Ways to save on home insurance from consumer
experts
Blame natural disasters, the
pandemic and your location |
Article Courtesy of Channel 6 Click Orlando
By Tobie Stanger, Consumer Reports
Published
June 9, 2023
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You don’t have to live in a disaster-prone place for
your homeowners insurance bill to make you feel like disaster has
struck. Homeowners insurance premiums are expected to rise significantly
this year throughout the U.S.
On average, homeowners can expect to see
their bills climb 7.1 percent in 2023, according to the
business analytics firm S&P Global Market Intelligence. That
follows an even bigger jump of 12.6 percent last year,
nearly double the overall inflation rate. Historically,
homeowners insurance bills have risen only about 5 percent a
year.
What’s behind these scary numbers? Read on for answers—and
for solutions to help you save money. And if you’re shopping
for coverage, check Consumer Reports’ Homeowners Insurance
Buying Guide. CR members can consult our exclusive
survey-based homeowners insurance ratings for the best
companies across the U.S.
Blame the Weather
Insurance experts generally agree that
two major forces have pushed insurance premiums skyward.
“Broadly, it’s inflation and climate change,” says Tim
Zawacki, lead insurance analyst at S&P Global.
There have been more very destructive weather events,
including Hurricane Ida in 2021 and Ian in 2022, causing
billions of dollars of damage to insured properties. In
fact, the years 2019 through 2022 were the most costly three
years for insurers ever, according to the American Property
and Casualty Insurance Association (APCIA). The industry has
responded by passing costs on to policyholders in affected
states.
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You don’t have to live in a disaster-prone place for
your homeowners insurance bill to make you feel like disaster has
struck. Homeowners insurance premiums are expected to rise
significantly this year throughout the U.S.
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Florida homeowners, many of them still
reeling from Ian—and from earlier premium price spikes—can
expect premium increases of 40 percent [PDF] in 2023, the
Insurance Information Institute, an industry group,
projects. In Louisiana, still recovering from Ida,
policyholders in the pricey high-risk insurance pool will
see premiums swell by an average of 63 percent when they
renew this year. Those unlucky folks represent a tenth of
all the state’s insured homeowners.
“But it’s not just hurricanes that have had an impact,” says
Karen Collins, a vice president at APCIA. “It’s storm events
like tornadoes and hail, and also wildfires.” In 2022
residents of Colorado, for instance, which has suffered from
mudslides and wildfires, got jolted by a 16.7 percent
premium increase, on average, not far behind windstorm-prone
Louisiana (27.6 percent), South Carolina (19.7 percent), and
Florida (19 percent).
Building Inflation Hits
Hard
Higher construction costs have a big impact on what
homeowners will see in their policy renewal letters this year. When
material and labor expenses go up, so do premiums. Between 2020 and
2022, pandemic supply-chain kinks, coupled with heavy demand, boosted
the price of residential construction materials by 33.9 percent,
according to the Bureau of Labor Statistics. Workers also became harder
to find, forcing builders to raise wages. Though prices have dropped for
some materials—like lumber—that inflation hasn’t completely abated.
Demographic shifts can also play a role. South Carolina’s 19.7 percent
jump last year was partly due to its growing population, which ratcheted
up demand for new homes, Zawacki says. “Local costs for labor and
materials are factored into the replacement cost formula, which drives
premiums.”
What You Can
Do to Save on Homeowners Insurance
If you want to hunt down the best value for your
insurance dollar, comparison shopping is a good way to start. Companies
don’t judge you and your property identically, so you may get a more
favorable price from one company than from another. Just make sure
you’re comparing coverage apples to apples.
If you’re worried about losing your standing as a longtime customer, you
don’t necessarily need to be. While your current insurer may provide a 5
or 10 percent loyalty discount, staying put may also be sending it the
message that overall price hikes won’t send you running to a competitor.
Just 13 percent of Consumer Reports members in a recent survey said they
regularly shop for new coverage. But among the 7,075 who did switch to a
new carrier within the five-year period covered by our survey, 39
percent said they did so because they got a better price.
Keep in mind that in this inflationary period, it’s key to establish the
right replacement cost for your home so you’ll be covered in the event
it gets destroyed. For that reason, Zawacki favors using a local,
independent agent or broker who sells policies from several insurance
companies vs. an online vendor. These professionals can go over how the
different companies have determined the replacement cost of your home,
and they also may recommend policy add-ons that can help your coverage
keep up with inflation. (Find an agent through Trusted Choice, which is
affiliated with numerous such companies.)
If you’d rather hunt for coverage online, consider websites such as
Insure.com, NetQuote, SelectQuote, and TheZebra, which provide initial
quotes from a variety of insurers. Also check with your state insurance
department, which may publish rate comparisons. Floridians, for
instance, can go to Florida’s Office of Insurance Regulation;
Californians, to the California Department of Insurance.
