Insurance companies are trying to get your attention by creating clever TV ads that give the impression that it is easy to lower your premium. What about homeowners insurance? Crickets.
It’s quiet out there when it comes to home insurance. Insurance companies have been playing chicken with policyholders for years. If you have too many claims, they may raise your premiums or deny you a renewal. If you have one claim, such as for plumbing leaks, it can increase your premium. Many homeowners who have no claims are afraid to shop for a new insurance carrier.
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Multiple claims can result in your current insurer dropping you when your policy is up for renewal. If that happens, you’ll need to seek coverage through a “surplus lines carrier,” like Lloyd’s of London. This specialist in higher risk areas that standard insurers will not touch.
Rates can be affected by many factors, some of which you cannot control. In the past, insurers considered building construction, protective features and claims history, among other factors, to set your premium, says Bill Wilson, CEO of InsuranceCommentary.com, an insurance-information website. These factors are still considered, but insurers increasingly rely on big data, which can lead to hundreds of rating factors. Your “insurance score” may include your credit history, claims history, home construction details, safety features, and other factors. A natural disaster or a statewide crisis can impact the premiums of policyholders from unaffected states.
You can save without switching
There are ways to reduce your premium if you are happy with your current insurance company. You can start by selecting a minimum $1,000 deductible, or higher if you have the funds. Your premium can be cut by as much as 15% by increasing your deductible from $500 up to $1,000.
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It’s a good idea to stick with one insurance company and one agent over the long-term. According to Melanie Loiselle Mongeon, vice president at Loiselle Insurance Agency in Pawtucket (RI), “If you have 2 unexpected claims within a year after being claim-free for 10 consecutive years, the insurance company will be more lenient and more likely to keep your business,” she says. “Guaranteed replacement costs” coverage is a type of insurance that you can’t replicate with another company. This coverage is useful in times of rising construction costs, such as when your initial estimates are wrong or if the cost of rebuilding a large area of your home increases due to a natural catastrophe.
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When is it time to switch
Loiselle Montgeon says that a sharp rise in premiums, such as 15% or more, is a good reason to shop around. You should also consider shopping around after major home improvements, such as new safety features or a life-changing event. Discounts could be available for those who are retiring or starting a new job. Perhaps you live in an area that is susceptible to natural disasters, and would like better coverage such as removing a high hurricane-deductible.
A solid policy is built
All policies include a loss-of-use provision. This will pay you up to 20% to allow you to move elsewhere while your home is being fixed. You might be able to increase this amount if your home is in an expensive location. It is a smart idea to make a list of all your possessions using a home inventory tool such as the spreadsheet or app offered by United Policyholders.
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Living in a House
The estimated cost of rebuilding your home is the dwelling limit. This does not include the market value or the land value. This cost can be estimated by your agent, an independent appraiser, or a local builder. The estimated rebuild cost should not exceed 80% of your dwelling limit. Instead of