Ten Tips On How To Minimize Homeowners Insurance
Rate Increases
More and more Americans are facing significant rate increases in their homeowners insurance—and complete coverage loss. Fortunately, there are ways to avoid these costly situations.
A recent national survey determined that nearly 2.5 million households have lost their homeowners coverage in the past 24 months, and another 51 million households (about 42% of all American households) experienced homeowners insurance rate increases, with some as high as 25% or more. To help avoid these troublesome situations, here are some helpful tips.
• Monitor your claim activity. Be cautious. Consult your insurance agent when filing smaller claims. Insurance companies will track the number and type of claims you file. Frequent claim activity, no matter how small, may be grounds for non-renewal. If your claim exceeds your deductible by $200 or less, consider withholding the claim and paying for the loss out of your own pocket. The out-of-pocket expense probably will be less than the premium increase you likely will pay and keeps your claim record clean. It also allows you to stay insured for those major, catastrophic losses.
• Consider raising your deductible. The owners of a $300,000 home with a pool might consider whether a low $250 deductible makes sense. If someone steals their TV, replacing it isn’t going to break the bank. Those same consumers need appropriate insurance coverage for a total catastrophe, though, or if they get sued. They may want to take a $1,000 deductible and use the savings, which can be about 7%, and buy an “umbrella liability” policy that gives them $1 or $2 million of coverage in case of a lawsuit.
• Combine your insurance coverages. Many companies offer multi-policy discounts. It usually makes sense to have your auto insurance AND homeowners insurance with the same company, which may save you 10% or more.
• Take advantage of any and all discounts. Many consumers don’t realize that they may qualify for reduced rates for living in gated communities, being a non-smoker, having an excellent insurance history, and owning smoke alarms or security systems. Ask your insurance agent about every possible discount, especially if you’ve made some of these changes to your home or lifestyle since your last renewal.
• Think twice about your liability coverage. Carefully consider additions to your property that could be dangerous. Because you are liable for anything that happens on your property, adding a pool, trampoline, recreational vehicle, or even a vicious dog to your property may significantly raise your risk of an accident in your insurer’s eyes.
• Don’t buy specific computer or high-tech equipment insurance policies. Though equipment insurance coverage may seem like a good idea, since so many people now have computers at home, a standard homeowners insurance policy will cover most basic computer equipment. If you have a home with the structure insured for $100,000, you typically have $50,000 of personal property coverage, including computer equipment not used for business. If your computer equipment is used for business, the home insurance policy typically provides $2,500 of coverage for computers. Only people with home-based businesses, laptops used for business outside the home, or elaborate high-tech equipment need to consider extra coverage. It’s cheaper to buy an endorsement to the home or home-business insurance policy rather than a separate computer policy.
• Stick with one insurance company and the company will be more likely to stick with you. An insurance company is more inclined to overlook a blemish on your claims record if you are a long-term customer rather than a new one. Hopping from one insurance company to another makes it difficult to build a relationship with any company.
• Combine your home with other coverages. Keeping your homeowners and auto insurance policies with one company makes you a much more attractive customer. Insurance companies may think twice about dropping your homeowners insurance coverage if it also means losing your auto insurance business. That bond can be further strengthened by having a personal umbrella policy—coverage that protects you from rare but potentially catastrophic liability claims and lawsuits. Umbrella policies are a bargain from a coverage and account stability standpoint, costing as little as $150 per year. Maintaining multiple policies with one company may lead to significant discounts.
• Home improvements help. Your home’s wiring, plumbing, heating and roofing should be in good condition at all times. At least twice a year, walk through your home and inspect it for developing problems. Older houses should be modernized. Believe it or not, your insurance company has the right to inspect your property. It can require repairs for continuity of coverage or decide against renewing coverage on a house considered hazardous. Initially, these fixes may seem costly, but if they’re ignored, they can be dangerous and ultimately more expensive.
• Buyer beware. If you are shopping for a new home, learn about the house’s claim history before you buy it. Ask for a disclosure report which can be obtained from your real estate agent or the seller’s agent. Insurance companies will be wary of a home with previous multiple structural or water-damage claims. It can work against you, even if you were not the owner of the home at the time.
Granted, there is no full-proof way to avoid homeowners insurance rate increases or being non-renewed by your insurance company, but heeding these precautions can help you become a more valuable policyholder.
