After several years of steadily healthy increases, homeowners insurance is expected to rise by 2.8 percent this year -- the smallest increase in five years, according to the Insurance Information Institute (III).

The average cost for homeowners insurance in 2004 is estimated at $608, up from $591 in 2003 and $508 in 2000. The III points out that rates vary considerably around the country.

"Small decreases in the frequency and cost of claims have helped improve insurer financial performance, resulting in a significant moderation in the cost of homeowners insurance in 2004," said Robert Hartwig, senior vice president and chief economist for III.

Hartwig said the slowdown in the increase in insurance rates comes at a good time for homebuyers -- a time when sale prices, property and school taxes, energy costs, and interest rates are on the rise.

He attributes part of the increase in insurance costs in recent years to the healthy real estate market.

"Over the past several years, millions of families took advantage of near-record low interest rates, purchased larger homes or made additions and improvements to their existing homes in record numbers," he said. "Bigger, newer and upgraded homes cost more to insure simply because they're more expensive to rebuild or repair."

In 2003 there was a record 6.10 million existing homes sold, according to the National Association of Realtors. And NAR economists expect 2004 to break another record with 6.17 million.

New-home sales also broke a record in 2003 at 1.09 million sold, according to the NAR.

And when it came to remodeling in 2003, Americans spent some $214 billion, according to the National Association of the Remodeling Industry. The trade group expects that figure to swell to $224 billion this year.

The III says several factors contribute to how insurance rates are determined. First is the amount paid out for losses. In 2003 there were three billion dollar-plus disasters -- including the California wildfires ($2 billion) and Hurricane Isabel ($1.7 billion).

Insured natural disaster losses amounted to almost $13 billion in 2003, the third highest year on record. Mold-related claims grew into a multi-billion dollar problem by 2002.

Regardless of where you live, the III says there are a number of things you can do to potentially reduce how much you pay for homeowners insurance, including:

• Shop for the best deal. Get at least three quotes. See if your state department of insurance has any price comparisons available. Determine which companies provide the best customer service and are readily available to answer your questions.

• Raise your deductible. The higher your deductible, the less premium you'll pay. For example, if you raise a $500 deductible to $1000, you may save as much as 25 percent.

• Buy your home and automobile policies from the same insurer. Some companies will reduce your premium up to 15 percent if you have at least two policies with them.

• Make your home more resistant to disasters. You might be able to save by adding storm shutters and shatter-proof glass or reinforcing your roof. If you live in an older home, you should consider modernizing your heating, plumbing and electrical systems to reduce the risks of water and fire damage.

• Understand the costs. The cost to rebuild your home is not what you paid for it. Don't include the cost of the land in deciding how much coverage to purchase.

• Secure your home. Some companies offer a modest discount, usually at least 5 percent, for installing smoke detectors, burglar alarms and dead-bolt locks. Some insurers will also offer a discount if you install a sprinkler system and a fire and burglar alarm that rings at the police, fire or other monitoring stations. First you'll want to research the costs involved, and whether you'd be saving on your premiums.

• Inquire about discounts. Ask your company about all potential discounts. For example, some offer discounts to those 55 and older.

• Investigate group coverage. You may be able to get a group coverage plan through your employer or a professional or business group. See if it's a better deal than what you have.

• Stay put. Many companies offer discounts for longer-term customers -- sometimes up to 10 percent if you've had your policy through the company for more than six years. Be sure to compare prices against other companies once in awhile.

• Review your policy and the value of your possessions. If you sold that pair of diamond earrings or other valuable for which you have a floater policy -- additional coverage for items not covered by a standard homeowners policy -- be sure you're not paying for the extra insurance.