Its June 5th, and I think that maybe, just maybe, winter is finally over.  Its a bit cold and rainy today but I don’t think it will change to sleet, and that is good.  Now that it is summer, what are you doing at your house?  Are you having a wedding reception or another kind of party?  Are you doing something to generate a little extra money, like mowing the neighbor’s lawn or fixing the neighbor’s car?  Did you buy a pool or a jacuzzi, or a dog to jump in your pool or jacuzzi?

Many things happen that can make life interesting, and they can affect your insurance, as well.  Any of the things mentioned above can have an affect on your homeowners insurance, and some can lead to losses that might not be covered. 

But I didn’t expect you to know that, because you haven’t spent years going through Homeowners policies like I have.  (that means you probably have a life, LOL.)  But you should know enough that changes have the potential to cause problems, and its a good idea to call your Homeowners agent and be sure you haven’t done anything ‘rash’.  Sometimes you may have to buy some extra coverage, either as an endorsement (add-on) to your policy or perhaps even a separate policy, but that is much better than having an uncovered loss when you weren’t expecting one!

If you’re still not sure, you can always give us a call.  If we don’t know the answer, we know how to find the answer, and we also know how to find the coverage you need, if it is avaiable (not everything can be insured, you know.)  While auto policies provide pretty standard coverage, homeowners policies don’t, and it pays to pay attention.  Enjoy life, and be smart!

Some hard truths about Homeowners Insurance

Even though 2013 in Connecticut wasn’t a bad year for Homeowners losses, the trend we’ve seen in recent years of higher prices, higher deductibles, restrictive coverages and tighter underwriting continues, and appears certain to continue for the foreseeable future. You have probably already seen this affect you in the form of higher prices. I’d have to say the average premium increase we’ve seen on homeowners policy forms is over $100. But there’s more to the picture. Much more.
First, if you have a loss, you should only report losses that will cause you severe financial hardship. Reporting losses that are smaller could end up costing you more than the loss, and can even cause you to be nonrenewed by your company and/or be rejected for new insurance. A prospective client had two small claims on her policy from natural disasters here; both were for food spoilage and totaled just over $2000 for both. Yet when the client applied for new insurance, every company but one wouldn’t provide coverage. So, Myth 1 is busted: Losses that are related to catastrophes (especially if they’re small) won’t count against you. False! Companies simply no longer forgive losses….ANY losses. In a related note, if you have a lot of scheduled items on your policy, like jewelry items or silverware, you should review the items and delete smaller items. Those count as claims also, and a claim for a $150 pendant could cost you more than that in renewal rate surcharges.
To go along with that, take a look at your deductible. Half of our companies require a $1000 deductible on new submissions. If you still have a $500 deductible, you are being surcharged for the privilege. You should at least get a quote for a $1000 deductible. The credits are attractive now, and will almost certainly save you money in the long run. If you have a larger home, ask about larger deductibles; in some cases deductibles up to $10,000 may make sense.
Some people lament that a homeowners policy is being turned into a catastrophe policy. That may be lamentable, but it is true. Your goal with your homeowners coverage should be to protect against catastrophic property and liability losses. Coverage is still important, because you do want those types of losses covered as best you can. But by eliminating smaller losses and going with a higher deductible, you will minimize your costs for this ever more expensive coverage. And while it may not be what you want to hear, it is the best outcome you can attain. Questions? Call us for answers and advice.

Has your home gotten ahead of your homeowners insurance?

I’m writing this post because I’m just ending a journey with my house.  I have been living in the house I grew up in, and when I spent twenty years on the road, racing, my house suffered.  A few years ago I realized I had to do some major work, so taking advantage of the rates I refinanced, and decided to to the outside of the house (siding and windows), all three baths, and my kitchen.  I went into this with my eyes open but didn’t really realize what I was getting into!

My first contractor, who did the outside of the house and started the inside, became very ill earlier this year and had to abandon the work.  Finding a replacement contractor took all summer, and the work is just getting finished as we speak.  I’m very happy with the results, and also am pleased to contribute to the economic recovery of our Country.

Many people are doing the same thing as I.  But if you are, don’t forget about your insurance!  If you increase the value of your home, do you have enough insurance to coverr the changes?  This is especially important if you actually add on to your home in any way, be it a simple deck or a full scale addition. 

The answer is easy, of course….call us!  We’ll go through your coverage with you and make sure that if there’s a loss to your new labor of loss, you’ll be compensated for it.  As I’ve found out, doing renovations is WAY too much work to risk losing.

Let’s talk about credit!

Most consumers are aware that insurance companies use a modified version of your credit score when underwriting Auto and Homeowners insurance (and increasingly, business insurance as well).  Certainly, at least 90% of the companies we deal with use this tool.  Having top-notch credit will save you money on insurance, and if you have good credit and haven’t shopped your coverage in the past two or three years, you’re probably paying more than you need to.

However, like everything else, the use of credit by insurance is slowly changing.  To start, lets look at why insurance companies use credit.  Having bad credit doesn’t cause people to have insurance losses.  However, there is a proven correlation between credit score and insurance losses; people with lower scores, as a group, have more losses than people with higher scores.  While there is speculation as to why this is so, nobody really knows that answer and it actually isn’t an important question.  What matters is there is that ‘special something’ about higher scores that insurance companies reward with lower rates.

