Expert Commentary

Insurance Tips for Homeowners

With insurance premiums for homeowners policies rapidly escalating, Robin Olson provides tips to save premium dollars and reduce losses.

Personal Lines Insurance
October 2002

Many consumers have faced rapidly escalating insurance premiums on their homeowners insurance during the last few years. In some cases, consumers have experienced difficulty in procuring insurance, particularly people with several claims. Many consumers believe that they are powerless when it comes to these situations. However, there are numerous steps that homeowners can take to reduce their premium (without sacrificing coverage) and to lessen the possibility of future losses. Consumers can benefit accordingly because some insurers offer loss free discounts. In other cases, consumers with flawless or near flawless loss history can qualify for policies offering lower premiums.

Saving Premium and Reducing Losses

The following tips offer ways of saving premium dollars and reducing losses on your homeowners policy.

  1. Consider increasing your deductible to the highest one you can afford, even if the premium savings do not seem to justify it. This will serve a dual purpose of decreasing your premium and increasing the chance that your loss history will be good, since incidental losses will be paid by you and not the insurance company. A loss-free record over time saves premium dollars.
  2. Consider purchasing a monitored burglar alarm. Most insurers provide discounts to homeowners with these alarms, some as high as 20 percent. Burglars often pass by homes with prominent burglar alarm signs displayed, opting for homes without these signs. Property identification programs are another deterrent to burglary. These programs provide stickers on which your identification number is permanently imprinted. You then place these on all valuable personal property. This makes it more difficult for burglars to fence or pawn your property.
  3. Replace washing machine hoses when they show signs of deterioration, because a burst hose can cause extensive damage. Inspect the hoses on a regular basis. In addition, turn off the washing machine water faucet when the appliance is not in use to prevent leaks.
  4. Maintain your roof in optimal condition. A roof inspection on a periodic basis can identify sections that need repair and thus prevent water losses. Roofing materials containing high wind resistance features should be considered in windstorm-prone areas. Some insurers provide discounts for these types of roofs.
  5. If you experience a water leak, make sure it is properly repaired and remediated, which can include the removal and replacement of building materials such as sheetrock. For larger water leaks, a professional who specializes in remediation should be called in. These measures will reduce the possibility of hazardous and expensive mold losses down the road.
  6. If you are considering buying a home, be aware that many insurance companies offer new home discounts. Some insurers offer the highest discounts (e.g., 20 percent) on brand new homes and gradually lower discounts for several years as the home ages.
  7. Request a copy of a CLUE report on the home you are considering buying. CLUE stands for Comprehensive Loss Underwriting Exchange and this report provides a list of prior losses for a particular home. It is generated from a database of insurance losses compiled by a high percentage of insurance companies. You can normally contact your current homeowners agent to get this information on a prospective home. Be wary of purchasing a home experiencing prior foundation, water, or mold losses.
  8. Train yourself on how a fire extinguisher works. Always keep a fire extinguisher in the garage as well as the kitchen and on each floor of your home. In addition, the furnace should be inspected each fall by a licensed professional.
  9. Install and maintain smoke alarms throughout the house. It is best if the alarms are interconnected, so that if one goes off, they all go off. Test the smoke alarm once a month. These detectors should be approved by Underwriters’ Laboratories (UL) or other recognized testing laboratories.
  10. Consider purchasing both your homeowners and personal auto coverage with the same insurer. Many insurers offer home/car discounts for multiline customers, with some discounts as high as 20 percent.
  11. Shop your homeowners policy with financially strong insurance companies. Do not select a particular insurance company just because it has the lowest rate. Other factors to consider are claims handling reputation, customer service, and financial strength. Keep in mind, however, that some insurers offer long-term customer (e.g., 5 or more years) discounts. These can make it worthwhile to stay with your current insurance company if you are pleased with their service.
  12. Periodically check your credit rating. There may be cases in which an error has occurred which could negatively affect your rating. The credit bureau has procedures in place to remedy these situations.

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.

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