As the cost of homeowners insurance continues to rise across the country, particularly in catastrophe-prone areas such as the West Coast and Florida, many luxury-home owners are seeking ways to reduce their premiums. Although the cost of coverage varies widely based on many factors, such as the size of a house, its age and location, there are discounts and credits available that can reduce premiums by up to thousands of dollars a year.
According to the Insurance Information Institute, an industry trade group, the average premium for a homeowners policy rose 3.1% in 2018, the latest year for which statistics are available, to $1,249. But owners of luxury homes pay much more. “High-end homes are more expensive to repair or replace than a standard home,” said Loretta Worters, an Institute vice president. “The home is usually far larger and may have special decorative moldings, luxury kitchens with imported Italian marble countertops, gold fixtures, murals, all more costly to replace.”
One of the easiest ways to reduce your homeowners insurance premium is to bundle policies by insuring your home, car or boat with the same company. Lydia Leeds, an executive producer in Manhattan who owns a vacation home on over 3 acres in northwest Connecticut, pays $2,358 to Travelers to insure the property, valued at nearly $1.5 million, but she’s saving 12% on her premium by insuring her home and automobile with the same company. Ms. Leeds also gets a 10% credit for having a central-station alarm system and a 2% credit for installing a water sensor that detects leaks. Her discounts total $1,600.
Discounts are also available for bundling other types of policies. Chubb, for example, offers up to 7.5% off, in most states, for bundling home and valuables coverage for jewelry, fine art, wine or other collectibles, according to Fran O’Brien, division president of Chubb North America Personal Risk Services.
Updating your home not only increases its value but can also entitle you to a premium discount. By replacing the roof or windows, or updating the electrical system, you reduce the risk of loss to an insurance company, and that translates into a lower premium.
The same goes for adding hurricane shutters, straps to secure the roof or a whole-house generator in a storm-prone area. A wind-mitigation inspection can document improvements that would make a home sturdier in a storm.
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Other discounts are available as well. This is when a good insurance agent can be invaluable, since they know the intricacies of insurance. Travelers, for example, offers a green-home discount of 5% if a policyholder’s home is LEED-certified. Homeowners with no claims for a period of years may also be entitled to a “claims-free” discount. Discounts for living close to a fire station or hydrant may also be available. Remember that not all discounts are available from all insurance companies.
One other way to reduce your homeowners insurance premium is to increase your deductible. For a typical $5 million home, increasing one’s home-insurance deductible from $10,000 to $50,000 reduces the overall premium by 24% a year, on average, said Andrew Hurst, research and data analyst for ValuePenguin, a personal-finance website owned by LendingTree.
Tips for Reducing Your Insurance Premium
If you’re in the market for homeowners insurance, here are a few things to keep in mind:
Don’t forget to protect your valuables. A standard homeowners policy may not adequately protect your jewelry, art or wine collection. According to Loretta Worters of the Insurance Information Institute, a standard policy may provide coverage for up to $2,500 on jewelry, whereas a policy geared toward high-net-worth homeowners may include blanket coverage up to $150,000 or more, with limits of $10,000 per item. For expensive watches or other valuable pieces, endorsements can be added to the policy for additional coverage.
Consult your insurance agent before you move. Luxury homes are often in areas with low crime rates, but they may face other risks, such as hurricanes, floods or earthquakes. If you’re considering multiple locations for your move, an insurance agent can provide guidance on relative rates in each place. The age of a home also affects the insurance rate. Even if you’re buying new construction, call your agent early in the process. It is easier during construction to install wiring for central burglar and fire alarms, as well as sprinklers and water shut-off valves, all of which would qualify you for a discount.
Compare companies and policies. It might seem obvious, but a recent survey conducted in March 2021 by ValuePenguin, the personal-finance website, found that 26% of Americans have never compared multiple insurance quotes. That could be costing them money, as 80% of those making more than $100,000 a year who shopped around saved money by doing so, according to ValuePenguin.