How Can I Stop Overpaying for Home Insurance?

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Rebecca says,

As prices go up, I'm trying to cut expenses wherever possible so I can invest more for the future.

I'm paying a ridiculous amount for insurance, especially for my homeowners, which has been rising in Florida.

Is there any way to reduce home insurance while complying with what's required by my mortgage lender?

Thanks for your question, Rebecca.

I also live in Florida and can certainly relate to your question, as can many listeners who are homeowners.

While you can't control the underlying reasons why home insurance premiums have been rising,

there are plenty of hacks for fighting back.

This podcast will review tips for reducing the cost of home insurance without losing the coverage your lender requires or putting your finances at risk.

Hey everyone, welcome back to episode 2012 of Money Girl.

This is Finance Friday, where I answer your burning money questions.

I'm Laura Adams, an award-winning author, spokesperson, money-speaker, and founder of The Money Stack, my sub-stack newsletter.

You can sign up for The Money Stack and learn more at LauraDatams.com.

You can also leave a voicemail with a money question or comment by calling 302-364-0308.

I'd love to feature your question on Finance Friday.

Again, it's our weekly Q&A bonus edition of the show.

And speaking of rising costs, we're about to tackle a major expense for many of you, weddings.

Throughout the month of May, I'm hosting a special series on wedding finances.

From guest, etiquette, to bridal budgets, I want to answer your burning questions.

Have you been impacted by wedding costs recently?

Send me a voicemail or an email via LauraDatams.com.

The details for both of those are in the show notes.

Don't wait too long, though. I want to make sure we've got time to include your question in the lineup.

All right, let's talk about the state of home insurance in 2026.

I just saw some new data from Insurify that shows that the average annual cost of homeowners insurance in the United States is expected to exceed $3,000 by the end of 2026.

The states like California, Nebraska, New Mexico, and Georgia are likely to see the largest increases with some home premiums there, surging 10% or more.

Home insurance rates are rising fastest in high risk areas.

Like where Rebecca and I live in Florida, homeowners in Florida pay an average insurance premium of nearly $8,300 a year.

Minus not that high, and I am very happy about it.

Severe weather like tornadoes, hurricanes, wildfires, and hail causes more frequent and costly claims for carriers.

Plus, inflation of construction materials and labor means it's going to cost mortuary para home to remain profitable insurers raise rates, and that puts a squeeze on many homeowners.

In fact, according to recent data from the National Association of Realtors, or NAR, insurance costs are becoming such a burden that they're actually causing home sales to fall through across the country.

In high risk states like California, NAR shows that 13% of realtors reported a sale falling through specifically because the buyer could not get affordable home insurance.

If the insurance premium plus other monthly expenses, including the loan principal, interest, and property taxes, exceed a lender's required percentage of your income such as 30%, they can turn a home buyer down for financing.

So be sure to research what a standard homeowners policy will cost before you make a real estate purchase offer you don't want to wait until you're under contract to get insurance quotes.

If you want good homeowners insurance, but you need to keep the cost as low as possible, I want you to consider one or more of the strategies that I'm going to cover.

Number one, increase your deductible.

Insurance deductibles and premiums work like a seesaw. When one goes up, the other goes down.

Your deductible is the amount you must pay before your insurance benefits begin.

So if you increase a deductible, be sure you can afford to pay it in the case of a claim.

Raising your homeowners deductible from, let's say, 500 to 1000, could save from 10 to 25% on your premium, but it does depend on your insurer and the state where you live.

Some carriers might offer deductibles as high as 5,000 or 10,000 for those who want coverage only for more expensive repairs.

Again, you've got to be sure that you could make those repairs.

There are also required special disaster deductibles in high-risk areas for events like hurricanes and wind storms.

These are additional and separate from the regular deductible for claims for things like theft and fire.

Special deductibles are a percentage. They could vary from 1, maybe up to 5% of a home's insured value, but they can be even higher.

The amount you have to pay depends on your insured value and the trigger event, such as whether a hurricane makes landfall or reaches a certain strength category, such as being category 1 or 2.

For example, if your home is insured for $400,000 and you have a 2% hurricane deductible, you pay the first $8,000 of damage before the insurance company pays any covered claims, and many states allow insurers to offer higher deductibles such as 10%.

However, 8-10% deductible on $400,000 of coverage means you're responsible for the first $40,000 of hurricane-related damages. That's a big chunk.

Before you call your insurance agent to hike your deductibles, if you have a mortgage, your bank likely has a maximum allowable deductible, such as $2,500 or 5%.

They want to ensure you can actually afford to repair a home while it's still there collateral for your mortgage.

