5 Surprising Homeowners Insurance Facts and Savings Tips

Money Girl details 5 surprising facts about what affects homeowner insurance quotes, and reveals tips on how to save money, and how to prevent your premium from ballooning over time.

Laura Adams, MBA
7-minute read
Episode #386

There’s no place like home, but owning one is a huge investment. In addition to the cost of a mortgage and property taxes, homeowners insurance can take a massive bite out of your budget.

No one likes to pay for homeowners insurance - until you need it. Fortunately, there are smart ways to get high-quality home insurance and still save money.

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In this episode, you’ll learn 5 surprising facts about what affects homeowner insurance quotes, as well as how to save money, and how to prevent your premium from ballooning over time.;

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Who Needs Homeowners Insurance?

When you buy a home, lenders require you to have a minimum amount of homeowners insurance, in order to protect what they’re financing. You must be able to repair or replace the property if it gets damaged or destroyed by a covered event, such as fire, wind, or hail.

But in order to protect your own interests, you should have a comprehensive homeowners policy that goes above what a lender requires. For instance, every homeowner should have liability coverage to stay safe from a lawsuit, plus loss of use coverage, which pays for when you’re forced to move out while repairs are made due to a covered disaster.

However, unlike with auto insurance, there’s no law that says you have to purchase any amount of home insurance. So once your mortgage is paid off, you can drop coverage if you like - but I don’t recommend it.

See also: How to Buy a Home in 10 Steps, Part 1

When I began working as an insurance analyst and spokesperson, I got access to all kinds of interesting data. Here are 5 facts I’ve learned about homeowners insurance that may surprise you:

Fact #1: Credit is an Important Rating Factor

If you’re a regular Money Girl reader or podcast listener, you already know that your credit history reaches its tentacles far into your financial life. Not only does it play a role in things like the interest rate you pay for credit accounts, and whether you can rent an apartment, but it also affects your insurance premiums.

A 2014 insuranceQuotes.com study found that if you have fair or median credit, you pay 29% more on average nationwide for home insurance than someone with excellent credit. But if you have poor credit, your premium nearly doubles - and you’ll pay 91% more!

Only a few states currently prohibit insurers from using credit when setting home insurance rates. So in every state except California, Maryland, and Massachusetts, keeping your credit in tip-top shape will help you save a substantial amount of money on home insurance.

See also: Credit Score Survival Kit, a free tutorial to build excellent credit!


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.