Low-Income Homeowners Insurance
Learn more about the best home insurance options for homeowners on limited budgets.
Insurance options for low-income homeowners
Owning and maintaining a home is a big financial commitment; insurance to protect your house is a key part of those costs. For low-income homeowners, this expense can feel challenging, but keeping your home protected is essential. Not paying your premiums can lead to having your insurance policy canceled, leaving you and your home completely unprotected.
Fortunately, there are ways to find affordable home insurance coverage, and many insurers and state and federal programs offer assistance to make this possible. Use this guide to explore your options and find the support you need to keep your home secure without stretching your budget too thin.
Key takeaways:
- Income level doesn't affect your insurance rates
- The best way to save money on home insurance is to shop around
- Most states have a FAIR program that offers affordable rates to low-income homeowners
Does my salary impact my insurance premium?
Income level doesn’t directly affect the price of homeowners insurance, but certain factors often linked with lower incomes can impact premiums. For instance, if you have a lower income, you might face challenges like a lower credit score or live in an area considered “high risk” by insurers—both of which can lead to higher premiums. Insurers sometimes see lower credit scores as indicators of higher claim likelihood, which can increase rates.
One of the biggest factors that affects your insurance rates is your ZIP code. If you live in an area with high property crime rates or significant risks from natural disasters, premiums are likely to be higher. Additional elements, like the building materials, the age of your home, and its distance from a fire station, also influence the cost of your insurance.[1]
How to find cheaper homeowners insurance
Saving on homeowners insurance is a priority for everyone, but if you’re on a fixed income or a limited budget, finding affordable options becomes even more essential. Being a smart shopper can help you keep costs down while still protecting your home.
Below, you’ll find several strategies specifically designed to help low-income homeowners secure suitable home insurance coverage. While not every insurer offers all these options, they can serve as a helpful starting point in your search for affordable protection.
Look at bundling your home and auto insurance with the same insurance company. Multiple policies with the same insurer can lead to savings and streamline your monthly bills. (It should also be noted that being a homeowner will likely decrease what you pay for car insurance.)
Most insurance companies offer some form of discounts for qualifying customers. Some examples include discounts for loyalty, occupation, or upgrading parts of your home, such as your roof. Contact your insurance agent to ensure that you benefit from all available homeowners insurance discounts offered by your insurer.
Your insurance history plays a major role in the premiums that you are charged. If you have filed several claims in the past, your insurer will likely find you to be more likely to file claims in the future. This means that you can expect your rates to rise. As such, carefully consider when to file an insurance claim and when not to, as claims can raise your rates dramatically for years to come.
The way a homeowners insurance company pays out for claims can have an impact on your premiums. The primary valuation methods are replacement cost value (RCV) and actual cash value (ACV). Replacement value will pay enough to cover the full cost of replacing your home or personal property. Actual cash value factors in depreciation when paying out a claim, often leading to a much lower payout. While your primary dwelling will almost always be valued at replacement cost, your personal property can vary depending on your policy.
If your personal property coverage pays out at replacement cost, you may consider downgrading to actual cash value if your insurer offers that option. You won’t get as much of a payout if you have to file a personal property damage claim, but the savings in downgrading from replacement cost coverage could ensure that your coverage remains in place.[1]
While being somewhat underinsured is bad, it’s far better than dropping your coverage altogether. Look at the coverage options offered by your insurer to see if there are any add-ons that you no longer need. Most of your policy info can be found on your declaration page. These may include endorsements that protect a home business or offer protection against cyber attacks.
Consider what is absolutely necessary when making such decisions. The type of coverage that you choose will have an impact on your rates. Some home insurance policies offer much more robust coverage (HO-3 and HO-5) than others (HO-2). Your insurer may have a package or policy type available that is more in line with your budget.
What you paid for your home and the cost to rebuild it are two separate things. Remember that part of your purchase cost includes the land on which your home sits. Your dwelling limit should only be high enough to cover the cost to rebuild your home. Work with local contractors or insurance agents to work out local building and material costs to make sure that you aren't overpaying for your coverage.
While this may entail an initial investment, home security systems or other improvements can often lead to savings on your insurance. The Insurance Information Institute states that some insurers will offer savings of up to 20%[3] for the additions of certain security or monitoring systems. If nothing else, they can help protect against having to file a costly homeowners theft claim.
You may also have some leeway in your policy’s coverage limits. For instance, if you had set your personal liability coverage limits at a higher level than required, reducing them to the minimum amount required may provide some small savings.
Also, if you have endorsements for certain expensive items, have them reappraised to ensure you aren't overpaying for coverage.
What if I can't pay for the insurance on my house?
If you are unable to make your payment, contact your insurance agent or a representative of your company to inquire about a grace period. Many insurance companies discontinue coverage 10 to 30 days after a missed payment. Consult your insurer to confirm the duration of the company's grace period.
It’s crucial to work with your insurance company to make your payment: non-payment may result in the cancellation of your policy. Even a short lapse in coverage can have major consequences. Along with penalties and higher home insurance costs, you may face the prospect of a house fire or other damaging peril while uninsured, leaving you on the hook for all repairs.
Can I temporarily pause my insurance payments?
