Shave hundreds off your home insurance bill by dropping this added coverage
By Dawn Allcot
You know you need home insurance to cover your house, other structures on your property, and the items within your home in case of catastrophic damage.
You also know you need personal liability and medical payments coverage in case anyone is injured on your property.
But if you review your home insurance policy carefully, you might notice several endorsements you don’t need.
And talking to your insurance agent about removing these endorsements could save you $700 or more off your homeowners policy every year.
That’s enough for a nice weekend getaway.
Enough to re-decorate a room in your house.
Or money to stash away in your emergency savings fund to take care of pesky home repairs or home maintenance issues.
Review your home insurance policy and see if you can save money by removing any of these four endorsements that could be a waste of money.
1. Identity Theft Coverage
With the rising incidences of cyber-crimes, including credit card fraud and identity theft, many homeowners are seeking protection in case their identity is ever stolen.
But your home insurance agent may not be the best place to purchase identity theft coverage for a number of reasons.
The identity theft endorsement typically offers up to $25,000 to help you repair and replace your identity. This may include the expense of a financial counselor to help you contact creditors, notify the credit bureaus, obtain copies of your credit reports, and even freeze your credit to prevent new accounts from being opened.
It can also cover reimbursement of tax advisor fees, lost wages, and paperwork and mailing costs, including loan re-application and notary fees.
Many of these services, however, including freezing your credit reports, are available free of cost and can be done without assistance from a financial advisor or attorney.
While $25,000 may seem like a substantial coverage limit for your identity theft endorsement, the likelihood of needing that much coverage – or even reaching your deductible – is slim.
A Bureau of Justice Statistics survey estimated the average indirect cost of identity theft at $503.
Most identity theft endorsements have a deductible of between $100 and $500.
It just may not be worth it to make a claim.
You should also be aware that the identity theft endorsement does not protect against credit card fraud.
In most cases, your credit card company will cover the costs if your credit card is used without your knowledge as long as you report the theft as soon as you find out.
Some insurance companies include the identity theft endorsement, typically written through Hartford Steamboiler, as a way to make extra money without taking on any risk, since claims are paid through Hartford Steamboiler.
Many homeowners may not even know they have this endorsement and wouldn’t know how to file a claim if they needed to.
If you decide to invest in identity theft coverage, consider using a company that specializes in credit and identity monitoring.
Although you may be able to forego this coverage entirely.
With so many free services available to monitor your credit and your identity, you may never need to pay for identity theft insurance, and you can save money by asking to have this endorsement removed from your policy.
Total savings: ~$35/year
2. Mechanical Breakdown Coverage
Some home insurance providers offer an affordable mechanical breakdown coverage as an endorsement to your homeowners policy.
For approximately $30 to $70 per year, this endorsement will pay for any failures of mechanical equipment in your home, such as your heating or central air conditioning systems.
There are several problems with filing a home insurance claim through this endorsement, however.
If your heat fails in the middle of winter, or your AC breaks down in the dog days of summer, you are likely to want it fixed immediately.
You will probably forget you have mechanical breakdown coverage as part of your home insurance.
If the thought crosses your mind, you probably don’t want to go sorting through paperwork to find your policy to see what’s covered.
And you definitely don’t want to wait around for the insurance company to approve the estimate and cut you a check.
Convenience and urgency are two good reasons to forego this endorsement.
But they aren’t the only reasons.
Your home insurance policy is designed for catastrophic loss.
Every claim you make can put you into a higher risk category, potentially raising your home insurance rates.
If you make too many claims, your home insurance carrier may even decide to drop your policy.
Home insurance is not a home warranty or a home maintenance policy.
You want to save your home insurance for a catastrophic loss that will be greater than your deductible.
Such as a house fire that makes your home unlivable.
The cost to repair home heating or cooling systems often won’t be much more than your deductible.
If you factor in the long-term costs of making an insurance claim, which can increase your risk profile and raise your premium, it just isn’t worth it.
You are better off building up an emergency savings fund to pay for mechanical repairs.
You can also put the cost of the mechanical breakdown endorsement toward annual AC tune-ups, reducing the chances you’ll need emergency service for your home’s systems.
Total savings: $70/year
3. Water Back-ups of Sewers and Drains
Unlike mechanical breakdown coverage, you may find that one day you actually need coverage for the damage to your basement if a sewer or drain backed up.
Most home insurance policies automatically exclude seepage, but if water backs up into your basement from a sewer or drain, this home insurance endorsement to your policy could cover the necessary repairs.
If you have a finished basement, the “Water Back-ups of Sewer and Drains” endorsement could help pay for clean-up, mold remediation, and remodeling of your basement–if rain finds its way from a drain into your lower level.
However, this endorsement only offers $5,000 in coverage, which can be increased for an additional premium.
Most times, it comes with a deductible separate from your home insurance policy deductible.
At Coastal, we write this endorsement into every policy so that our clients are protected against water backups.
