NEW YORK (CNN/Money) -
If you're a homeowner, you know what a pain homeowner's insurance can be. Rates have been on the rise for several years, with premiums rising an average of 7.4 percent last year and expected to continue to rise this year.
But price isn't the only issue anymore. These days, carriers are limiting coverage in ways that may surprise you. Worse yet, 2.5 million households lost their homeowners coverage from 2001 to 2003. And nearly a third of those who did were unable to find other coverage, according to a survey by Independent Insurance Agents & Brokers of America (IIABA).
What can you do if you're shopping for homeowner's insurance. Here are today's 5 Tips.
1. Buyer beware.
If you're shopping for a new home, get a home disclosure report from your agent or the seller's agent. Find out about any problems the home has had early on.
Insurance companies are wary of water damage and any indication of structural damage to the home. Big problems could make it impossible for you to get coverage.
You can also get a CLUE report on the property you're going to buy. See if there have been any claims filed for damages to the home. If there were multiple structural or other damage claims filed by the previous owners, it can affect your home's insurability. You can get a CLUE report at the Web site, www.choicetrust.com.
As you look over your home insurance papers, look for language relating to "guaranteed replacement." In recent years, some carriers have redefined or eliminated this provision, which used to ensure that if your home was destroyed, it would be rebuilt. Some companies have capped payouts to a percentage of your policy's face value.
2. Maintain good credit.
A bad credit report could keep you from getting the coverage you need at a price you can afford.
CNNfn's Gerri Willis shares five tips on homeowner's insurance.|
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Madelyn Flannagan, vice president of education & research at the Independent Insurance Agents & Brokers of America (IIABA) says, "It's important to maintain good credit because many in the insurance industry view your credit report as an indicator of future potential losses."
It may not be fair, but bottom line, it's up to you to check your report for errors and keep up with your payments. You can get copies of credit reports by contacting the three major credit bureaus: Experian, Equifax and TransUnion. They all have Web sites and toll free numbers. Experian's is www.experian.com, or call 1-888-397-3742. Equifax's is www.equifax.com, or call 1-800-685-1111. TransUnion's is www.transunion.com, or call 1-800-888-4213.
If you find errors, complain in writing to the credit bureaus and provide documents supporting your claim. For more IIABA recommendations on how to minimize rate increases and non-renewals check out www.iiaba.org.
3. Pick a winner.
Once you're ready to shop, it makes sense to find some consumer-friendly companies. Consumers Reports has a very user-friendly list of insurance companies who've gotten high marks from consumers.
|Amica Mutual Insurance†||95†|
|Chubb Indemnity Insurance†||89†|
The group surveyed over 14,000 people who filed claims between January 2000 and April 2003. The scores in the table reflect respondents' overall happiness with the their company's claims handling and settlement. A score of 100 means that readers were completely satisfied, a score of 80 that they were very satisfied.
For more information on these companies, see below.
4. Choose your battles.
- Amica Mutual Insurance. The Web site has 1-800 numbers for various insurance units like auto, life & home. Available in all states but AK and HI.
- Auto Owners Insurance. Don't be fooled by the name, they offer home, life, car and business insurance. Available in AL, AZ, CO, FL, GA, IA, IL, IN, KS, KY, MI, MN, MO, NC, ND, NE, OH, SC, CD, TN, VT, VA & WI.
- Cincinnati Insurance. Available in all states except AK, AR, AZ, CA, CO, CT, DE, HI, ID, LA, MA, ME, MS, NJ, NM, NY, NV, OK, OR, RI, SC, SD, TX, WA, WY
- Chubb Indemnity Insurance. Available in all states.
- USAA. The 7th largest homeowners insurance company in the nation. Available in every state to the military community only.
Once you're in your own home, you'll want to be careful about making claims on your policy. IIABA says insurance companies track how many you file. Frequent claim activity, even for the small stuff, can be grounds for non-renewal.
A good rule of thumb is if your claim exceeds your deductible by $200 or less, consider not filing the claim. While you'll be paying for the loss out of your own pocket, the expense will probably be less than the premium increase you could suffer later.
This course of action will also help keep your claim record clean and allow you to stay insured for major or catastrophic losses. Remember that insurance is for big stuff, not everyday home maintenance.
5. Get a CLUE.
After you've owned your home for a while, you'll want to check your CLUE report.
Just as the banking industry tracks your credit history with credit reports, the insurance industry tracks claims by address. Insurance companies use information from "claims history databases" like Comprehensive Loss Underwriting Exchange (CLUE) to help gauge the insurance "risk" of potential clients.
Scout for errors that may affect your insurability. CLUE says its Personal Property reports contain up to five years of personal property claims information like loss dates, types of loss and amounts paid. The company says more than 90 percent of insurers writing homeowners coverage provide claims data to its Personal Property database.
To get a copy of your clue report and get information on how to dispute errors in it, go to www.choicetrust.com, the Web site of CLUE's parent company. CLUE reports aren't free. Prices range from $9.00 to $19.95 depending on how detailed you want the report to be.
Something else that longtime homeowners should be mindful of is just how much their home has appreciated over the years. If your home's value has soared but you haven't changed your coverage, you could be underinsured if an emergency occurs. Also, be sure to inform your insurance agent when you make improvements to your home.
Gerri Willis is a personal finance editor for CNN Business News. Willis also is co-host of CNNfn's Open House, weekdays from Noon to 12:30 p.m. (ET). E-mail comments to email@example.com.