, there are proactive ways to potentially get a better deal on future homeowners insurance policies.

Keep At-Home Activities Safe

Before you install a swimming pool or buy a trampoline, consider how this could affect your homeowners insurance expenses. By increasing the risk of injury on the property, these backyard additions can raise your insurance premiums.[8] You may be tempted to hide the addition from your insurance company, but then you would not be protected against injury from these items. Additionally, your insurance company could drop you as a client if they find out about a hazard like this on the property. 

Build and Maintain a Good Credit Score

Your credit score is a three-digit number that indicates how responsibly you have used credit. This figure is based on multiple factors, including how often you pay your bills on time, your length of credit history, and how much of your credit limits you use. Having good credit is crucial for getting loans with favorable interest rates. Good credit can also help you secure an apartment, land a job where credit scores are a factor, and earn lower insurance rates[9]. Building or improving your credit score may take a little time, but it is well worth the effort.   

Renovate with Insurance in Mind

Before you start a home renovation project, consider the insurance implications. With some smart additions that reduce the risk of damage, you might be able to reduce your homeowners insurance premiums. Here are a few upgrades to consider:[10]

  • Installing a security system
  • Updating old electrical, heating, or plumbing systems
  • Upgrading to a fortified roof
  • Getting a generator

Consider Refinancing to Reduce Homeownership Costs 

If growing insurance premiums are making overall homeownership costs unmanageable, consider refinancing your home loan to reduce the monthly mortgage payments. Refinancing can potentially lower your mortgage payments by either providing a lower interest rate (if current market rates are lower than your existing rate) or by stretching your remaining balance over a longer loan period. 

Refinancing your mortgage can have serious financial implications, so it is important to understand the pros and cons of refinancing before making a decision.

The Ultimate Goal: Adequate Coverage at the Best Price

The ultimate goal of saving on homeowners insurance is to find the best price for the amount of coverage you need. 

Finding the Balance Between Cost and Coverage

Different homeowners have different levels of risk tolerances. One homeowner may be comfortable carrying the minimum required amount of homeowners insurance, while another may prefer more extensive coverage. The important thing is to find the coverage that works for you and your household. You want to ensure sufficient protection while managing premium expenses. 

Re-Evaluating Your Coverage Needs Regularly

Your homeowners insurance coverage needs may change over time. For example, if you get married, have children, or get a new pet, you may need to update your policy to ensure that it still works for your changing household. Many homeowners like to review their policies with an insurance agent annually to ensure they’re still getting adequate coverage at the best price. 

Implementing Your Homeowners Insurance Saving Plan

Armed with this information about how to save on homeowners insurance, you’re ready to start reviewing your current policy and/or shopping for a new one. As you shop for homeowners insurance, remember:

  • Even as costs are rising, there are ways to find deals.
  • You can take proactive steps now to improve your chances of getting the best possible insurance rates in the future.  
  • The goal is to get the best price while maintaining a level of coverage you’re comfortable with.

Stay protected, stay safe, and enjoy your home!