CR members can consult Consumer Reports homeowners insurance ratings to
identify companies that best satisfied the 59,670 members who responded
to our survey. We judge carriers on price, breadth of coverage,
non-claims customer service, and other factors. We also rate them on
claims handling, including how satisfied members are with the dollar
amount they receive.
Use These
Other Money-Saving Tactics
The first quote you get from an insurer may not be
what you ultimately pay, says Collins of the APCIA. “You may start out
with a higher quote,” she says, “but when you show the steps you’ve
taken to mitigate risks, it can moderate the cost.”
These strategies can help:
Bundle coverage. Purchasing your homeowners and auto coverage
from the same company can provide savings of up to 30 percent overall.
You could save more, too, if you bundle your boat or motorcycle.
“Bundling insurance policies also can simplify your bill paying and
record-keeping,” says Loretta Worters, a spokesperson for the Insurance
Information Institute.
Keep your deductible high. Higher deductibles equal lower
premiums. Going to a $1,000 deductible from $500, for instance, can
shave your premium by 25 percent, the III says. And going from $500 to
$2,500 potentially saves even more.
Clean up your credit. Insurers in 46 states can use what’s called
a credit-based insurance score in their pricing of homeowners insurance
premiums. They can also check your score regularly and use it in their
renewal pricing. An analysis by PolicyGenius found that poor credit can
generate a premium twice as high as good credit. To improve your odds,
don’t take on too much credit card debt in the months before shopping,
and pay your bills on time. Check your credit reports with
annualcreditreport.com regularly to identify errors and correct them.
And ask the insurer what impact your credit score is having on your
premium. “In theory, the insurer should tell you the source of the
score—Lexis-Nexis, Experian, for instance—so you can review it,” says
Chuck Bell, programs director for advocacy at Consumer Reports. (CR has
argued against the use of credit in insurance pricing, and using credit
scores for homeowners pricing isn’t allowed in California, Maryland,
Massachusetts, or Michigan.)
Landscape with fire in mind. Cutting back dry
brush around dwellings and outbuildings in a fire-prone area can earn
you a 5 percent break on your premium. (Worters says it’s rare to see
this discount in wildfire-prone California.)
When You’re Ready for Home
Improvements, Consider These
You may not want to do major work on your home just
to save a few hundred dollars on homeowners coverage. But if you’re
prepared to do so, here are places to start.
Add or replace home systems. Replacing old plumbing and adding a
home security system and gas- or water-leak detectors can lead to
insurance savings of 2 to 6 percent or more.
The online insurer Hippo offers 13 percent off your
policy for a security system with professional monitoring.
Upgrade the roof. This part of your house is often where problems
start, from water leaks to fires from wind-borne embers. So some
insurers add a surcharge of 10 to 15 percent for older roofs. (A
PolicyGenius analysis found major insurers charging from 12 to 40
percent more for a 20-year-old roof vs. a new one.) Check CR’s ratings
of asphalt roofing shingles if you’re ready to replace your roof. And in
a hurricane- or tornado-prone area, go to fortifiedhome.org to learn how
to install an impact-resistant roof system that could be eligible for a
35 percent discount from some insurers.
In Florida, you may have no choice but to upgrade your roof, by the way.
Some insurers won’t cover roof damage unless the roof is newer than 10
or 15 years old, says Melanie Musson, an insurance expert at
Clearsurance.com, an insurance shopping website. “In that scenario,
residents may not end up paying wildly inflated premiums, but they’re
getting less coverage for their money,” she explains.
Mind How Your
Behavior Affects Your Premium
Pick your pets and pursuits wisely. You may
love the cuteness of that Doberman puppy, but owning one could cost you
more in premiums than, say, a shihtzu. Some insurers maintain that the
risk of dog bites—and liability lawsuits—is greater with certain dog
breeds, and they may set a surcharge or deny coverage. (Showing the
carrier that your dog has passed the American Kennel Club’s Canine Good
Citizen training may help you avoid an insurance surcharge.) Likewise,
trampolines, pools, and other fun toys are accidents waiting to happen
in insurers’ eyes. And reporting that you’re a smoker suggests you’re a
fire risk. While not divulging these items can help you avoid
surcharges, your insurer could drop you if it learns of them later, say,
after you or someone who’s been injured files a claim.
Be cautious about how often you make a claim. Filing one every
five years shouldn’t raise a red flag with your carrier and trigger a
premium increase, Worters says. But more than that is pushing it.
“Making three claims in two years, for instance, shows you have a
proclivity for claims,” Worters says. That could raise your rates or
influence your carrier not to renew your policy.
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