How can I save money on homeowners insurance?

How Can I Save Money on Homeowners Insurance?

save on homeowners insuranceBy Bill Hupp

In October 2010, J.D. Power and Associates released a study that found customers with homeowners insurance declined to a five-year low. According to the study, this dissatisfaction stemmed largely from increasingly poor policy offerings and substandard customer service.

But first, to borrow a phrase, consumers must make sure their own house is in order if they hope to field ideal homeowners insurance offers.

Tim Sheppard, an Erie Insurance agent in Peoria, Ill., says there are several factors taken into account when insurance agents are determining your offer.

First, agents collect personal information such as your credit history and any recent losses claimed to help determine if you are even eligible for homeowners insurance. If so, you are issued an insurance score, a credit-based points system used by companies to assess risk. Each company is different with tiers ranging from 1-30 to 1-300, but the better your insurance score is, the lower your tier level will be.

Secondly, your house itself is evaluated on four criteria. Agents will assess the age, working condition and installation quality of the plumbing, furnace, electrical wiring, and roof.

It is illegal for companies to “red-line”, i.e., discriminate against a homeowner on the basis of a “good” or “bad” neighborhood. That says territories have their own rates based on past history.

“We use our claims data to determine what territorial regions produce what volume of claims costs, ”said Leudke.

Location does play a part in the process, however, when it comes to the proximity of your home to a fire hydrant in case of an emergency.

“Fire district will be a cost determining factor,” said Sheppard. “If you live in a rural area, you might pay more.”

Town class ratings range from 1-10; one being urbanites who live down the street from an accessible hydrant, and 10 might be small-town farmers who live out in the country. There isn’t much of a difference in cost between classes 3-7, according to Sheppard, but there is a huge difference between 1 and 9, due to the considerable expense of trucking water out to fight fires.

Steven Gawlik, a Farmers Insurance agent in suburban Chicago, says that a popular misconception he sees is when people look to insure their home for the fair market value.

“Homeowners insurance has to do with reconstruction cost or replacement value. It has nothing to do with real estate market value, which is a popular misconception,” said Gawlik.

That is why full replacement value is the recommended starting point for an amount of coverage.

“There is sometimes a significant difference between the two,” said Leuke. “Especially during times like these when the market value of homes has declined in recent years.”

Besides improving your credit score, you can lower your home insurance premiums by keeping your house mechanically updated. If your credit score is already good, you can choose to pay a higher deductible in order to lower your monthly bill.

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