While most of us understand the necessary evil of paying homeowners insurance, it’s a surprise that a lot of people still know next to knowing about how their policy works or how it affects their taxes. Considering how much you shell out for your insurance premiums every month, knowing exactly how you can make it work for you can lead to a ton of perks and benefits. But how does it work, exactly?
Take a look below.
Homeowners insurance offers you protection if your home or belongings are stolen, damaged or destroyed. So you’re covered against theft, flood damage, fire damage and water damage – among other things. In addition, the policy also covers you in case someone hurts themselves inside your home—whether slipping on the floor or falling down the basement stairs—so any liability is shouldered by your policy. And even when it comes to pets, if Princess scratches and swipes a guest or Fido bites someone’s leg, you’ll be covered for that as well.
1. Mortgage Interest
The most well-known tax deduction is the one you get from your mortgage interest. Everyone seems to spout the merits of this tax deduction. Investopedia, however, provides cautionary advice, saying that the benefit you get is far too small. However, it’s still something to look into based on your specific situation.
2. Home insurance
For a handy explanation, CoverHound provides some insight on homeowners insurance tax deductible scenarios. But basically, if you have homeowners insurance, and declare your home as your primary place of business—whether you’re a freelancer, consultant or have your own company—whatever costs you incurred from operating your business from home can be written off by taking it out of your homeowner’s insurance outlay.
Homeowners who rent their properties can take advantage of similar benefits. The only thing you’ll need is to find the right policy and you can look forward to more tax write-offs in your future. Remember though, that this only applies to properties you rent full-time.
If you got a mortgage to finance your home, then you’re entitled to a tax break. Check if you paid points to qualify for a better rate on your loan. If you did, then you can claim a tax break. The only problem with points is that you won’t be able to get them any time soon. However, if you can afford to wait, then you’ve got a tax break coming your way.
Other Homeowners Insurance Tips
1. Equip your home with a security system and smoke alarms. Added safety features can help reduce the monthly premiums you’re paying for your homeowner’s insurance. For instance, you can get five percent off your insurance premiums by adding a smoke alarm. Other safety and protection features, such as locks on doors and windows also can give you a good rate.
2. Get multiple policy discounts. If you’ve got multiple policies or are considering opening another policy, then don’t jump ship to another insurance provider. Instead, use the same company so you can take advantage of their multiple policy discounts.
3. Do your research. Adding a pool is certainly a nice thought but did you know that having one in your home jacks up your premiums by at least 10 percent? Anything that can potentially cause you or another person harm in the home is a hazard and thus adds to your monthly insurance costs. So if you don’t want to pay extra, make sure you do your research thoroughly beforehand.
4. Pay off your mortgage. Another reason to wait until you’ve got enough money in the bank is this: as soon as you pay off your mortgage, your insurance rate will go down. A lot. That’s because insurance companies believe that by owning that home, you’ll take better care of the property.
5. Always read your policy. There could be major changes in your coverage or new restrictions and you’ll want to be fully aware of them. If you don’t understand a condition or term, consult your insurance provider or have your legal counsel review and read the file with you.
With these tips, you’ll have an easier time when you’re looking to lower your costs, whether it’s through tax breaks or nifty homeowner’s insurance tips.