IRMI Tip of the Month: Insurance Purchasing Ideas for Homeowners

In some parts of the country, consumers have faced substantial increases in their homeowners insurance premiums, particularly in coastal areas subject to hurricanes and windstorms. Other consumers have experienced reduced coverage, moving from all risks coverage for their dwelling to named perils coverage. Still others have received nonrenewal notices due to minor losses, such as water damage claims. The following are some insurance purchasing tips that may help you save premium dollars and reduce losses on your homeowners policy.

1.      Try to increase your deductible to the highest one you can afford, even if the premium savings do not appear to justify it. This will decrease your premium and increase the likelihood that your loss history will be excellent, since minor losses will be paid by you and not your insurance company. A loss-free record over time saves premium dollars. For example, if you currently have a $250 deductible on your homeowners policy, consider increasing it to $500 or $1,000.

2.      Consider purchasing a monitored burglar alarm. Alarms have proven successful in reducing burglary rates. In addition, most insurers provide premium discounts to consumers with these alarms, some as high as 20 percent.

3.      Maintain your home in optimum condition. If a repair is needed, perform it as soon as possible. For example, loose or missing roof shingles should be repaired or replaced immediately. A home in excellent condition is much less likely to experience a loss. 

4.      If you plan to buy a home, be aware that many insurance companies offer new home discounts. Some insurers offer the highest discounts, such as 20 percent, on brand-new homes and gradually lower discounts for several years as the home ages. Additionally, some insurance companies are now offering discounts for homeowners who are age 50 or older.

5.      Request a copy of a Comprehensive Loss Underwriting Exchange (CLUE) report on the home you are considering buying. This report provides a list of prior losses for a particular home. It is generated from a database of insurance losses compiled by a high percentage of insurance companies. You can normally contact your current homeowners agent to get this information on a prospective home. Be wary of purchasing a home with prior foundation, water, or mold losses.

6.      Install and maintain smoke alarms throughout the house. It is best if the alarms are interconnected, so that if one goes off, they all go off. Test the smoke alarms once a month. These detectors should be approved by Underwriters' Laboratories (UL) or other recognized testing laboratories. Most insurance companies provide discounts for home with operating smoke alarms.

Get more personal lines insurance and risk management tips and ideas from IRMI.

Copyright 2008, International Risk Management Institute, Inc.