Why you need to re-shop your home insurance every year

You feel safe knowing that your home insurance policy will cover the costs if something terrible happens to your home. But with your premium diminishing your bank account every month, you can't help but wonder: Am I paying more than I have to on home insurance?

There's a good chance you are - especially if you haven't updated your insurance policy in years.

That's because most insurance rates - including health, auto, and home - are determined by many aspects of someone's life. And if your life has changed - in little or big ways - those changes could affect how much your insurance rate is, says Gerard O'Sullivan, program manager of the Consumer Affairs Unit at the State of Connecticut Insurance Department.

"So, you need to reexamine the policy and talk with an insurance agent about how you can lower the cost," he says.

Here are five examples of how re-shopping your home insurance annually can save you big…

#1: You've Made Safety Home Improvements

If you've recently invested in deadbolts on your front and back doors, or put in new exterior lighting to prevent any sneaky burglars from getting close to your home, the presence of these things could reduce your home insurance costs.

"You should ask about available credits for such items as smoke and burglar alarms and other safety and security elements," said Bruce Ramge, director of the Nebraska Department of Insurance. "Make sure your insurer knows of any safety equipment in the areas they insure."

So, how much can these minor safety improvements save you on home insurance?

"You can usually get discounts of at least 5 percent for a smoke detector, burglar alarm, or dead-bolt locks," according to the Insurance Information Institute (III). "Some companies may cut your premiums by as much as 15 or 20 percent if you install a sophisticated sprinkler system and a fire and burglar alarm that rings at the police, fire, or other monitoring stations," the III adds.

O'Sullivan says you could also score additional discounts depending on safety changes within your neighborhood.

For example, "There could be some changes in your fire protection code area, and that could make a huge difference in your bill," he says.

[Think it's time to re-shop your home insurance? Click to compare rates from insurers now.]

#2: Your Credit Score Has Improved Drastically Within the Last Year

You've always known that your credit score can affect your lending abilities. But did you also know that a low credit score can make your home insurance premium higher?

"Your credit score is allowed to be used in determining your insurance rate," O'Sullivan says. "Some states have outlawed it. But it has shown to be statistically true for how people pay or don't pay their bills on time."

Insurance companies want to be paid on time, too, so if you have a history of late payments or skipping payments, they want to cover themselves by charging you more, he says.

So, if your credit score has improved over the last year, talk to your insurance agent to see if you now qualify for a better rate. If not, continue to pay down credit cards and work on repairing your score little by little so your premiums can eventually go down, O'Sullivan says.

#3: Your Policy Covers Items You No Longer Own

That expensive ruby broach you inherited from Aunt Penny was gaudy, and you would never wear it. So, you sold it at auction a year ago and bought a first class, round-trip ticket to Paris.

But did you forget you're still paying for the extended jewelry coverage for that broach on your home insurance?

"This happens all the time with people's policy covering items they no longer have," O'Sullivan says. "I tell people to go through their policy during the tax season and figure out what they no longer have and what needs to be changed on the policy."

Doing a yearly update of the inventory you have in your home will not only eliminate coverage for expensive items you no longer possess, but it will also enable you to add new items that might not be covered.

[Has it been a while since you updated your home insurance? Click to re-shop your insurance now.]

#4: You Can Finally Qualify for a Customer Loyalty Discount

You have known Bill, your insurance agent, since you got your first car at 18. You've purchased your health insurance, motorcycle insurance, and now your home insurance through his company. It's been a long-term, trusting relationship.

Did you know it could also be a lucrative friendship? Yes, insurance companies value your loyalty, and may offer you a lower bill because of it.

"If you've had coverage through an insurer for a number of years, ask about a reduced premium," states the Nebraska Department of Insurance.

Some companies may have a timeframe on when a customer is considered "loyal," so it's important to check with you provider to see when/if you'll be able to quality for a loyalty discount.

Ramge says that "this discount is not too common, but when available can run anywhere between 2 to 10 percent."

#5: Your Insurance Company Has Been Hit with Too Many Claims in the Last Year

While sticking with the same insurer can yield some big savings (as we mentioned above), it could also have an opposite effect and cause you to miss out savings.

"I tell people all the time to shop around. You have to shop around often," says O'Sullivan. "We get people saying that they looked around two or three years ago. But you need to do it more often."

And while you might think shopping around for home insurance on an annual basis is tedious, it could pay off big time for you.

In fact, "Things change constantly with the claims history of one insurance company to another. Your company may have been hit with more claims because of some disaster somewhere and can't offer lower premiums. But another company might not have been hit very hard and can offer a lower premium," explains O'Sullivan.

He also suggests homeowners examine the coverage, not just the price.

"Read your policy and what it covers. Look at all the exclusions. If you don't understand it, ask your agent," he says.