It’s often said that comparison is the thief of joy.
However, if you’re comparing the cost of your insurance to your neighbors’, you may have determined the real thief is your insurance carrier!
But before we grab our pitchforks, it’s important to contextualize why two neighboring properties (even if they’re seemingly identical) can vary so much when it comes to the cost of homeowners insurance.
At Berry Insurance, we understand that price is an important factor for any policyholder - especially now when it feels like prices are on the rise for nearly everything. That’s why our team is always seeking easy ways for our clients to potentially save money, without compromising coverage.
Keep reading this article to learn why the price of a homeowners insurance policy varies, what factors will influence cost the most, as well as ways you can save money!
Table of contents:
- Why am I paying more for home insurance than my neighbor?
- What factors influence the cost of home insurance?
- How can I save money on my homeowners insurance policy?
So, why am I paying more for home insurance than my neighbor?
This is a great question!
Just as two families will be wholly unique from one another, so too are their home and property. Even homes in residential neighborhoods that look nearly identical from the outside will be rated separately based on a variety of factors.
Additionally, each insurance carrier rates their policies differently - so two home insurance policies from competing carriers will likely rate homes differently and thus have varying costs.
And while your neighbor may be bragging about their lower premium, they may not be insuring their home to value - meaning they could be left with gaps in coverage and be in a tough spot if they suffer a claim.
What factors influence the cost of home insurance?
Here are some major factors that you can expect to play a role in determining the price of your home insurance policy and why it may differ from your neighbor’s rates:
Home insurance limits:
Every type of insurance policy has limits. These amounts are the total amount the insurance carrier would pay out if you were to file a claim.
And each policy actually has several different limits corresponding with the separate coverages within the policy.
Your home insurance may have limits for coverages such as dwelling, personal property, other structures, loss of use, medical payments to others, personal liability, and personal injury.
Generally, with higher limits, you can expect to pay a higher cost.
Deductible:
A second factor that will greatly affect your price will be your deductible. This is the amount you would have to pay out before an insurance carrier paid you any claim money.
You typically will have a few deductible options to choose from. With home insurance you can usually set your deductible at $1,000, $2,500, $5,000.
The higher your deductible, the lower your premium will be.
Exposures:
When calculating a quote, insurance companies will determine the likelihood of you filing a claim based on your perceived risks - and thus costing them money. The higher your risks, the higher your premium will be.
Some common exposures to think about that could separate you and your neighbor would be pets/certain dog breeds, trampolines/play structures, pools, valuable home features, detached structures, solar panels, bodies of water, home businesses, and much more.
For more information on the effect of exposures on your home insurance policy, check out this guide: Unique Exposures that Could Impact your Home Insurance.
Your insurance carrier:
As we mentioned, every insurance carrier rates cost differently, so the cost of a homeowners insurance policy will vary based on the carrier it’s quoted with. Our team has even seen quotes for the same property vary by several hundred dollars between carriers.
This is why we always stress working with an independent agent (like us at Berry Insurance) who can shop your insurance around with the multiple carriers we work with to get you the right coverage at the right price.
To learn more about how a carrier’s underwriter will be rating your home, check out this guide: What Underwriters Look For When Writing Home Insurance Coverage.
Endorsements:
These are typically referred to as the “bells and whistles” on a homeowners insurance policy. Endorsements can include everything from:
- Water backup
- Extended replacement cost
- Cyber coverage
While some of these coverages come included in packages offered by carriers, they can affect your premium quite a bit. When our team of agents at Berry Insurance compares policies, it’s often endorsements like these that make a big difference on why two policies (like that of your neighbors) vary greatly.
Additionally, with carriers offering these packages, many times policyholders with a cheaper package will miss out on potentially important endorsements.
Prior claims:
As with your home’s exposures, any prior home insurance claims would cause your carrier to consider you as more of a risk to have another and would charge you more because of it.
Other home factors to consider:
- The home’s age
- The home’s location
- The home’s size
- The materials the home is made out of
Found yourself denied coverage altogether? Read this article to learn exactly what makes a property uninsurable, and what other options you have: Why Your Home Insurance Application May Be Denied.
How can I save money on my homeowners insurance policy?
Now that you know exactly what goes into determining the price of your policy vs. your neighbors, you’re likely wondering how you can bring your cost down.
Of course when it comes to coverage, the right policy won’t always be cheap - as you want to make sure you’re properly covered for every situation. But there are still some ways you can look into to save money on your policy.
Bundle policies:
Many insurance companies offer incentives for the more business you provide them. By bundling multiple policies (like your homeowners and auto) with the same insurance provider, you could save yourself approximately 5-25% on your policies.
This is typically the simplest way to reduce the cost of your insurance.
Increase your deductible:
As we touched on earlier, increasing your deductible can be a sure way to reduce the cost of your policy.
Of course, if you have a situation resulting in a claim, you would need to pay more out-of-pocket, but it could make sense for you to take that chance in order to save some money.
Pay via EFT/ACH or pay ahead:
Paying for your insurance through electronic funds transfer (EFT), automated clearing house (ACH), or paying the premium up front can eliminate billing fees.
If you’re comfortable with your payment automatically withdrawing from your bank account each month, or if you can afford to front the entire premium, these methods can save you both time and money.
Switch to paperless billing:
If you still get your insurance bills in the mail, opting to have them emailed to you instead could also be a simple way to save you money on your premium.
Apply discounts:
Depending on your insurance carrier, you may be eligible for home insurance discounts for things like:
- Early quoting
- Being over 55
- Non-smoking households
- Being a recent-purchaser
- Having home alarms/security systems
- Bundling with other policies
- Water leak detectors
- Automatic water shut off
- Having generators
Keeping up with the Joneses
Let’s face it, no one likes to feel like they’re paying more for the same thing when compared to their neighbors or friends.
However, now that you know more about what goes into rating home insurance policies and how individualized they are, you can have a better picture of what determines your specific policy rates when compared to your neighbors.
Still feel like you’re paying too much and want a change? We hear you!
If you’ve already followed our steps on how to save on your policy, but still aren’t satisfied, you may be considering shopping around your current policy. But is remarketing always the best option? Read this article to learn more about when remarketing may and may not be the best option - and how it could leave you with more headaches: Why You May Not Want to Remarket Your Insurance.