Periodic review of our personal finances extends to many areas. Portfolio rebalancing helps your investments match changing time horizons and risk tolerances. As our families grow or coverage options change, we must review our health insurance for the best choices.
Home insurance is an essential cost that may not receive the same attention. Houses are not as dynamic in comparison to investments or healthcare. Unless moving, many homeowners rarely check their home policies.
However, checking your home insurance coverage for overlaps or excess coverage can yield instant savings. The process is also simple and time efficient with a potentially big ROI.
First time buyers and existing homeowners alike can benefit from a few practical steps.
Here is a home insurance checklist to get started:
Choose a Sensible Deductible
A sensible deductible results in month over month savings that is leverage for:
- College Savings
- Debt Reduction
- Meeting Monthly Expenses
You can speak with an agent to discuss the impact of raising deductibles on premiums. A practical deductible protects homes yet leverages savings to improve personal finances. Even in the instance of a small claim, the time value of money may pay for itself.
The time value of money as leverage: A dollar is more valuable today than at some date in the future, which is seen in inflation or other economic concepts. The monthly savings from a higher deductible are leverage to increase investment contributions or chip away at principal on debt.
Investment Manager Elliott Broidy is among the money managers known to consider money’s time value when making portfolio decisions. The same approach has everyday value to consumers, as well.
Savings on interest expense from credit cards or compounding investment returns can exceed out of pocket costs on home insurance claims.
Each situation is unique, but you may consider working with an agent to discuss the value of each insurance rider beyond catastrophes.
Check for Excess Coverage
Does your policy insure the home and land? Unless the land is used for farming or other income, you may not need to insure beyond a home. Instances of fire or other disasters typically do not affect land for most homeowner purposes.
When is the last time you took an inventory of assets? Take an inventory of your assets and compare to liability coverage. Excess liability coverage may seem like a good idea for new policies. However, the excess cost is money that cannot be recouped. Your home insurance premiums may be inflated unless assets are valued near liability limits.
Note: This exercise may also reveal your liability is too low!
Bundle Coverage for Discounts
Buying a home, car and life insurance rarely happens at the same time. As a result, many homeowners have different policies at separate carriers.
Consolidating your policies to one agent can rack up fast savings. It also makes it easier to identify overlaps and manage your policies.
Leverage Home Upgrades for Savings
Examples may include:
- Home Alarm Systems
- Roof Renovations
- Fires Resistant Insulation
- Non-Smoking Family
Best Practice: Insurance companies continually update discounts to retain and attract customers. When is the last time you checked for home insurance discounts?
A quick chat with your agent can uncover savings from home upgrades made after policies were signed.
Trimming expenses beyond the obvious can be difficult. Thankfully, there are simple ways to economize these recurring costs. Due diligence on home insurance and other policies may quickly improve your personal balance sheet.