Before buying any property insurance, learn how to lower property insurance premiums with our full guide here.
"Building Sum Insured" is the cost of rebuilding a property from scratch in case of it is totally destroyed by an unforeseen event such as a large fire or natural disaster.
Many owners assume that building sum insured is equal to property value. This is a mistake since property value includes both building cost and the land value. If your property is sitting in a prime location, a significant portion of your property value will be due to the land value and not the building cost.
To lower your property insurance cost, your building sum insured should only be equal to the building cost (excluding land value).
One way to estimate your building cost is to find out the price of (similarly-sized) vacant land near your property and deduct it from your total property value. For a more accurate estimate, the vacant land should be zoned for same residential purposes as well.
The deductible is the amount of losses that you pay for before insurance coverage kicks in. For example, if you deductible amount is $250 and you had a fire outbreak that resulted in $1,000 of damages, you will have to pay $250 from your own pocket and the insurance company will cover the remaining $750.
How to lower property insurance premiums: The deductible amount has a direct impact on your monthly insurance premiums - A higher deductible = lower insurance premiums. By raising your deductible from $250 to $1,000, it's possible to cut your insurance premiums by up to 20%.
Most homeowners choose a deductible of $500 to $1,000, Forbes recommends going for a bigger deductible of $2,500 to $10,000. Their logic is that you should set your deductible to only cover losses that you can't afford.
Improving your home security lowers the risks of thefts and burglary. With less liabilities, insurance companies will be able to offer you better property insurance rates.
It's important to know what security measures your insurance company looks at. Installing deadbolt locks and burglar alarms are standard for most insurance firms. Ask your insurance agent what other security measures qualify for further discounts.
More tips to lower property insurance costs: Upgrade your property's fire safety. In general, this involves installing smoke detectors, carbon monoxide detectors and fire extinguishers. Some insurers may grant you additional discounts for sprinkler systems and fire alarms.
All in all, you can expect to shave 5 to 10% off your insurance cost by upgrading your property security and fire safety.
Other than saving money on insurance, a safer property has other benefits as well - If you're renting it out, it is going to attract more tenants and higher rents. If you're staying in it with family and friends, well nothing beats a safe home.