This blog post is a result of an eye-opening conversation with my personal Insurance Broker, Scott Egelhoff, a 30 year industry veteran and partner with Insurance Agency of Ohio, who was quick to inform me all insurance companies are raising their rates significantly higher than the inflation rate– often above 20%! Did you know that Earthquakes, floods, hurricanes, ice storms, tornadoes, wildfires and other extreme weather events throughout the world resulted in an estimated 123 billion dollars in damages last year? It is important to know what criteria may adversely impact your rates and what you can do to mitigate some of the costs.
- CREDIT SCORE AND INSURANCE SCORE
Credit scoring systems, such as your FICO score are used by lenders to determine whether they will approve you for a loan and what interest rate you will be charged. The higher the score – the lower the risk. The consumer with a higher score will be rewarded with more favorable terms. Credit based insurance scores are a reflection as to how well you handle your money. While income does not factor into a credit-based insurance score, someone with a poor credit score may pay 400% or more in premiums than someone with an excellent score. Bankrate has prepared a table displaying the average annual full coverage premium by credit tier and by company. For example: Erie Insurance, one of the examples listed in Bankrate’s table, charges a customer with excellent credit an annual fee of $837, whereas a customer with poor credit would be charged $3,588 for the same coverage. As part of your annual fiscal health plan, you should order your free annual credit report, check your report for mistakes, dispute inaccurate information, pay bills on time and use credit responsibly.
The amount of insurance coverage should be based upon 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 of fracking in Ohio has resulted in an increase of earthquakes, and even though the readings may be quite low on the Richter scale, they can cause damage and the need for a claim. Most policies offer coverage for underground utilities such as electric, gas and water lines. While underground utility coverage varies and most insurance companies offer water and sewer coverage up to $10,000, Cincinnati Insurance offers coverage up to $25,000. All coverage is subject to your deductible. If you have a home with an unfinished basement, it would be prudent to consult with your utility providers to determine the monthly add on fee for their coverage, (note each utility company will have their own fee), what the limits are and what your deductible will be—this enables you to make a decision as to whether you are best served to obtain coverage from your insurance company or utility provider. Additional cost saving measures would include increasing your deductible, and/or bundling your insurance coverage, HOWEVER some insurance companies offer a bundling discount when you first sign up, and then they increase rates year over year. It is important to re-evaluate your insurance every year, if you’re not careful, you could end up paying more than you would by keeping your policies separate.
- FREQUENT FILER
If you frequently file insurance claims, you will not only pay higher insurance premiums, you are at risk of having the insurance company terminate your coverage. If you are considering a claim, evaluate the cost after your deductible and determine if you would be best served to pay for that remedy out of pocket in lieu of filing a claim.
- LOCATION LOCATION LOCATION
Where you live has a direct impact on your rates. If you live in a hurricane zone your rate will be significantly higher than if you live in a state where weather related damage is less extensive. If you live in an area with a high crime rate, you will pay more than those who live in an area with little crime. Inquire with your insurance company as to items that will help reduce your premiums, such as monitored alarm systems, dead bolt locks, fire extinguishers, smoke detectors and sprinkler systems.
- REPLACEMENT COSTS
Replacement costs are a huge factor… Material costs have increased dramatically – for example, per Nationwide Insurance, floor coverings have increased 12.5%, Drywall 18% and Concrete products 14.8% over last year. Custom homes with superior upgrades such as bricks & stone exteriors, fireplaces, granite, solid hardwood floors, slate roof, solid wood crown molding and baseboard trim and top of the line appliance packages and amenities require higher replacement coverage than other homes. It is important to evaluate your replacement cost when determining coverage as often the replacement value is significantly higher than current market value. Additional factors considered include the age of the home, vintage homes have unique features that are more expensive to replicate, and a home with a roof in poor condition will require a higher insurance premium due to risks associates with leaks and potential water damage.
Choosing an Insurance Provider to service your home insurance needs is as important as choosing the right Real Estate Broker to facilitate the sale of your farm, home, land or commercial property. Ohio Broker Direct has Sold over a BILLION DOLLARS of Real Estate, SAVING our Sellers Millions of Dollars in commissions with our For Sale By Owner Flat Fee MLS Listing options.
While all Insurance agents and Brokers are paid a commission of approximately 15% of the premium for both new customers and renewal clientele, not all agents have the knowledge or skill-set referencing the myriad of products and options available in the marketplace. Insurance agents for All State, American Family Insurance, Nationwide and State Farm only sell products that are offered within their portfolio, whereas an Insurance Broker, or agent working for an Insurance Broker, will have a greater array of options which may better suit your needs. The convenience of one stop shopping with an Insurance Broker really comes into play when you are bundling auto, business, E&O, home, life, umbrella and other policies, as the discounts can prove to be quite substantial. It is important to remember that insurance companies are not charities, they are in business to make money and it is your responsibility to do your research to ensure you are receiving the best product for the best price to meet your needs.
Joan Elflein, Broker / Ohio Broker Direct
Ohio Broker Direct & its Brokers or Associates assumes no responsibility or liability for any errors or omissions in this blog, we advise all participants engaged in the buying or selling of real estate to enlist the services of a Real Estate Attorney.