Quick Insurance Quiz For You:
Which of these factors may impact your homeowner's insurance rates?
1. Personal Credit
2. Pets
3. Size of Your Garage
4. Claims Filed By Previous Homeowner
5. Asking About a Potential Claim
6. All of the Above
If you are like most people, you selected "personal credit" as the only seemingly legitimate factor that could impact your homeowner's insurance rates.
WRONG
The correct answer is #6, ALL OF THE ABOVE!
Asking about a potential homeowners insurance claim
Some states, such as Texas, prohibit insurers from raising your rates if you make an inquiry about a potential claim; that is not the case everywhere.
Suppose Wile E. Coyote drops an anvil on your roof and puts a hole in your attic. You might call your insurer because you want to know if anvil damage is covered, and what filing a claim might do to your insurance rates. That's a fair question, but the mere act of asking for information could trigger a rate increase or get your homeowner's insurance policy canceled.
While inquiries are not always reported to the CLUE system, some are, and many insurers track home insurance inquiries internally. Southern California insurance broker Eugene J. Solomon says, "If you call the agent -- especially an 800 company -- and ask a question about a potential claim, you just made a claim. You lose your loss-free discount and/or inhibit the ability to get the best price. You can't 'withdraw' the claim either."
You can avoid this situation by reviewing your existing policy today, so you know if falling anvils are excluded from your coverage. Then you can decide if you want to add coverage or roll the dice.
If you want information from your insurer without being penalized, make your questions very general -- for example, "I'm comparing my policy with other options to be sure I'm getting the best rate on my homeowner's insurance and need to know if your standard policy covers anvils falling on roofs." Avoid giving your name or account number over the phone.
Other Factors That Can Impact Your Insurance Rates:
- Credit score.
- In states that allow this, insurers incorporate credit scoring into their home insurance pricing. While most consumers don't feel that their credit score has anything to do with their insurance risk, insurers can point to statistical data that indicates you're more likely to file a claim if your credit score is low. If you're paying more than you'd like because of a low FICO score, do what you can to raise it -- then shop for a better deal and compare rates on homeowners insurance quotes.
- Claims filed by the previous homeowner.
- Even if you've been a perfect insurance customer, if your home's previous owner filed homeowners insurance claims, and the cause of those claims has not been addressed, you could end up paying more. It's something to ask about when you buy a home. Request the seller to provide you with a copy of their Comprehensive Loss Underwriting Exchange (CLUE) disclosure information. If the problem has been corrected, make sure your insurer knows this.
- Number and type of pets.
- Unless you live in a state that prohibits this practice, like Michigan and Pennsylvania, insurers may charge you more or turn you down if your pet's breed is on their restricted list. Be sure to explore "pet-friendly" insurance companies, which don't deny coverage based on your pets.
- Garage size.
- Because larger garages contain more valuables, a home with a large garage could be more likely to be burglarized. More risk equals higher premiums.
- Attractive nuisances.
- Pools and trampolines pose significant risks, especially to children, and their presence will be likely to increase your home insurance premiums.
- Home business.
- If your business attracts clients to your home, you run a greater risk for being sued by your clients should they become injured on your premises.
- Your location.
- Even if your claim history is pure as the driven snow, trigger-happy neighbors can cause your rates to rise. Using the CLUE database, insurers can check out everyone near you and you may be tarred with the same brush. Other location-based factors include proximity to a fire hydrant/fire station and the incidence of natural disasters, such as forest fires.
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