An Insider's Guide to Lowering Insurance Costs

A lower premium can sometimes cost you more later. Most consumers want the same thing from insurance: protection that fits their needs at a price that fits their budget.

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Understanding the Trade-Offs Behind a Lower Premium

When insurance costs increase or household expenses tighten, it's natural to look for ways to save money.  

Before making changes to a policy, it's helpful to understand a simple truth: 

When insurance gets cheaper, the reason isn't always the same. 

Sometimes premiums go down because a consumer qualifies for discounts or bundles multiple policies. Other times, the policy itself changes. Understanding the difference can help consumers make informed decisions and avoid surprises later.

Two approaches to lowering insurance costs

1. Savings that don't necessarily change coverage

Many consumers are able to lower insurance costs through opportunities such as:

  • Bundling home and car insurance 
  • Qualifying for available discounts 
  • Reviewing policy information with an insurance professional 
  • Taking advantage of available programs and features 

In many cases, these opportunities may lower premium costs without changing the protection provided by the policy.

2. Savings that may involve a coverage trade-off

Other cost reductions involve changing the policy itself. 

The three most common examples are: 

  • Higher deductibles 
  • Lower coverage limits 
  • Removing certain coverages 

None of these choices are automatically right or wrong. The key is understanding the trade-offs before making a decision.

Start with savings that may not require changing coverage

Bundle policies

Bundling means putting more than one insurance policy with the same insurer.

For example, a consumer might purchase car and home or renters insurance from one insurer rather than using separate insurers.

Insurers may offer a multi-policy discount when policies are bundled. Farmers, for example, offers a variety of insurance products that may be eligible to bundle, including car, home, renters, condo, life, umbrella, motorcycle, boat and RV coverage. Available combinations and savings vary by product and state.

How much could bundling save?

Consumers who purchase eligible policies from Farmers may qualify for a multi-policy discount. Farmers customers may save up to 5% when bundling renters and auto insurance, or up to 15% when bundling home and auto insurance. Eligibility, savings and available policy combinations vary by state and individual circumstances, so a Farmers agent can explain which options may apply. 

Bundling can offer benefits beyond a lower premium: 

  • Fewer accounts to manage: Policies may be available through one insureror one online account. 
  • Simpler billing and updates: Having policies in one place can make bills, renewal dates and policy changes easier to track. 
  • A more complete coverage conversation: One insurance professional can review how different policies work together and help identify possible gaps or overlaps. 

Discounts

Depending on the insurer, policy type and state, consumers may qualify for other discounts based on factors such as insuring more than one car, driving history, home safety features or payment choices. Because eligibility and savings vary, it can help to ask which discounts are available and whether they change any coverage.

Ask about savings for safety updates

Certain updates that help protect your home or car may also help lower your insurance premium.  

Examples may include: 

  • Upgrading your home security system 

Programs vary by insurer, state and policy, so let your agent or insurer know about any updates you’ve made and ask whether you qualify for available savings.

Three common ways coverage changes may lower costs

1. Higher deductibles

A deductible is typically the amount a policyholder pays before insurance begins contributing to a covered loss.

Increasing a deductible may lower premium costs, but it can also increase out-of-pocket expenses if a claim occurs.

Deductible vs. premium: What’s the difference?

A premium is the price you pay for an insurance policy, usually monthly or annually. A deductible is the amount you may need to pay toward a covered claim before insurance pays its share. Choosing a higher deductible may lower the premium, but it also means paying more out of pocket if a covered loss happens.

Why does having a higher deductible lower your insurance premiums?

A higher deductible means you agree to pay more if you have a covered claim. Because the insurance company would pay less toward that claim, it may charge you less for your policy.

Ask:  

  • How much would be paid out of pocket if a claim happened tomorrow? 
  • Does the amount paid out of pocket depend on the type of loss (example, hurricane, wind/hail, water, etc.)? 

Many consumers focus on monthly savings without fully considering what they would owe after a loss.

2. Lower coverage limits

Reducing coverage limits can lower premiums, but it may also reduce the amount available after a covered loss.

Many homeowners know approximately what their home would sell for. 

Fewer know what it would cost to rebuild. 

Those numbers can be very different. 

Market value may reflect: 

  • Land value 
  • Municipal service, including school district 
  • Housing demand 

Reconstruction costs may reflect additional expenses that are necessary to rebuild a home, such as: 

  • Labor and contractor availability 
  • Building materials, including local nuances 
  • Contractor and architecture cost and fees 

As a result, a home's rebuilding cost may be higher than its market value. 

  • Where to find your reconstruction cost on your insurance policy: Look for the Dwelling Coverage or Coverage A Limits amount listed on the declarations page of your policy. 
  • Ask: How was the rebuilding estimate calculated and when was it last updated? 

3. Removing coverage

Sometimes consumers choose to remove optional coverages to reduce costs. 

  • For example, a homeowner may choose not to carry coverage for water that backs up through sewers, drains or sump systems. 
  • A car owner may choose to remove comprehensive coverage (examples of losses that Comprehensive car coverage may help protect against include theft, hail, fire, falling objects and animal collisions).  

Removing coverage may lower premium costs, but it may also mean certain losses are no longer covered when you file a claim. 

  • Ask: Which losses would no longer be covered if this coverage is removed?

A quick coverage reality check

We suggest homeowners and car owners periodically review their coverage, starting with questions like these. 

Could a homeowner answer: 

  • What is the deductible? 
  • What is the dwelling coverage limit? 
  • Is coverage for water that backs up through sewers, drains or sump systems included? 
  • What is one common loss that isn't covered? 