You might ask to increase the amount of your coverage – or remove it altogether.
It comes down to this:
If water backs up into your basement, how much will it cost to fix the damage?
Is your basement finished?
Does it include high-end electronics, a home theater, or expensive collections?
If so, you may want to increase the coverage levels of this endorsement in case you ever need to make a claim.
If your basement is finished, but could be repaired inexpensively, and if you don’t store anything of value down there, you wouldn’t want to make a claim.
Remember, home insurance is for catastrophic damage and making smaller claims can reduce your insurance credit score, raise your risk profile, and increase your premiums.
If the damage will cost less than a few thousand to fix, you may be better off eliminating this endorsement and paying for the repairs out-of-pocket.
Of course, if you don’t have a basement or don’t live in an area prone to heavy rains, you could consider removing this endorsement and saving a few bucks.
Refusing the “Water Backup of Sewers and Drains” endorsement on your homeowners insurance policy could put an extra $80 to $100 per year in your pocket.
It may not sound like a lot but eliminating coverage you don’t need can add up!
Total savings: $80 – $100/year
4. Off-Premises Theft Exclusion
Our final item is actually an exclusionary endorsement that you would add to a policy to reduce your premium and coverage.
What is an exclusionary endorsement? Its an endorsement that you add to your insurance policy that removes coverage.
Most insurance policies include coverage of your personal property even when it leaves your home.
So if you take your items off-premises, whether on vacation, away to college, or simply on a quick trip to a friend’s house, your items are covered for damage from fire, wind, vandalism, malicious mischief, and theft.
But if you add an Off-Premises Theft Exclusion endorsement, your items will be covered for all types of damage, but not for loss from theft.
Requesting this exclusionary endorsement can reduce your insurance premium by as much as 10 percent per year. Why pay for coverage you probably won’t use anyway?
If you are like most people, you don’t often travel with items that are valued at more than your home insurance deductible.
If you wear diamond jewelry, such as an engagement ring, you probably have a separate endorsement, or rider, on your policy to cover theft or damage.
But you most likely won’t take other expensive items – such as artwork, collectibles, or wine – out of your home where it is in danger of being stolen.
Off-premises theft insurance may also have a claim limit that reduces its value.
For instance, if you are taking a family road trip with four iPads, a portable DVD player, expensive luggage, designer clothes, and a YETI cooler, and your car is broken into, your policy could cover the total value of the loss. But would you file a claim for $2000 if your policy deductible was $2500? The answer is no because you wouldn’t have exceeded your deductible and filing a claim would be pointless.
Of course, as with these other endorsements, you have to decide if adding the endorsement is the right choice for you.
If you have children at college and they bring expensive computer equipment on campus, it might be worth it to keep off-premise theft coverage on your policy.
However, if you have a $1,000 deductible, and your college student’s computer is a MacBook valued at $1,500, it may not be worth making an insurance claim if the computer is stolen.
Remember: Home insurance was created for catastrophic events and major losses.
Making a claim that would put just $500 in your pocket won’t pay off in the end if your premium increases.
Make too many small claims, and your carrier could drop you, leaving you with the hassle of shopping around for a new home insurance policy at a higher price.
If you are in a profession where you use – and frequently travel with – a lot of expensive, specialty tools, you may think it would be worthwhile to keep off-premises theft coverage on your home insurance policy.
But if you use these tools for a job or your business, they may not be covered under your home insurance policy.
You would need to get a Business Personal Property endorsement (BPP) added to your home insurance policy or take out a separate business insurance policy to cover these items.
Talk to your agent about your best course of action to cover your expensive items when they are not in your home.
You may discover you don’t need off-premise theft coverage, and you can save hundreds of dollars a year with an exclusionary endorsement.
Total savings: ~$450 – $500/year, depending on the total cost of your home insurance policy premium
Purchase Only the Coverage You Need
Of course, there is other insurance coverage you may not need. For instance, there’s no need to purchase earthquake insurance if you don’t live in an earthquake zone.
(Helpful tip: Nearly every Long Island homeowner should consider purchasing a separate flood insurance policy due to our proximity to the water.)
Read your policy carefully and think twice before signing off on endorsements or additional coverage you may not need.
Think Before You Make a Claim – and Save Money
It may be easy to save close to $1,000 per year on your home insurance by eliminating a handful of endorsements.
In short: If the damage only costs a few dollars over your deductible, is not catastrophic, and can be covered by emergency savings or your credit card, do not make an insurance claim.
And if you know you won’t make a claim, you probably don’t need an endorsement for that coverage.
The best way to save money on your home insurance is to purchase only the coverage you need, minimize your claims to keep your risk profile favorable, and talk with your agent to make sure you are getting the best price on a home insurance policy that meets your specific needs as a homeowner.
4 Homeowners Insurance Endorsements That Could Be a Waste of Money
- Identity Theft Coverage
- Mechanical Breakdown Coverage
- Water Back-ups of Sewers and Drains
- Off-Premises Theft Exclusion