So unless you regularly keep enough cash on hand, hiking your regular or your disaster deductible on your home policy to reduce the premium may not be a wise gamble.

Carefully consider what you're prepared to pay out of pocket versus the annual cost of an insurance premium.

2. Bundle Coverages

Bundling insurance is purchasing various policies from the same carrier, like your home, auto, and life insurance. It can save money, such as 15, maybe even up to 25%, depending on your insurer and your home state.

However, I recommend checking the combined price, that bundled price from one insurer, with separate policies from different insurance companies, just to be certain that bundling is worthwhile.

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Noom 3. Consider your personal belongings. Home insurance covers some types of personal possessions, but usually for less than you'd expect.

For instance, jewelry, watches, furs, silverware, electronics, and firearms are typically limited to $1 or $2,000.

Therefore, if you have jewelry worth $10,000 that's lost or stolen, you would come up $8,000 short with just $2,000 of coverage.

If you have items worth more than insurance coverage caps, you can add an insurance rider to expand protections, this is known as scheduling your personal property.

It does cost more, but certainly gives your most expensive items separate coverage so you can replace them.

I know we're trying to help Rebecca save money, but my point is to pay attention to valuable items that you would want to replace after a covered disaster.

Scheduling items may cost less than you'd expect.

Noom 4. Review your coverage.

Home insurance for your dwelling and any outbuildings should only be based on the cost to rebuild them.

Not the amount you paid or the appraise market value for the entire property.

You never include the value of land in home insurance coverage because insurers only ensure what sits on top of the land.

Depending on a home's age, location, and construction quality, the insured value could be higher or lower than its market value.

If you've owned your home for a while, be sure you have the right amount of coverage.

Also be aware if you have actual or replacement coverage.

Actual cash value or ACV coverage pays to repair or replace your property or possessions up to the policy limits minus a depreciation deduction.

In other words, it pays a percentage of what it would cost you to go out and buy the same item.

While an ACV policy costs less, it probably won't pay enough to rebuild your home or fully replace your personal belongings without paying a significant amount out of pocket.

And the other type is replacement cost value or RCV coverage.

This pays the amount to rebuild a similar home and replace damaged belongings.

It gives you more coverage, but costs more.

Number 5. Make upgrades to your home.

Insurers reward homeowners who upgrade or harden their homes to make them more resistant to disasters.

For instance, features like weather-resistant roofing, shatter-resistant windows, smoke detectors, water leak detectors, electrical sensors, security alarm systems, dead bolts, and storm shutters.

All of these make your property less risky to insurers, which typically qualify you for premium discounts.

Yes, these are investments in your home.

However, when you voluntarily make these kinds of upgrades or you've just got needed repairs that you have to make, be sure you let your insurer know.

Otherwise, they won't have the necessary information to give you a discount on your premium.

Number 6. Build or keep great credit scores.

In most states, maintaining good credit is critical for reducing what you pay for home and auto insurance.

Depending on where you live, having poor credit can cause you to pay 20% or more compared to having excellent credit.

So that's just one more reason why building great credit is essential for a healthy financial life.

Number 7. Compare rates.

Shopping around for rate quotes is critical because prices vary considerably from insurer to insurer.

They even vary from one year to the next.

Compare home insurance quotes from at least three companies for the same coverage and deductibles.

Being loyal and sticking with an insurer for several years may qualify you for a significant discount.

However, don't let that keep you from periodically shopping to ensure you're still getting a good deal.

While shopping, ask carriers what discounts they offer.

One may offer a significant price reduction not offered by a competitor.

Remember insurance companies, they're not going to call you about ways to save money.

You have to proactively ask for discounts.

So a short phone call to update your agent on your, you know, something like new home upgrades or smart home sensors or even improved credit scores could save you a lot.

Rebecca, I hope the show gives you potential ways to save money on your home insurance without sacrificing the coverage you need to protect your finances in the event of a disaster.

It basically comes down to being a savvy consumer and shopping around.

And I know that takes time, but you know, it's often really worth putting in a little time to do that homework.

That's all for now. I'll talk to you soon. Don't forget to check the show notes for how to reach out with your wedding related money thoughts and questions for our wedding finances series next month.

Until then, here's to living a richer life.

Money girl is a quick and dirty tips podcast. We've got a great team. I want to thank Steve Ricky Berg for audio engineering.

Holly Hutchins is our director of podcast Morgan Christianson is our advertising operation specialist.

Rebecca Sebastian is our marketing and publicity manager.

Nathaniel Hoops is our marketing contractor.

Amaram El Nagib is our podcast associate.

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