Why are Homeowners Insurance Premiums Increasing?
. and how can I reduce those costs?
Many customers may be going through sticker shock when they open the renewal notices for their homeowners insurance. Premiums are going up, sometimes way up. A few homeowners may actually see lower rates, but mostly the trend is in the other direction. The big question is, why? Customers who may have never filed a claim or missed a payment are getting a higher premium. What’s going on?
First, let’s offer a little perspective. For many years, homeowners coverage has been a bargain. When compared to the cost of typical home repair, remodeling or maintenance items, such as painting, the value of your homeowners insurance looks even better.
There are several main reasons behind premiums going up now, including losses from catastrophes - severe weather and forest fires - which have been worse in the past ten years than in the previous 40 years combined, totaling $100 billion since 1990. One severe hail storm can total tens of millions of dollars in losses. And the cost of home repair and construction is up significantly, meaning the cost of settling claims is up.
Another factor in higher costs is the broad coverage we have come to expect in today’s standard homeowners policy. Over the years, homeowners insurance has evolved into an ‘all-risk’ policy, including items such as guaranteed replacement costs, which has created an even bigger gap between premiums and the cost of covering claims.
So what can you do to keep insurance costs down? Increase your deductible, for
a start. A deductible of $1,000 instead of $250 can cut your premium by up to 25 percent. Be careful not to file a lot of small claims - broken windows, damaged fences, or items that amount to a few hundred dollars - which drive up costs and can lead to an insurance company non-renewing your policy. Homeowners insurance was never meant to cover routine maintenance. It’s best to cover a small repair or stolen item yourself and save your insurance coverage for a major loss.
To help avoid having to file a claim in the first place, take the time to take care of routine maintenance. Items that are easy to overlook:
Replace worn rubber hoses on washing machines and dishwashers, a simple step to prevent water damage. You can find reinforced hoses at your local hardware store.
Keep pipes in good repair, especially in cold weather, to help prevent bursting and possible flooding.
Keep gutters free of debris and inspect the roof frequently for signs of leaks or wear.
In fire-prone terrain, clear underbrush, woodpiles and trees away from the house.
And remember to keep a home contents inventory, including a videotape or photographs of your belongings, up to date.
In the face of a rapidly changing insurance market, we all can learn new ways to wisely use our homeowners insurance. Don’t take insurance for granted. Use an expert. An independent insurance agent that knows your property can offer other practical steps to help keep insurance costs down.
© 2003 by SAFECO Corporation. Used with permission.