5 Things You Should Do Every Year to Lower the Cost on Homeowners Insurance

Reviewing your homeowners policy is not something that we often think about doing, with so many other tasks on your to do list, but by taking 30 minutes, once a year, you may be able to see dramatic savings. After the recent onslaught of natural disasters, average annual premiums are expected to surpass $1,000, with some owners likely to see double-digit rate hikes. Now is the perfect time to take a fresh look at your coverage, look for ways to save and make sure that you have all the coverage you need.

Step 1. Measure how much coverage you need.

Your No. 1 priority must be the house itself. "Possessions, living expenses and liability should all be secondary," says Amy Bach of United Policyholders, an insurance advocate group.

Don't base your coverage level, though, on the home's appraised value, which includes land costs. Instead use the recent per-square-foot replacement costs, which in Bloomington-Normal area can range from $100 to $180 per square foot. The difference can be sizable. In Hawaii, land makes up 52% of the average home's value, according to the Lincoln Institute, in Illinois it is 5%.

Step 2. Inspect what's not covered.

Don't assume that everything is covered. As homeowners learned the hard way after Hurricane Irene, standard policies exclude damage from flooding, not to mention earthquakes and landslides. "Most people aren't aware of what their policy does and doesn't cover until they file a claim," says Deeia Beck, executive director of the Office of Public Insurance Counsel, a state consumer agency in Texas. Most of us here in Central Illinois don’t really think about earthquakes, but with New Madrid fault line nearby (geologically speaking) is your home covered for an earthquake? Ask your agent what it would cost to add such coverage and decide if it is worth the cost. Also, take note of common exclusions, such as those on mold and even broken pipes owing to lack of routine maintenance. You know which nuisances your home is susceptible to. Use that knowledge to beef up coverage by adding so-called endorsements.

Step 3. Recheck the deductible.

It may not be the same as it was a year ago. Many insurers are retooling deductibles from set dollar amounts to percentages, which can often represent a substantial change. In general, you want to go for the highest deductible you can afford to lower your premiums. Beware, though, that not all insurers that are making this switch from dollars to percentages are cutting premiums at the same time. Also, be mindful that these deductibles are a percentage of the insured value of your entire home, not of what needs to be fixed. So if you have a $400,000 home, even a 5% deductible may be too steep a price to pay, and a reason to shop around.

Step 4. Hammer away at your premium.

Insurers don't always spell out how much your rates shot up on renewals. So dig out last year's documents and compare for yourself. If your rates rose 5% or more, make sure to call the company for an explanation. Knowing whether the increase resulted from changes in your risk profile or from broad-based increases in the marketplace will help you negotiate and comparison-shop -- which you should do at every renewal or at least every couple of years.

To shop around, get quotes for free through Insure.com or InsWeb.com. Want extra guidance or have an unusual property? Then work with an independent broker. (You can find one at iiaba.net.)

In addition to bumping up your deductible, you can lower your premium by bundling together your home and auto insurance, which can shave off from 5% to 15%. Also, installing security systems, storm shutters, or a new roof can chip away another 15%.

Step 5. Clean up your work area.

Finish your project by getting all your documents in place. If you haven't already done so, conduct a home inventory (worksheets are available at uphelp.org). Pair that with receipts, photos, or videos and then store all your paperwork along with a complete copy of your insurance policy -- in a fireproof box. For extra protection, scan and store all of that information digitally on a flash drive, and remember to keep that off-site. If disaster strikes, you don't want this critical information to be at risk too.

First Time Buyer Mistakes To Avoid

Now is an absolutely great time to be buying a house for the first time. Interest rates are at all-time lows, the market hasn’t seen a bounce in prices (yet), banks are lending again and there are a number of great programs in place to help the first-time buyer. Buying real estate is a big responsibility, and when doing it for the first time it is important to avoid some common mistakes.

Find The Right Professional To Assist You

First-timers underestimate the importance of finding the right real estate agent. Not all agents are equal. Not just their level of experience levels but every agent has their own unique personality. You want to be sure you find an agent that you feel comfortable with and that you respect.

Things to consider when selecting an agent include experience and education. What can they bring to the equation? Do they know the area well? Will they be an advocate for you and negotiate aggressively on your behalf? You will also want to know if they are a full-time agent dedicated completely to real estate and their clients. One easy way to judge this is by how fast they returned your initial contact. If they don’t get back to you within 24 hours, move on, find someone that is eager for your business.

