What Causes Insurance Prices to Increase?
Consumers are feeling the sting of Homeowner insurance rate increases as they come to grips with the changing weather models the insurance industry uses to calculate the amount they charge for homeowner rates.
According to a transcript of a radio program discussing exploding insurance industry costs and the related rate increases presented by the National Public Radio in January of 2012, rate increases of the top insured’s are expected to average 10% during 2012. During the interview by David Schaper of Robert Hartwig, President of the Insurance Information Institute (IIS), the storms and weather related losses of 2011 almost certainly contributed to this year’s rates.
While there was not a single catastrophic event that can be blamed for the increase, it was actually a large number of smaller events including Hurricane Irene, blizzards, heat waves, fires, floods and droughts that occurred in significant locations.
These high loss ratios combined with the unprofitable rate of return on the company’s investment income (amount of money earned from premiums and any other investments held after the deduction of claims and benefits paid out to policy holders) leaves the industry with no choice but to make rate adjustments.
For many years, homeowners’ insurance was considered the safe side of the personal package policy. It was looked on as the solid performer when compared to the volatile behavior of the auto market, with the issues of PIP and renewal shopping. But now after 4 years of sub-par performance, homeowners insurance is forcing adjustments.
If your homeowners’ insurance policy price has risen, there are many things you can personally do to mitigate the impact.
1) Review the values of the properties and possessions you insure
Inside each insurance package are standard coverages for specific items. For example, you may have added coverage for a wedding ring or have insurance for your collection of antique spoons. Make sure these coverages are appropriate and up to date.
2) Review your deductibles
The amount you pay for insurance can be greatly affected by your willingness to assume part of the risk yourself. The deductible is the portion of the policy that allows you to specify how much of each loss you are willing to sustain.
3) Review your discounts and seek new ones
Most insurance companies offer discounts for certain behaviors or qualities that customers can control. One example is a non-smokers discount; another is a good student discount. These discounts vary from insurance company to insurance company. Work with your local independent insurance agent to identify all of them that will benefit you.
4) Maintain your credit score
Your credit history greatly affects your insurance costs. The consequences of late payments and too many credit cards can cost you hundreds in additional insurance costs.
5) When purchasing a new home, consider the insurance costs associated with it.
Many people consider the insuring cost when purchasing a car, but how many think of the additional costs that can occur with a new home purchase. Age of a home, type of roof, condition of wiring and flood zone all a major contributors to your final insurance costs.
Working together with your local independent Insurance agent, you can make a positive impact on your homeowner insurance rate increase.
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