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Homeowners insurance and discounts

Insurance is a rather simple form of gambling. The insurance company offers odds on the different ways you might suffer a loss. You can place a bet and, if you suffer the loss in the predicted way, you claim your “winnings”. Well, that’s changing the words around to make you think, but the spirit of this is correct. It all comes down to the ability of the insurer to predict how many people will lose money and how much they will lose. The total amount plus a margin to cover administrative costs and provide a profit, is then divided among the policyholders as the premium. So why should the insurer give you a discount? The answer comes down to those predictions. If you do something to change the odds on you losing money, the insurer rewards you.

Take something as simple as a fire alarm. They cost very little to install and maintain. Yet, if smoke is detected early, you can either put out the fire before it has a chance to take hold, or you call in help before your home burns to the ground. So a small investment earns a big reward. Now add in another fire-related variable. Did you have the good sense to buy a home close to the fire department? If so, your rate will be lower than for the people who decided to live somewhere off the beaten track. Even if they have early warning from an alarm, it still takes too long for a tender to arrive. Now what about the cause of the fire? Old homes have bad wiring that often causes fires. Get a certified electrician to make your home safe and you earn a discount. Similarly, new pipes don’t leak and properly maintained furnaces don’t catch fire as often.

Now think about the structure. The web site run by your local Insurance Commissioner will have details of the recommended technical specifications for roofing and other materials that will earn a discount if you upgrade your home. Homes of straw blow down when the wolf storm blows. Better to build your home of bricks with a sturdy roof.

As to where your home is located, having the money to buy into a gated community can give you a big saving. All that additional security is a deterrent to thieves. If there are no gates but an active community watch, you still make savings. Put the other way round, living in a community with the wrong ZIP code condemns you to higher rates because the risk of home invasions and vandalism are higher.

No claims discounts are coming into play. The longer you go without making a claim, the bigger the savings passed on to you. So, when you add all these up, it may not entitle you to cheap homeowners insurance, but it certainly becomes more affordable. Bundle the policy with auto insurance and that improves the savings. So shop around and get as many homeowners insurance quotes as possible. Then you can balance loyalty against those tempting initial offers to change to another insurer.

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