Car insurance companies are falling all over themselves to grab your attention with clever TV ads, giving the impression that lowering your premium is as easy as picking up the phone. But when it comes to homeowners insurance? Crickets.
Yes, it’s pretty quiet on the home insurance front. For years, insurance companies have played a game of chicken with policyholders who dare to use their insurance. They’ve threatened to raise premiums — or refuse to renew your policy — when you make too many claims. Just one claim can raise your premium if it’s the “wrong” kind — say, for plumbing leaks. Even many homeowners with no claims on their record are too intimidated to shop for a new carrier.
Homeowners insurance rates typically rise a bit each year to keep up with inflation. When you file a claim — especially for an event unrelated to a widespread catastrophe, such as a hurricane or wildfire — you can expect your rate to go up even more for several years. Having one claim unrelated to a widespread catastrophe within the past three years on your record can knock you out of the running for many insurers; two claims in that time frame make it nearly impossible to switch, says Spencer Houldin, president of Ericson Insurance Advisors, in Washington Depot, Conn.
File multiple claims and you risk having your current insurer drop you when your policy comes up for renewal. In that case, you’ll have to find coverage through a more expensive “surplus lines carrier,” such as Lloyd’s of London, which specializes in higher risks that standard insurers won’t touch.
A slew of factors can affect your rate, many of which are out of your 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. They still consider those, but increasingly, “insurers are relying on big data, meaning there can be potentially hundreds of rating factors,” he says. For example, your “insurance score” could blend your credit score with your claims history, your home’s construction, its safety features and other considerations. Or a natural disaster that stretches an insurer’s resources in one state can have an impact on the premiums of policyholders in unaffected states.
Shopping around for a new homeowners policy is one way to save money. But a better deal on the surface may come at the cost of important coverages or useful perks. Before making the jump, explore other ways to lower your rate with your current insurer.