10 things that can lower or raise your homeowners insurance rates
Insurance companies get more skittish by the year, and they're dropping homeowners. Don't buy a home only to discover that some old leaky pipe may make your place too costly to insure.
Admittedly, insurance doesn't top the list of considerations in the hunt for a new home. It's not as if buyers spend hours ogling nifty premiums on the home and garden channels.
But just keep in mind that perky woman from the insurance commercial and the mantra she chimes: "Isn't getting discounts great?! … Yes!"
Bone up on the insurance breaks now — when choosing a home — and it could mean thousands of dollars pocketed every year for use on the fun projects down the road. Often, things about the home itself can affect your insurance rates — factors that are costly, if not impossible, to change later. (Bing: Find an independent insurance agent)
Below, experts outline 10 factors that make the biggest impact. Study up on these, discuss the details with your insurance agent and keep them in mind when you're evaluating homes to buy.
1. Is the area susceptible to hurricanes, mudslides, wildfires or other natural disasters?
Natural disasters have become so costly that many large insurers now refuse to provide homeowners with coverage in certain high-risk areas. Buy within a half-mile of brush in wildfire-prone California, for example, and you may be forced to shop smaller, high-risk insurers, which might charge three times more, independent agents say.
The same might go for coastal areas or steep slopes. Buy in, and it could mean an extra $3,000 or more in premiums every year — for as long as you're there. The average cost of a homeowners insurance policy is projected to be close to $900 for this year, according to the Insurance Information Institute.
"It can be a big, big problem if you get in a situation where none of the big companies want to insure you," says Tim Gaspar, owner of Gaspar Insurance Services, an independent agency outside Los Angeles. "You have to go to a high-risk company, and they can charge whatever they want to charge you."
Tilmon Brown, a developer who remodeled an old brick firehouse in Mobile, Ala., for his own family, learned after years in the house that his insurance company had canceled wind coverage because of high costs of hurricane repairs.
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Never mind that his solid structure has withstood hurricanes or that he couldn't find an insurer offering the coverage. The state finally set up a wind pool, for which he pays $2,100 a year on top of his $700 homeowners coverage — a total more than quadruple his previous annual bill.
Brown says he'd opt out of the insurance, which has a $50,000 deductible, but his lender requires it. Some buyers in high-risk zones where state pools aren't available have been unable to close on home sales.
If the home is susceptible to floods or earthquakes, you'll need a separate policy no matter where you live.
2. How's the roof? New? Wind- and hail-resistant?
If the roof — or the plumbing, for that matter — has not been updated in 25 years, you could also have difficulty getting into anything but a high-risk, expensive insurance group, Gaspar says.
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"Unfortunately, you'd be limited with what insurance companies are willing to deal with it," he says. "It's not even a price issue."
If the roof is new and it's constructed of impact-resistant material, you could qualify for a discount if it's an area subject to hail or high winds. The amount of the discount varies but could be as high as 20%, says Dick Luedke, a spokesman for State Farm, the largest provider of homeowners insurance in the country.
The same principle applies to construction under the roof. Masonry, for example, is more likely to withstand nature's forces and so is considered less risky, eligible for perhaps another 10% discount, Luedke says.
3. Is the plumbing new?
Ditto on the plumbing. If the system is a quarter-century old or has had unresolved problems in the past, insurance providers will be wary.
"Companies are scared to death of water claims because they can lead to mold, and mold is very expensive to remediate," says Bill Wilson, vice president of education and research for the Independent Insurance Agents & Brokers of America, a trade group.
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If the home inspector reports leaky pipes, it might be wise to request additional information, or even upgrades, prior to purchase.
4. Does the electrical system meet current code?
Unlike the plumbing and the roof, the electrical system doesn't need to be replaced to qualify for a good insurance rating, agents say. But it does need to have been updated within the past 25 years to meet current codes. That means circuit breakers; no old-fashioned fuses.
5. How far away is the fire department?
If the home is more than five miles from a fire station, your rates will likely start rising, says Dawn Roberts, general manager of LeDoux Insurance Agency in Eugene, Ore. They might jump by 20% to 240%, depending on the home's distance from a station or hydrants.
State Farm doesn't measure the distance; it looks at whether homeowners in the area have submitted claims for fire losses.
