May 14, 2010
Hurricane season starts June 1st -- a good time to review your homeowners insurance policy to make sure you're protected from the weather, as well as other risks.
• Coastal states are bearing the brunt of premium increases. In 2009, premiums for renters and homeowners insurance rose by 3.2 percent overall. In many coastal areas, however, increases have been higher in recent years. Rates in Louisiana rose an average of 11.4 percent from 2006 to 2007.
WHAT TO DO: Shop for better options. In moving to a new company, you might lose the "loyal customer" discount that can be 10 percent of the premium. But if that base premium is relatively high, you could still save money by making a switch. When CR surveyed subscribers in 2008 about their homeowners insurance, they found that among those who switched to a new carrier in the prior four years, more than half paid less for coverage. When shopping look into the financial ratings of any company you're considering.
• Percentage deductibles for some risks are becoming common. In many states, homeowners now have two deductibles: one for their main policy and another for a high-risk peril such as a windstorm or a hurricane. Florida requires a hurricane deductible of two percent for homes valued at $100,000 or more. Policyholders can opt to go higher, up to 10 percent of the insured value.
WHAT TO DO: If you must take a percentage deductible, set aside savings toward it in your emergency fund. Switching to a higher flat-dollar deductible can reduce your total costs over time.
• Lower home prices spur interest in less coverage. With property values depressed in many regions, homeowners may want to reduce the limits of their homeowners insurance. Here's why that's unwise: Homeowners coverage isn't based on your home's market value; it's based in part on the cost to rebuild your home if it were destroyed, a figure related to local building costs.
WHAT TO DO: Check your coverage with an agent to make sure you've got the right amount. Your home's replacement cost equals the cost of labor and materials to rebuild, generally excluding the foundation.
• Credit scores are becoming more of a factor in underwriting. Your risk of experiencing financial trouble is increasingly central to how an insurer determines your premium. In most states, even customers in good standing -- and those with good credit histories -- can face much higher premiums based on their "credit-based insurance scores."
WHAT TO DO: Pay your bills on time, and check your credit reports periodically for mistakes and correct any that you find.
• New coverage targets modern-day concerns. A dozen major carriers will sell identity-theft coverage as a stand-alone policy or endorsement (with other extras) to your homeowner's policy. Depending on the carrier, the coverage might reimburse you for expenses incurred if your personal information is compromised. Those expenses may include lost wages, notary fees, and legal fees.
WHAT TO DO: According to Consumer Reports Money Adviser, you'll probably fare just as well monitoring your credit reports and regularly changing passwords, among other ID-theft precautions that cost nothing to implement.
