Making Smart Homeowners Insurance Decisions

When you decide to buy a home, one of the first issues you face is homeowners insurance. All lenders require borrowers to have homeowners insurance on the property that the lender is helping the borrower to buy. The homeowners insurance protects the lender's investment, as well as your own investment. It's not just a smart money strategy to have homeowners insurance, it's also a requirement for getting a loan.

When you face the prospect of homeowners insurance, there are specific scenarios you want to consider to make smart decisions that will save you money on premiums. You don't want to be too cheap with premiums, however; while chances are slim that you'd ever experience a problem with your home, in the event of an emergency there is nothing worse than realizing you let a policy lapse, or that you're under-insured.

Tips for getting the most out of your homeowners insurance:

• Bundle your policy. Call the company that handles your auto and life insurance. Many companies will give you a bulk discount.
• Keep deductibles high. A $250 deductible policy will cost more than a $1,000 deductible policy. Go for the high-deductible policy and keep $1,000 in the bank as an emergency. You will save money in the long run.
• Think about safety. Get gun safes for any firearms (common for military families). Make sure all fire and CO detectors are wired and up to date. Consider a security system. All of these measures will help to decrease your premiums.
• Go for replacement value. A 25 year old television can't be replaced for the amount you paid 25 years ago; replacement value for your belongings means you get enough money to go to a store, right now, and replace the item with an equivalent item.
• Think about short-term living. If your home is damaged by a fire or a flood, where will you live? Some policies cover hotels for short-term periods, then rent for longer-term periods while you remodel. There is a huge difference between 1 year of rent vs. 2 years of rent covered by insurance. If you live in a hurricane-prone or fire-prone area, consider the 2 years of rent.
• Keep your insurance payments in escrow. Many lenders require that you pay homeowners insurance and property taxes with your mortgage payment. In this case, the lender's servicing department makes payments for you. If you are prone to forgetting to pay bills, keeping the payment bundled could help you to maintain constant coverage.
• Update your list of owned items. In the event of an emergency, you don't want to forget about a new computer or camcorder that should be covered by insurance.

Follow these tips to get better homeowners insurance and to do so frugally.