After you purchase a home, the first item on your to-do list should be obtaining insurance. If you take out a mortgage to help pay for your home, the lending bank will require that you have at least enough insurance to cover the value of the home that is still mortgaged. This helps to protect both you and the bank’s investment. Most homeowners have additional insurance to cover the rest of the value of the home. You may also want to add on additional liability coverage for property damage, living expenses after a loss, personal liability, and medical expenses.
It should be no surprise that protecting your home, its contents, and any visitors comes at a price. Unfortunately, that price has more than doubled over the last ten years. The average annual premium is now $952. Of course, this cost varies based on your state of residence, the value of your home, the amount of insurance coverage, and the home’s risk for damage due to natural disasters. For example, if you live in Idaho, you are probably paying around $534 per year, whereas Louisiana homeowners pay $1,722. Of course, part of the reason the costs are so high in Louisiana is due to the high risk for damaging hurricane winds and floods.
Paying your premium is as simple as mailing in a check, having the funds automatically withdrawn from your account, or transferring the money through the insurance company’s online payment system.
When you purchase homeowners insurance, your independent insurance agent will give you several options for paying your annual premium. You can pay in monthly installments, the whole year at once, or in two six-month payments.
There are advantages and disadvantages to these payment options. If you pay monthly, then you won’t have to pay such a huge sum all at once. You can budget that amount along with your other monthly bills. Your payments per month will be consistent. On the other hand, your home insurance company may charge you an extra fee for the convenience of paying monthly instead of annually or every six months. This could be several extra dollars on each month’s bill.
If you pay every six-months or once per year, then you will have to pay a larger lump sum. This may be difficult for some homeowners who are unable to afford the bigger payment. However, the insurance company may offer a paid-in-full discount for customers who are willing and able to pay up front. This discount can be up to five percent. So, rather than paying an additional monthly fee and increasing the total you pay each year toward your homeowners insurance, you will actually be paying less.
Let’s look at an example. You live in Idaho and are charged the average home insurance premium amount of $534 per year. You have two choices: paying monthly or annually.
If you pay monthly, your fee will be $534 divided by 12 months which equals $44.50. However, you will also be charged a fee for paying monthly, which makes your actual bill $46. This is an extra $18 per year for a grand total of $552 for home insurance.
If you pay in one lump sum, the insurance company will give you a 5 percent paid in full home insurance discount. This changes your home insurance annual fee to $507.30. The $45 difference between one option and the other may not seem like a lot, but it can make a huge difference in your overall annual living expenses.
Speak to your agent today about the paid-in-full discount. They may have offered it to you when you first purchased your homeowners insurance, but it’s never too late to switch to an annual payment scheme.
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While the majority of people want an agent involved in their purchase of insurance, many people want to see if they can save money by buying direct from the insurance company. Others want to try a direct quote to make sure the premium they’re now paying through their local agent is fair. If you want a quote for your coverage, click on the competitive quote button on the right side of this page.
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