Homeowners across the country are getting squeezed by their homeowners insurance premiums. That's because in an attempt to stop their financial bloodletting, home insurance companies are looking to consumers to make up the costs for record weather incidents, plunging profits and insurance fraud. While some of these factors might be out of your hands, you can take steps to avoid higher rates in certain situations.
Currently, many homeowners in Texas can expect their rates to go up. The state's insurance department recently approved rate hike requests of 3.5% to 7% (depending on the county) requested by Allstate. Farmers and State Farm also gained approval from the state's insurance department to increase rates, and Farmers customers in the Lone Star State pay an average 10% more for home insurance than last year. Georgia insurer GuideOne Insurance raised rates by an average 12% in March 2012. A majority of the other insurers doing business in Georgia sought, and won, approval for increases of 18% to 22% from the state's insurance department.
Many factors go into determining home insurance rates, including the claim history of the property owner.
"The math is simple: File multiple claims in a three- to five-year time frame, and your rates can go up," said Billy Van Jura, an independent insurance broker in Poughkeepsie, NY.
But a few surprising scenarios can also send your home insurance rates through the roof.
Here are three such scenarios you should try to avoid.
A Dirty Roof
Over time, many roofs develop black or brown discolorations and streaks, often caused by algae spores floating in the air that land on your shingles and set up camp. Another common explanation is mold or moss that grows when tree branches hang too close to the roof for water to evaporate freely, said Ron X. Gumucio, communications director for the Asphalt Roofing Manufacturers Association.
Those algae-induced dark streaks and discolorations threaten insurance rates because in the eyes of an insurance company, the condition of a roof can lead to a home insurance claim, said Brian P. Boak, a personal insurance specialist and broker in the greater New York City area. And claims cost the insurance companies money. A claim for a new roof can run $5,000 to $10,000 or more, depending on its size and type of shingles.
"A dirty roof can also dictate the quality of upkeep of the home, which also may lead to other claims," Boak said. "A good roof protects the rest of the home, and if an insurance company feels that the roof is in such a shape that it is not protecting the home they will want it fixed or will set the policy for cancellation."
Moss can be detrimental to asphalt shingles because it can cause their edges to lift or curl, increasing the chance that they'll blow off in the wind.
"The mold or moss can also get under shingles and raise them, allowing water to seep under the shingle and cause a leak," Boak said. And leaks often lead to claims for water damage to walls, ceilings, insulation in attics, property, etc.
Boak said insurance companies normally conduct a home inspection when they issue a new policy; others may conduct random inspections to ensure proper maintenance. And if they find a roof stained with algae or mold, an insurance company may send the homeowner a notice stating they need to correct the problem or risk cancellation of their home insurance policy.
Spare your rates:
Opt for a professional roof cleaning. The cost to clean your roof will
vary based on your location, size of your roof and extent of moss or mold. Or clean your roof yourself by applying a solution of chlorine bleach, trisodium phosphate (found at hardware and home improvement stores) and water.
They're great when you’re locked out of your home. But those handy spare keys could send your insurance rates through the roof, said Robert Siciliano, a personal security expert and security consultant with ADTPulse.
"If you're careless with your spare keys and they're lost or fall into the wrong hands, they can lead to theft or vandalism," he said. And that triggers the need to file a claim for damages and stolen property.
Theft and vandalism claims can be very costly.
"If you've filed more than two claims in three or so years, your rates may increase or (it may lead to) your carrier choosing to not renew your homeowners policy," said J.R. Couch, a Farmers Insurance agent in Phoenix.
Stashing a key at the neighbor's house isn't always your safest bet even if your neighbor is trustworthy. Siciliano cautions you can't gauge the trustworthiness of extended family, friends and other visitors to their home.
Spare your rates: If you opt to leave a key with neighbors, skip those with teens. Even if the teen is an upstanding kid, you don't know his friends and their penchant for hijinks. And make sure your neighbor doesn't slap an identifying label on your key.
"That way if they're robbed, the thief won't have easy access to his next target," Siciliano said.
The safest way to stash a key is to tuck one in a Realtor-grade lock box with a password-protected lock. They're relatively inexpensive, with prices starting as low as $30 on buylockbox.com.
Van Jura said he's written policies on homes that look OK but wind up on the verge of being uninsurable because of peeling paint.
"When the insurance company's inspector sees paint peeling in the siding and trim, they become suspicious about the rest of the home's maintenance," he said.
Even a little peeling paint here and there can be troublesome.
"Small amounts of typical peeling paint that happen after a rough winter or weather pattern can even link the home to poor maintenance," he said. And poor maintenance could mean higher rates or trouble obtaining coverage.
Spare your rates: It sounds simple enough, but Van Jura said many homeowners fail to touch up peeling paint visible from the road. However, doing so adds curb appeal and sends a message to home insurance companies that the house is loved and cared for.
The Investing Answer:
If your rates surge out of control, you can look at a higher deductible
to lower the premium.
"Or shop around for a new insurer who offers a lower rate," said Linda Sherry, national priorities director at Consumer Action, a national consumer advocacy group that champions the rights of consumers they say are under-represented -- such as those facing exorbitant home insurance rates.
Beware, Sherry warns. Before accepting a homeowner as a new customer, home insurance companies may do a "drive by" to make sure they're not taking on a high-risk customer.
"They may insist someone repair things on the home," she said. "If you don't perform the repairs, you could lose the new policy and be out of luck because you canceled the old one."
If you do shop around, make sure your home is in insurable condition. The same goes if you want to reduce the odds of filing a claim and footing out-of-pocket expenses like a deductible.
"It should be free of any obvious liability risks like cracked sidewalks someone could trip over, broken steps someone could fall on or missing shingles that could lead to a leak," Sherry said.