Monday, September 27, 2010

When To File A Homeowner's Insurance Claim

In some cases it is very obvious when a homeowner's insurance claim should be filed. If there has been a fire, a burglary, or major vandalism, there is no doubt you should call your insurance company right away. But in other cases, some small claims might be best kept off your insurance records. It all depends on the cost of the damage, the amount of your deductible, and how it could affect your future premiums.

How Much Is Your Deductible?

If the amount of the damage or loss is less than or even right around the amount of your deductible, there is really no point in filing a claim. You won't really get anything out of it other than a claim on your record and a potential increase in your monthly premiums. Whenever something occurs such as damage to your home, get an estimate on the repair before you call in a claim. It might not be worth it to get the insurance company involved. It's a personal choice how far beyond the deductible amount the cost of repair or replacement needs to be before the claim is worth it. Remember that it can hurt you in the future if you make too many small claims.

Increases In Premiums And Worse

The more often you use your homeowner's insurance to make a claim, the more likely it is your rates will rise. Worse than that, if you have too many claims your insurance company may set your policy to non-renew. That means they have decided that you are too high a risk to insure any further and will not allow you to renew your policy when it expires. Although few people make enough claims for this to happen, a lot of small claims can get you there. In some cases, the insurance carrier can drop you if you make a claim with in the first 90 days of the policy period. This does not happen often, but it is up to the carrier.

Before you make a claim against your homeowner's insurance, make sure that it is worth it financially, that you will actually get something out of the claim, and that it won't hurt your future with the insurance company. Increases in rates are not unusual and will usually go back down again after a certain period claim-free. When you decide to make a claim, make sure that the increase in premium balances out against what the insurance company will pay out on the claim. If the loss is a small amount in relation to the deductible, consider paying it out of pocket rather than filing a claim.

Tuesday, September 14, 2010

I have not had a claim. Why did my insurance go up?

In the last few days I have spoken with clients that have had an increase in their yearly insurance costs. Some folks were mad, some shocked, and some where just concerned. Some of the increases where small, fifteen or twenty dollars compared to last year. Others where higher. Regardless of how much the increase was, all of them wanted to know why the increase in cost. And who can blame them? I work in this business and my insurance went up too. Add to the fact that the housing market has dropped and it can get rather aggravating.

So why the increase? First all insurance carriers change their rates during the year. They must file a rate request with the department of insurance and have it approved before they can increase rates. They have to show good data as to why the increase is justified. This is usually due to losses that the insurance carrier has experienced. They have to have money to pay out claims and meet state solvency requirements. That money has to come from the premiums they collect as well as investments that they make. Remember, a carrier is not considered solvent by the state if they can pay every policy they have out. They must have other reserves in addition to being able to pay all policy holders and operating expenses.

Second, carriers raise the amount of coverage you are getting each year just a little and that also raises your premium each year. They do this to keep pace with inflation, the cost of building materials, fees and labor. If a fire takes out your home and the homes around you for ten blocks, then there can be an increase in the cost of labor and materials to that area since the things needed to rebuild are now in high demand. Supply and demand economics in action.

Last, the rebuild cost of your home is different than the real estate value of your home. In real estate the sale of the home across town as well as the sale of the home down the street affect the value of your home. The land is part of the sale and the value of the land is included in the appraisal. In insurance we are only rebuilding the structure. The square footage, type of materials, location and other factors all influence what it will cost to rebuild your home. Carriers get this information from a variety of sources that collect rebuild data from all over the country. They look at the cost of materials, labor, type of construction, building code upgrades, county and city fees, fire department fees, type of construction and much more. The carrier then applies their formula to the information they receive from their data provider. They may add 20% for a two story home, subtract 5% for newer construction, add  3% due to crime statistics and losses in the area, etc.

The bottom line, if it is a minor increase for more coverage (i.e. $20 a year more for $45,000 more in coverage) I would not be too concerned. You can also change your deductible to lower your premium, but remember that you must have the money to pay the deductible at the time of the claim. Check to see if you are being charged a broker fee. Some of these fees can be over $100. If you have been with the same carrier for 3 years or more, see if switching carriers would help or if your agent can rewrite a new policy with the same carrier. Often times they can. This will cause the policy to be re-rated and the rebuild cost to be reset.

Remember, insurance carriers are like people in a grocery store. Some of them will buy potatoes, others carrots, some want beets, some would not buy a beet at any cost. It all depends on the carriers appetite for risk, in other words what types of customers and properties they want to insure and what type of property and claims history you have. You have options.

Friday, September 3, 2010

Have a safe and fun Labor Day Weekend!

Many people are going to travel this holiday weekend. Police are setting up DUI check points and will be on the look out. Stay safe on the roads by slowing down, giving yourself plenty of room between your vehicle and the one in front of you, and time to get to where you are going.

If you are bar-b-queuing, keep in mind that many house fires are started every year by a Bar-B-Que that suddenly flairs up due to grease, lighter fluid, cooking sprays and fat.
  • Keep children and pets away from the grilling area.
  • Keep your Bar-B-Que out from under trees.
  • Keep the Bar-B-Que away from deck rails and out from under patio roofs, awnings and roof overhangs.
  • Never leave the grill unattended.
  • Check hoses and connections on all propane and gas bar-b-ques. If you smell gas while cooking, turn off the Bar-B-Que, get everyone away form the area and call 911. Do not move or attempt to fix the grill.

Have a safe and happy holiday!