Could a car owner answer: 

  • What deductible applies to the policy? 
  • Is theft covered? 
  • Is hail damage covered? 
  • Which protections are optional? 

If those answers aren't immediately clear, it may be a good time to review the policy and discuss coverage options with an insurance professional. 

Reviewing coverage over time matters

Many consumers spend time comparing insurance options when first purchasing a policy but review their coverage less frequently afterward.

Insurance professionals often recommend revisiting coverage periodically, particularly after: 

  • Purchasing a new home, car or other asset 
  • Selling a car or other asset 
  • Replacing a roof or making other significant home improvements 
  • Completing major renovations 
  • Acquiring valuable belongings 
  • Experiencing significant changes in local rebuilding costs 
  • Major life changes 

A policy that met a consumer's needs years ago may not reflect the same circumstances today. 

Consumers don't need to memorize an entire policy

Insurance policies contain important details, but consumers don't necessarily need to read every page to understand the basics. 

What matters most is having a clear snapshot of: 

  • Key coverages 
  • What’s not covered 
  • Deductibles 
  • Coverage limits 
  • Optional protections 
  • Notable exclusions 
  • Who’s covered 

Understanding these areas can make it much easier to evaluate options, compare policies and make informed coverage decisions.

Roof age: One update many homeowners overlook that could impact long-term insurance savings

One of the most important home updates to share with your insurer is a roof replacement.

Your roof's age may affect how much insurance pays after a covered loss

Not all roof claims are settled the same way. Depending on the insurer, policy, state, and the age of the roof, a covered roof loss may be paid using Replacement Cost Value (RCV), Actual Cash Value (ACV) or Scheduled Roof Payment. 

Understanding how your roof is covered before you have a claim can help you know what to expect. 

Replacement Cost Value (RCV)


This generally pays the cost to repair or replace your roof with materials of similar kind and quality (minus your deductible) after a covered loss. Policy terms still apply. 

Example: 

  • New roof costs: $20,000 
  • Deductible: $2,000 

Insurance pays: $18,000 

Your cost: $2,000 

 

This simplified example assumes the entire $20,000 loss is covered, less deductible and is intended only to illustrate the concept. 

Actual Cash Value (ACV)


This pays the roof's value after accounting for age and wear. Factors such as the roof’s age, condition and wear may reduce its value and, in turn, the amount insurance pays after a covered loss. 

Example*: 

  • New roof costs: $20,000 
  • Roof is 18 years old 
  • The roof has lost much of its value over time due to natural aging, wear and tear. 
  • Hypothetical ACV: Insurance may value the roof at: $8,000 
  • Deductible: $2,000 

Insurance pays: $6,000 (current value minus the deductible) 

Your cost: $14,000 

*This is a simplified, hypothetical example for educational purposes only. Actual claim payments vary based on the policy, covered loss and how depreciation is determined. 

Scheduled Roof Payment


Using a predetermined claim payment schedule to account for a roof’s age rather than only determining the reduction in value after a loss. 

For example, for certain roof coverage, Farmers uses Scheduled Roof Payment: The percentage used to calculate payment for covered roof damage is based on factors including the roof’s material, age, and the policy includes a table showing the applicable percentages. This can give customers a clearer picture before a loss of how their roof will be valued. 

Typically, insurance policies explain when Actual Cash Value or Scheduled Roof Payment applies to a roof. For example, a policy may state that claims for roofs over a certain age will be settled using Actual Cash Value. When a consumer purchases a policy, they agree to the terms of that policy.

Why does roof age matter?

Insurance is designed to protect you from sudden, accidental damage. It's not designed to pay for normal aging, wear and tear, or deferred maintenance.

Roofs naturally deteriorate over time from exposure to sun, wind, rain, snow and temperature changes. 

Roof age can also affect how a covered loss is settled. That’s why it’s important to make sure your policy reflects your roof’s current age, and to understand whether your policy provides replacement cost coverage, ACV, or another method of settling roof losses. 

Replaced your roof? Update your insurance policy

If you've installed a new roof, it's important to let your insurer or insurance agent know.

Keeping your roof information up to date helps your policy accurately reflect your home's current condition and can help avoid surprises if you need to file a claim in the future.

Insurance decisions don't have to be made alone

Sorting through deductibles, limits, discounts and optional coverages can feel like a lot. A Farmers agent is a licensed insurance professional who can help make those choices easier to understand and provide  options based on a consumer's needs, priorities and budget. 

With access to a variety of insurance products through Farmers, an agent can look across coverage needs rather than focusing on just one policy. That broader view may help identify opportunities to bundle policies, qualify for available discounts, address possible gaps or overlaps, and better understand how one coverage decision could affect another. 

Consumers don't need to have a Farmers policy to start the conversation. A Farmers agent can review a current home or car policy—even if another insurer’s name is on it—and help explain what it covers and help identify options for adjusting coverage, saving money, or both.  

The goal is to help consumers make decisions with clearer information.

The bottom line

Insurance decisions are rarely one-size-fits-all. 

The goal isn't necessarily to spend more or less. It's to understand the relationship between price, protection and financial risk. 

Consumers who understand those trade-offs are better positioned to choose coverage that aligns with their needs, priorities and budget. 

Insurance works best when there are no surprises. Understanding what's covered, what's optional and what isn't covered can help consumers make confident decisions long before a claim ever happens. 

Ready to lower insurance costs without losing sight of coverage?

Start with a Farmers Coverage ReviewSM. A Farmers agent can help compare insurance coverage, deductibles and discounts so consumers can look for ways to save while choosing protection that fits their needs and budget. 

Call 800-515-1896