Whether you are purchasing a home for the first time or are renewing an old insurance policy, it is important to understand how you can secure the best rates for your homeowner's insurance. These four tips will show you how to get and keep a low premium rate.
1. Don't File Claims for Small Losses
Before offering you insurance premiums, your insurance agent will likely check both you and your property in the national CLUE (Comprehensive Loss Underwriting Exchange) database to see if there have been any claims filed in the past. This is because, statistically, if an insurance claim has been filed on a house once, it is likely that another one will be filed for it in the future. Also, even if you filed a claim on a different property, then you are seen as a riskier homeowner than someone who has never filed an insurance claim. Even if you have already secured a low premium, if you live in any state except Texas, then your insurance company can legally raise the rate of your insurance premium during the next review period after you file an insurance claim.
For this reason, for small damages that you can cover out of pocket, you may want to skip submitting a claim to your insurance company. However, keep in mind that if you pay out of pocket without submitting a claim, the expenses you pay will not count against your deductible, leaving you to pay your full deductible if a larger emergency occurs.
2. Improve Your Overall Credit Rating
If you have a poor credit score, you may be offered insurance premiums that are 91% higher than those with excellent credit. In order to decrease your premium, you should focus on keeping your credit score as high as possible. This can be done by paying your bills on time, limiting your number of credit cards and amount of debt, and leaving good debt on your credit report. Good debt is debt that you have paid off, preferably on time. Many people think it is better to get all debt off of your record as soon as possible; however, leaving debt that you have paid off on your record shows that you are fiscally responsible.
3. Understand Your Policy Thoroughly
When you suffer damage to your property or a liability issue, then your first instinct may be to call your insurance company to see if the issue will be covered before you make a decision about whether you want to file a claim or not. However, in many states, inquiries about claims are also reported to the CLUE database. Although this practice is slowly being eradicated in most states, it can lead to a higher insurance rate if a provider sees that you have made multiple inquiries about potential claims.
To avoid this, it is important that you fully understand your policy when you receive it. Make sure to take the time to discuss your coverage with your agent when you first get a policy and every time you renew it. You should ask about several hypothetical situations so you have a better idea of what will happen if you actually need to file a claim. This will save you from having to make an inquiry when damage occurs to your home.
4. Negotiate for a Higher Deductible
A higher deductible almost always results in a lower premium. However, many companies will cap your deductible based on the amount they think you will be able to cover during an emergency. This is often based on your credit score. In some cases, if you can show that you would be able to cover a higher deductible, such as having the amount of your deductible in a bank account or a cash deposit that will be maturing soon, then your insurance company will consider offering you a higher deductible and the accompanying lower premium.
Contact an insurance agency like Harris Insurance Services to learn more.