En Español

What Can You Do to Save Insurance Dollars?

Purchasing a home is the largest, single investment that most people will make in a lifetime. Adequately insuring your home is one of the most important decisions that you can make to safeguard your investment. Property insurance is designed to insure your home and its contents. In addition, you can purchase insurance to cover special items or situations that you have.

The price you pay for insurance is called the premium. The premium cost is based on several factors including: 1) which risks you choose to insure against, 2) how much insurance you purchase, 3) where your home is located, 4) the value of your home, and 5) from which insurance company you buy the insurance. Additional factors can affect your premium such as security devices in your home and how your home is built. All other things being equal, it costs more to insure an all-wood home than a home made of brick or stone.

Renter’s Insurance

If you live in an apartment or other single-family dwelling which you don’t own, then renter’s insurance (also called contents insurance) is designed to fit your needs. Renter’s insurance insures your personal belongings, but not the building structure. It also provides some liability protection.

Renter’s insurance is less expensive than homeowner’s insurance. However, most of the factors that determine homeowner’s insurance costs also affect the cost of renter’s insurance. When deciding where to rent, consider the building’s location, safety features, and construction materials.

Tips for Saving Premium Dollars

  • Smart consumers make the best use of their insurance dollars. Use these tips to help you save on premium costs.

  • Pay your premium annually or allow automatic deduction from your checking account to save finance charges. Usually the less bookkeeping a company has to do, the lower the premium will be.

  • Take the highest deductible you can afford. A deductible clause in an insurance policy means that a policyholder is responsible for all losses up to the "deductible" amount.

  • Install safety devices, such as a burglar alarm, sprinkler system, smoke detector, fire extinguisher, or dead bolt lock to reduce your premium. Check with your insurance agent to see which devices qualify for a discount.

  • Ask your insurance company about other discounts. For example, you may receive a discount if you buy your home and auto insurance from the same company. Retirees and nonsmokers may be eligible for a discount.

  • Before you buy, compare companies and policies. Although state insurance departments closely monitor insurance rates, this doesn’t mean that companies have to offer identical policies at the same price.

  • Each year review and update your coverage with your agent’s assistance. Drop floaters you purchased to cover specific items that you no longer need or own.

  • Take time to select an insurance agent. Look for someone who is knowledgeable and professional, and someone who shows concern for your well being. Your premium dollars should buy service as well as an insurance policy.

Where You Live Affects Your Insurance Cost

When buying a home or choosing a place to rent, consider location. A house or apartment near a fire station and/or a fire hydrant is less expensive to insure than one several miles away from fire protection. Insurance costs are lower for homes in low-crime areas.

Many insurers offer lower premiums to owners of new homes. New homes have fewer insurance claims because of the newness of construction and wiring and safety features. Also, when you’re purchasing or building a home, consider one built of fire-resistant materials such as brick; insuring it will cost less.


Written by Ellen Burton, Consumer and Family Economics Extension Educator, University of Illinois Extension, August 2000.