Find Home Insurance Quote | Customers are often upset when their homeowner’s insurance premium increases even when they've never had a claim. We understand how frustrating this is and wanted to share some reasons why.
AGE OF HOME
Your house is a year older. Just like health and life insurance, premiums can go up based on the age of the home because claims are more likely the older the house is and can be more expensive to fix.
Most insurance companies give what’s called an “Age of Home” discount or surcharge. Basically, the newer your home is the larger the discount. As the home ages each year the discount decreases and can eventually turn into a surcharge which increases your premium.
COST TO REBUILD
A traditional homeowner’s insurance policy will pay the cost to rebuild your home if it is destroyed in a covered loss. The cost to build a new home fluctuates based on the cost of labor and building materials like wood, metal, and cement. For example, Engineering News-Record reports a national increase of 3.2% for construction costs, 3.7% for common labor, and 3.5% for cement. All of this must be taken into account in the premium.
The cost of fraud. Just like shoplifters increase everyone’s costs of items in a department store, claims that are inflated or fraudulent increase costs to the insurance company and that is reflected in the premium. Let’s say a homeowner has a water damage claim and someone recommends inflating the replacement cost to take care of the deductible or to also add money to replace an item damaged in an unrelated event. Whenever a policyholder submits a claim like this, it increases the cost of insurance for all policyholders. According to the FBI, “The total cost of insurance fraud (non-health insurance) is estimated to be more than $40 billion per year. That means Insurance fraud costs the average U.S. family between $400 and $700 per year in the form of increased premiums.”
So, what steps can you take?
Talk to your insurance agent. He or she may suggest you increase your deductible (the amount you pay if you submit a claim) in exchange for a lower premium, review your coverage amount, or shop around for a new carrier.
Be careful though, if your premium increase isn’t substantial you might not want to jump ship. Most companies will take into consideration how much history you have with them if you need extra time to make a payment or if you have other special circumstances. It might be worth the slight increase in premium to keep your relationship!
Another way all of us can keep premiums down is to discourage fraud and inflated claims. Most people are honest and want to do what is right. However, many times, without considering it thoroughly, they think, “everyone does this” or “the insurance companies are robbing them blind.” But insurance fraud hurts us all and when you stand up and say, “that’s not right”, most people agree and follow their conscience.
What suggestions do you have for reducing premium?
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