It’s unlikely that a homeowners insurance company will allow you to stop paying your premium while maintaining coverage. Failure to make payments can lead to the insurance company dropping your coverage. For some homeowners, this could also break the terms of their home loan, which may require an active home insurance policy to remain in place as part of their lending agreement. Communication is critical in this situation.
If your home has experienced major damage, such as from a natural disaster, government programs may be able to help while you work to rebuild and repair. According to the U.S. Department of Housing and Urban Development (HUD), having a safe, sanitary, and functional home is key. FEMA assistance and housing counseling through HUD may be a big help after a severe event that affects your home and budget.[5]
Can my lender require me to carry home insurance?
Unlike auto insurance, there are no legal requirements to carry homeowners insurance. However, your bank or mortgage lender can require you to carry insurance coverage as a part of your lending agreement. Your lender has an insurable interest in the property and may set minimum coverage limits (especially for your dwelling coverage) to which your policy must adhere. Before purchasing your home insurance policy, check your lending agreement to ensure your new policy meets these requirements.
If you cannot meet certain financial requirements — or your policy is canceled — your lender can impose insurance coverage on your behalf. See the scenarios below for which such coverage is required.
Most lenders require homeowners insurance to be carried as a part of the loan agreement. If you let your current homeowners policy lapse or drop it altogether, your lender may find out. In this case, the lender can purchase home insurance on your behalf and tack it onto your mortgage payments, leaving you little choice but to pay it or risk losing your home. The lender has this ability because they hold an insurable interest, meaning they could lose money by financing an uninsured property.
Buying a house often requires a large down payment. This sum can be tricky to gather, especially for low-income or first-time homeowners. However, opportunities exist to get a home loan with less than the suggested 20% downpayment, though it may come with additional costs.
Borrowers who cannot make a downpayment of at least 20% are often required to carry private mortgage insurance. This coverage is not meant to protect you or your home but is designed to protect the lender if you cannot pay your mortgage. This is usually paid via monthly premiums, but your provider may offer other options. Most lenders will allow you to drop this coverage once you have paid enough on your loan to reach 20% equity.
What if my homeowners insurance deductible is too high?
The deductible can be a two-edged sword for those in precarious financial situations. Carrying a higher deductible can lead to cheaper insurance rates, making it easier to make your payments. However, in the event of an insurance claim, you will be responsible for pitching in to pay more to cover damages. In the event of a payout, those with a $2,000 deductible would have that amount deducted from their claims check. For example, if you suffer a $20,000 loss, your home insurance company would only pay $18,000, leaving you responsible for making up the difference out of pocket.
Of course, while a higher deductible can lower your payments, you must be actually able to pay it in the event of a serious claim.
Programs to help low-income homeowners
Some homeowners may benefit from government programs when struggling to find adequate coverage. For homeowners who are continually denied coverage from standard home insurance companies, you may want to consider your state’s Fair Access to Insurance Requirements (FAIR) Plan. This government-run insurance program allows “high-risk” homeowners access to insurance coverage.
These policies are not as robust as typical homeowners insurance policies and should be considered a last resort. If you are uncomfortable with these policies' lower coverage, seek supplementary coverage or consider non-standard home insurance companies that may offer policies to higher-risk customers.[4]
Considerations
For those in tricky financial situations, homeowners insurance can seem like one more burden in running your home. However, even if you have paid off your mortgage and own your home outright, dropping homeowners insurance is never a good idea. Home coverage isn’t required by law, but dropping it altogether leaves homeowners at a huge risk of losing one of the biggest investments you’re ever likely to make.
The best way to cut homeowners insurance costs is to shop for a new policy. Home insurance companies each have their own individual underwriting policies, meaning that one company could offer significantly cheaper rates than another in your area. Compare quotes from several companies to see if they can offer savings on insurance for your house. The Zebra is a great place to find free insurance quotes from many of the best homeowners insurance companies in the nation. Enter your ZIP code below to get started.
Compare home insurance rates side-by-side and find an affordable policy.
FAQs
What if I can't get coverage? Insurance Information Institute
How do home insurance companies pay out claims? CFPB
12 ways to lower your homeowners insurance costs. Insurance Information Institute
Fair Access to Insurance Requirements (FAIR) Plans. NAIC
Home repair and replacement assistance. HUD
More information about affordable homeowners insurance:
- What is an HO-7 Insurance Policy?
- Landlord and Rental Property Insurance
- What is an HO-1 Insurance Policy?
- What is an HO-8 Insurance Policy?
- Insurance for a Second Home
- How to Read a Homeowners Insurance Policy
- What is an HO-2 Insurance Policy?
- Vacant Home Insurance
- High-Risk Homeowners Insurance
- What is an HO-3 Insurance Policy?
About The Zebra
The Zebra is not an insurance company. We publish data-backed, expert-reviewed resources to help consumers make more informed insurance decisions.
- The Zebra’s insurance content is written and reviewed for accuracy by licensed insurance agents.
- The Zebra’s insurance editorial content is not subject to review or alteration by insurance companies or partners.
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- The auto insurance rates published on The Zebra’s pages are based on a comprehensive analysis of car insurance pricing data, evaluating more than 83 million insurance rates from across the United States.