"If there are a lot more State Farm fire claims in a given year in a given area, then the risk is greater," Luedke says. "We believe it's more accurate that way. If you rate how close you are to a fire department, you're not taking into account the proficiency of the fire department."
So how do you get access to the claims history of an area? Well, it's not likely that a private company in such a competitive industry is going to turn those data over for public consumption. But buyers can ask insurance agents to draw up estimates based on different variables and from different companies.
Perhaps the neighbors submitted recent claims, driving State Farm's rate higher, but a nearby fire station pulls down the rate with another company.
"Homeowners insurance has always been very competitive, so the tried-and-true way to save money is to shop around," says Jeanne Salvatore, senior vice president and consumer spokeswoman for the Insurance Information Institute.
I find it to be a terrible law to allow insurance companies to use credit reports for the purpose of insurance, what does this have to do with the law that says you have to have this to drive on the roads, not to mention we are not asking for credit, so therefore this should not be allowed. The insurance companies should only be concerned with driving records, not peoples personal finance information, which has nothing to do with following the law. Insurance companies are profiting big on others misfortune. Credit reports also contain alot of inaccurate information, and insurance companies think that the reports tell them whether or not people are responsible, this is not their business, and really it is simple if you do not pay your premiums then you do not have insurance, so why does the government think that this practice okay.
I have owned my home for 20 years and have never filed a single claim. My rates keep going up. I try to shop for lower rates but I cant find coverage with my dog. I owen a Rottweiler, and have had them all of my life from when I was eight years old. At only one point in my life did I not have one, and that was for a year. In that time my home was broken in to twice. The robbers did not get much so I did not file a claim. But the lesson to be taken from this is that a dog is better then an alarm. The local cops will not and can not answer every call in time to stop a robbery in your home, and the local thugs know this. The house next door was shot up in a drive by and it took almost an hour for cops to arrive.
I have taken steps to keep my dog separated from passers by. The fence is 3 feet away from the side walk, entry gates are inset 30 feet from the sidewalk. Locks are on the gates to prevent someone from opening them. I have lived with rotties for 38 of my 48 and I am being told by my ins.co. that If I only knew what these dogs can do! I will tell you what they do, they let me sleep at night, and let me go to work in the morning knowing that all I work for will still be there when I get home again.
I've been working for an insurance company for several years now. Funny how people pay for a service and never take the time to actually ask questions about what your purchasing. In other words contact your agent and ask questions that is why you have one... well that is of course if you have an agent.
One tip of advice your policy covers for a covered loss in that one incident and it is not a maintenance policy so fix those leaky pipes and get rid of that rotted wood.
Not all agents are crooks. The "big-name-we'll-meet-all-your-insurance-and-financial-needs-do-all-your-business-under-one-roof" companies tend to be the highest priced policies in the country. They pay for the huge ads and sponsor figure skating, golf tournaments, football games and various other activities. Look in your area for a smaller mutual company who can beat the "big guys" on prices and service.
There are several ways to look at the value of a home: actual cash value, tax value, retail value, replacement cost, and appraised value. Each of these numbers are generally different. Even if you bought your home for $40,000 thirty years ago, you must look at what it would cost to rebuild it from foundation up. Construction costs have gone through the roof in the past 30 years.
Remember, even insurance agents have to buy insurance. By law, they get no discount. Give the "little guy" a chance!! See what they can do for you! All the big guys started out as a little guy, they have forgotten where they started.
I have Farmers and now I understand why they have that name. The Agents in Lake County, CA are independents and many are pot growing farmers who also own the medical pot stores, here around the lake. Lake-a-billy Insurance Farmers. One of the agents got so drunk and stoned on my neighbors porch one day he couldn't back his new Dodge Ram pickup out of the driveway without doing $4892 damage to her Corvette. The gets a DUI while leaving without taking care of the damage he did. Yes, I managed to get it all on video. To much fun here in Flake County California... Not to mention the extreeeeem fire hazard and half dozen earth quakes everyday. Lower home prices here, but Farmers Insurance is high... pun intended
HomeOwners - $1056 yr.
Auto car & truck $828 yr.
health coverage $5092 yr.
age 61 paying for 40 yrs. $279,040.00 plus because I used to carry a business policy. and never filed a claim.
The insurance industry "had" a 9 billion a year workers compensation income. Now as the jobs are drying up, so go large profits. Now the look for other places to jack up rates.