I recently shared some information on our agency Facebook page called '5 Reasons Your Insurance Rates are Increasing'. It's certainly not a complete list, but it is a list of why's that affects everyone's rates right now, regardless of who you are and where you live. You can view it here.
So, what can you do about it? That tough answer is probably not much, but to start rethinking what homeowners insurance and auto insurance should be, make changes to your policies and try reduce your risk of a claim.
Change your thinking about what insurance should be.
I was chatting with a group of fellow agents a couple weeks ago about rates and claim filings and someone said something interesting 'everyone is used to their health insurance covering everything big and small so to a certain extent consumers expect their home, auto, RV and business policies to do the same thing. People are quick to file a claim of any size and expect it to be covered.'
While that comment was certainly off-the-cuff, there might be a nugget of truth in there. Our office regularly fields questions about unexpected medical bills and why are they so high (that is a whole other blog post!) and why do they have a balance. We expect our health insurance to pay for everything. Consequently, whether we realize it or not, we may be inclined to think that all types of insurance should do the same for us.
When you realize this, it's time to change the way you think about insurance. We used to know that insurance was to help protect our finances from truly catastrophic events and we stopped preparing for smaller inconvenient claims, instead demanding our insurance policies cover even the smallest (relatively) expenses. We are to the point that we feel we are entitled to coverage-after all, that is why we pay premiums, right?
Recently, I had a call from a newish first-time homeowner. She had just received a letter from their homeowner's insurance company letting them know they would not be renewed because they had filed two water damage claims within the past 12 months. The pay-out for each was between $1000 - $1500. For many, yes, having to come up with an unexpected $1000 is tough, but they had financial options. If you can pull from reserves or put the repair on a credit card-even high-interest or borrow from a family member, search out those options first. In these cases, do not make the call to your insurance company your first call. If you have the means, open up a Home Equity Line of Credit and keep it for those claims that are not catastrophic. If you need a good banker or lender, let me know! I have several I can recommend.
Once again, change what you think about what your insurance policy is supposed to do for you.
Make changes to your policies.
Once you start rethinking -or even to help you rethink - what insurance should do for you, it's time to think about making changes to your policies. When we expect our insurance to fix anything and everything, we start to lower our deductibles and add endorsements to them to make sure they will cover anything and everything.
Take a look at your homeowners policy. What are some coverages in there that were added by you or your agent that you probably don't need? Common small-coverage endorsements include things like 'spoilage of foods'. Usually the limit of coverage is low, $300 or $500. No one wants to restock their freezer because of food that unexpectedly thawed and went bad, but you were able to pay to put it in there in the first place. If you can tap into a few hundred dollars elsewhere, do that rather than call the carrier.
What is your limit for backup of sewer or sump-pump? $5000? If you can find a way to fund the repairs, cover it yourself. Don't call your insurance company.
What is your deductible? $500, $1000? Due to the costs of supplies and labor, there isn't much that can happen to your home that will cost under $1000? One of the easiest changes we can make to reduce our premium is to increase your deductible. Do it! Just make sure it's something you can still afford should something significant happen.
Prevent a claim from happening.
Home maintenance can be tedious and boring and hard!
Clean out the gutters. This can help minimize water damage and help prevent or reduce the damage from wildfires or your neighbor's careless behavior.
Check the caulking on your siding and around your windows. Besides helping to prevent insects from moving in, making sure your caulking is in good shape can help limit the change what a windy, stormy day push rain in around the window.
Install water sensors and freeze sensors. There have been quite a lot of advancements in the water sensor market in even the past two years. For obvious liability reasons, I cannot recommend any one brand over another, but there are a couple of different types to consider - the individual sensors you can place under your sinks, around your water heater and at the base of a toilet or the type that attaches to a main water line. some of the ones that attach to you water line advertise that they can detect excessive water flow as little as drops at a time.
There are many, many more home maintenance tasks you should consider, of course!
What shouldn't you do to help reduce your premium?
I cannot emphasize this answer enough....DO NOT REDUCE YOUR OVERALL DWELLING LIMITS. Yes, it can help reduce your premium, but usually not as much as you'd expect. It is imperative that you do not reduce this limit. Not only does this limit determine how much insurance company will pay to rebuild your home if it is a complete loss, it is used to determine what portion the insurance company will pay EVEN IN A PARTIAL LOSS. Insuring your home to it's full cost (or usually within 80% of its full cost) tells your insurance carrier that you want your home rebuilt. Insuring your home to less than 80% (usually) tells your insurance company that you only want them to pay you a portion of the cost to fix your home. (By the way, this is called co-insurance in home-owners insurance and will be a subject for a later post.)
OK, so to recap, rates are climbing for many reasons at a significantly higher rate than most of have ever seen. Homeowners can do several things to help reduce their risks and reduce their premiums over time.
Change how you think about homeowners insurance. Can you cover the unexpected costs?
Make changes to your policies and get rid of what you truly don't need and which you can afford to cover on your own.
Prevent a claim from happening in the first place or make changes that reduce the amount of damage an event can cause.
At Ferguson Insurance Services, we strongly feel that insurance agents are advisors. We are here to recommend not only the best package to cover your home, but also to protect you, financially for the long term.
If you want that from your agent, give us a call at (360) 400-0530 today or send us a message here.