Know What You Need, Know What You Want

A common mistake for first-time home buyers is that they haven’t really thought about what their needs and wants are. Now, a good agent will help you with this, but you should have done some thinking about this first. Make sure you differentiate between needs and wants. Needs might be the number of bedrooms or the particular school district. Wants might be a big yard, an extra half bath, an older home with character, etc. Know what you can compromise on and what you can’t and share that with your agent. This will help you shorten your search and helps you know when you have found the right house for you.

This Is One Of The Biggest Financial Decisions You Will Make

The third mistake is not considering that a home is an investment, but a long term one. Over time, a home can become one of your most valuable assets as you build equity and the home’s value rises. For it to be a good investment you have to purchase it correctly. Is this home priced right? Compare it to other similar homes. Is this home in a desirable location or is it next to a busy street, etc? Will it require a lot of work? Again, these are things that a knowledgeable agent will be able to help you with. Buying a home can be an emotional rollercoaster. It is important to take a step back and look at the purchase logically.

Finding The Right Lender Makes All The Difference

Finally, ask your lender lots of questions and be proactive about finding the best deal. Different lenders will offer you different rates. Research your options and shop around. Would you be better served with a 15-year or 30-year note? Ask lots of questions about the difference between adjustable and fixed rate mortgages. Learn about points. Find out how much interest you'll pay over the life of the loan. The lender is there to serve you, so don't be shy about getting the information you need.

You Can Do This!

Buying your first home is a tremendous achievement in one’s life. There is a pride in home ownership that is unlike just about any other feeling. It is one of the biggest decisions that you will make at this point in your life. Go about it the right way. Think it all the way through. Choosing the right real estate agent will help greatly.

So you just signed the contract on the house of your dreams, now what should you do?

After months of open house tours, private appointments with your agent and looking at listings online, you’ve found the home of your dreams. You’ve written an offer and maybe even gone through a few rounds of counter offers with the seller. You and the seller have come to terms at last and you now have a signed contract.

At this point, everyone is ecstatic. But most, especially first-time home buyers, are also a bit anxious. What was once just a dream of actually owning this particular property is now about to become a reality, and it can be scary. The next few steps you’re about to take require no small amount of time and money. So if you have any serious doubts whatsoever, now is the time to verbalize them. It will save everyone — especially you — a lot of time, money and stress.

If you’re ready to proceed, here’s what you can expect after signing the real estate contract.

Your earnest money check will be cashed

Depending on the market, this money can vary from $500 to 3 percent of the purchase price. These funds, which helped you show the seller you were serious about the offer, are held in an escrow account of the listing broker.

Most likely, you have contingencies such as document review, property inspection and an appraisal or loan approval to get through. The money you’ve set aside for escrow or earnest money is generally non-refundable, though if the deal falls apart through no fault of yours, you may be entitled to a refund.

Read everything

There will be a lot of information to go through. An experienced Realtor ® can certainly help you with this, but this is most likely the largest investment you have made in your life. You need to take the time and familiarize yourself with all of the documents you are provided. Your first step is to start reviewing the seller’s disclosures as well as city reports and property specific reports, such as the preliminary title.

Partner with the right mortgage broker

Prior to writing the offer, you probably went through some sort of loan pre-approval or pre-qualification process. Now that the contract is signed, it’s the time to start talking to your mortgage broker or banker about the current interest rates and types of loans.

You’ll want to “lock” in a rate, at this point. A bank will generally let you lock in a rate for a certain period of time, generally between 30 and 90 days, depending on the length of your escrow. Be sure to lock in your rate at the most optimum time, if possible.

This is also the time when the bank orders a property appraisal. It could take up to a week for the appraiser to set an appointment and another week for the appraisal to be submitted to the bank. You’ll likely be in touch with your mortgage professional regularly in those first few days of signing a contract.

Eliminating surprises, the Property Inspection

The property inspection (or inspections) is likely the last important milestone after you’ve signed a contract and before you close. Your Realtor ® will help you find a reputable, experienced and trustworthy home inspector and help schedule everything.

At this point in time you have probably walked through your soon to be new home several times and thoroughly reviewed the seller’s disclosures. Make a list of anything that concerned you and provide that list to your Realtor ® to alert the home inspector. Your Realtor ® should walk you through the final report and answer any questions you might have and take the appropriate follow-up with the inspector or the seller as needed.

You’re almost ready to move in

Many people assume the home search ends with the signatures on the contract. While the search may be over, the purchase process is really just beginning.  Use the time between contract signing and closing to do as much due diligence as possible. If you have any questions, now is the time to ask them of your real estate agent, loan officer, attorney or property inspector.

Also, be aware that this period can be extremely stressful for many people. A home purchase is a lot to go through on top of your daily work, family and home life responsibilities. Take time out to care for yourself — and prepare for your new life in a new home.