This blog post, ” How the Economy Affects Your Home Insurance Rates & Tips to Reduce Costs Now,” stems from an enlightening conversation with my personal Insurance Broker, Scott Egelhoff, a 30-year industry veteran and partner with the Insurance Agency of Ohio. Scott informed me that all insurance companies dramatically increased their rates in 2024. Forecasters have stated they will continue raise them further in 2025. Did you know that earthquakes, floods, hurricanes, ice storms, tornadoes, wildfires, and other extreme weather events worldwide often exceed $100 billion in damages each year? It is crucial to understand what economical risk factors may adversely impact your home insurance rates and what you can do to mitigate some of the costs.

A credit-based insurance score, also known as an insurance credit score, is a numerical value used by insurers to determine the likelihood that a policyholder will file a claim. This score is derived from your credit history and helps assess the risk you pose to the insurer. The higher your credit-based insurance score, the lower the perceived risk, which can result in lower insurance premiums.

Here are some key points about credit-based insurance scores:

• Purpose: Helps predict the likelihood of a policyholder filing a claim, giving insurers an idea of the risk and how much to charge for coverage.
• Calculation: Calculated using information from your credit report, such as payment history, outstanding debt, length of credit history, types of credit in use, and recent credit inquiries
• Difference from Credit Scores: Similar to traditional credit scores (like FICO), but specifically designed for insurance purposes, focusing on factors predictive of insurance risk.
• Impact on Premiums: A higher credit-based insurance score can lead to lower premiums, while a lower score can result in higher premiums. Poor credit can significantly increase your insurance rates.

Understanding your credit-based insurance score and maintaining good credit can help you secure better insurance rates and reduce your overall costs.

1. Credit-Based Insurance Score: Credit scoring systems, like your FICO score, are used by lenders to determine loan approval and interest rates. The higher the score, the lower the risk, and consumers with higher scores are rewarded with more favorable terms. While income does not factor into a credit-based insurance score, someone with a poor credit score may pay significantly more in premiums than someone with an excellent score. For example, in Ohio, a customer with excellent credit pays an annual fee of $1,390, whereas a customer with poor credit would be charged $2,775 for the same coverage. Order your free annual credit report, check for mistakes, dispute inaccurate information, pay bills on time, and use credit responsibly.
2. Insurance Coverage: Your coverage should be based on replacement cost, which is often higher than current market value. Additional costs include riders for art, guns, jewelry, high-spec entertainment systems, solar panels, and more. Earthquake, flood, and hurricane insurance also require additional riders and fees. The increase in fracking in Ohio has resulted in more earthquakes, making low readings on the Richter scale potentially claim-worthy. Most policies offer coverage for underground utilities, with water and sewer coverage up to $10,000 (or up to $25,000 with Cincinnati Insurance). All coverage is subject to your deductible. If you have a home with an unfinished basement, consult your utility providers to determine the monthly add-on fee for their coverage, the limits, and the deductible. This way, you can decide whether to obtain coverage from your insurance company or utility provider. Re-evaluate your insurance annually to avoid overpaying, and consider increasing your deductible and/or bundling your insurance coverage.
3. Frequent Filer: Frequently filing claims leads to higher premiums and possibly coverage termination. Before filing a claim, evaluate the cost after your deductible and consider paying for the remedy out of pocket.
4. Location, Location, Location: Your location impacts your home insurance rates. Some states also restrict or forbid insurance companies from using credit reports or credit-based insurance scores. Ohio allows credit scoring for homeowners insurance, with certain restrictions. While your credit score impacts your rates, other factors like location, home type, and claims history are considered. Living in a hurricane zone or a high-crime area results in higher rates. Check with your insurance company about items that can help reduce costs, such as monitored alarm systems, deadbolt locks, fire extinguishers, smoke detectors, and sprinkler systems.
5. Replacement Costs: Replacement costs are a significant example of how the economy affects your home insurance rates. Material costs have increased dramatically, and homes with superior upgrades require higher replacement coverage. Evaluate your replacement cost accurately, as it’s often significantly higher than current market value. Factors like the home’s age and unique features also affect premiums, with vintage homes and homes with poor-condition roofs requiring higher premiums.
6. Choosing an Insurance Provider: Selecting an insurance provider for your home insurance needs is as important as choosing the right real estate broker. Ohio Broker Direct has sold over a billion dollars of real estate, saving sellers millions in commissions with For Sale by Owner Flat Fee MLS Listing options.  
7. Insurance Agents and Brokers: While all insurance agents and brokers earn a commission of approximately 15% of the premium for both new and renewal clients, not all agents possess the knowledge or skill set to navigate the vast array of products available. Agents for companies like Allstate, American Family Insurance, Nationwide, and State Farm are limited to selling products within their own portfolios. In contrast, an insurance broker or an agent for a broker has access to a broader range of options. Bundling policies like auto, business, E&O, home, life, umbrella, and more is advantageous for discounts. Remember, insurance companies are in business to make money. Your credit-based insurance score matters; research and ensure you receive the best product at the best price.

In conclusion, understanding how the economy affects your home insurance rates and taking proactive steps to reduce costs can make a significant difference in your financial well-being. By maintaining a good credit-based insurance score, evaluating your insurance coverage needs, being mindful of your claims history, considering the impact of your location, and accurately assessing replacement costs, you can better manage your home insurance expenses. Additionally, choosing the right insurance provider and leveraging the expertise of an experienced insurance broker can help you navigate the complexities of the insurance market and secure the best possible coverage at the most competitive rates. Remember, staying informed and proactive is key to protecting your home and your finances.