However, since the companies began using this measurement tool, the modification of credit scores has become big business with services like ‘freecreditscore.com’.  These services teach people how to make their scores higher so they can reap the benefits of a high score, and not just for insurance.    But people aren’t changing their underlying behavior; they are learning how to ‘trick’ the scores to make them higher.  Hence, the statistical validity of the scores that the insurance companies rely upon is slowly eroding.

What does this mean?  It means that eventually credit will cease to be the important factor it is today.  It may still be used to a lesser extent, or it may be dropped entirely.  But today behind the scenes it is already having its use diminished. 

In Connecticut, a company can only use credit when the policy is first applied for.  If a person’s credit deteriorates, it cannot be used against them upon renewal.   To get around this, companies are looking at an insured’s payment history with the insurance company as a rating factor.  The upshot is that cancellations and even late payments can be used as rating factors, and can cause renewals to increase significantly.  Conversely, insureds with good payment histories will be rewarded with lower rates.

What’s good about this is it is within your control.  There are lots of things you can do to avoid paying your insurance late.  First, most companies offer automatic payment programs; either electronic fund transfer or recurring credit card payments.  Often, companies reward these payment programs upfront with reduced premiums and fees.  Also, many companies give discounts for paying in full, up front, at a rate of savings much higher than you can earn on your money in conventional investment channels.  So not only will you save on renewal, you can save significant money up front as well.

One way to think about this is that the insurance comapnies don’t want to chase their policyholders for money, and they will handsomely reward their policyholders who are with the program.  Controlling  your credit score and controlling your payment history with your insurance company are two things that you can do with little effort which will pay you back over time better than almost any investment (other than a lucky stock pick) you can make.  Take some time and check them out.

The market is ‘hardening’. What does this mean to you?

If you read any articles about property-casualty insurance, you may see the above expression used in discussing insurance trends today.   What this means to you is that rates are going up, for both personal and business insurance.  Sometimes, they’re going up a lot.  And, as an industry we expect to see this trend continue for two to three years (or more).

How much are we talking about?  Well, most of the personal auto increases we’ve seen filed so far this year are anywhere from 6 to 10% on a statewide average.  As for homeowners, we’re seeing slightly more; perhaps 10% on average.  Business policies vary more; depending on the type of business some are going up from 20% to 50%.   And some of the individual increases can be much higher than the average.  So, what can you do about this?

First, some increase in pretty much inevitable.  The entire industry has had a number of bad years prior to this, especially the last two years with our natural disasters in the Northeast (the snowy winter, the tornado, the hurricane, and ‘snowmageddon’ on 10/29/11) (I didn’t have to look that date up; anyone in our industry has it memorized).  In addition, the national and worldwide trend in catastrophic losses (i.e. the tsunami in Japan to the wildfires out West) increase the cost of reinsurance the insurance companies must buy, and since insurance is a mechanism to spread risk, we’re all paying for these losses.  So no matter where you are or what you do, over the next few years your insurance costs are going to go up somewhat.   That bit of bad news is beyond yours and my control.

Second, there are things you can do to keep yourself in a desirable class for the insurance company, and over time (and regardless of hard or soft market) these things will lower your bills. 

If you haven’t shopped your insurance in the past three years, for the most part it would be a good idea to do so.  The rating methodology of most policies has changed and its a good idea to see if these new rating programs can lower your premiums.  This is especially true for personal auto policies.

Keep losses to a minimum, ESPECIALLY on homeowners policies.  Almost all companies are finding ways to surcharge for losses (even catastrophic ones) and if you have too many losses you may not be able to find insurance in a standard market.  Even small losses, for example glass losses on your auto policy, can cost you more than the loss in the long run.  Call your agent (before you call your company, and if you don’t have an agent, get one!) before reporting any claim, and weigh the amount of recovery versus any adverse affect the loss may have on your pricing.  Despite what some say, every single loss on your insurance record has the potential to affect your pricing.   For best results, the losses you should file are the ones you truly can’t afford to pay yourself (and this is the basic idea of why insurance was invented).

Along with the above, consider higher deductibles.  However, find out the premium savings for them and be sure they make sense.  For example, I never sell $1000 deductibles on auto policies because the savings between them and $500 deductibles are minimal, and $500 is a lot more money to fork over for a covered loss.  Ask, get complete information, and make an informed decision.

Last, don’t forget that personal (and business credit) is used on a widespread basis to rate personal lines and small business policies.  Having a higher credit score will almost certainly save you money in the long run on insurance.

Don’t think of only price; consider the quality of coverage.  Be sure you have as much liability coverage as you can afford, and enough property coverage to cover large losses.  In other words, don’t be penny-wise and pound- foolish.  Consider your insurance provider the professional he/she should be, ask all the questions you want to ask to provide yourself the level of comfort in knowing that you have made the right decision…for you.  And if you don’t get those answers, call us, and we’ll help find the answers that you want.

Don’t forget your home!

The amount of money that is spent annually on selling personal auto insuance amazes me.   Geico alone spends around $500 million each year on their ads.  But have you ever wondered why companies try to get your auto insurance, but not your home?  The reason is that auto insurance is a much more profitable line of business than home.  Some of the larger insurers don’t write homeowners insurance on a regional or national basis (like Geico, Allstate and Progressive).  Many offer you quotes but if you check the insurance company is someone else.

While we have great auto rates and can compete with any of the ‘major’ brands, we feel that homeowners insurance is the more important product.  Auto insurance is, at heart, a very generic product.  Homeowners is NOT.  There are many more optional coverages on a homeowners policy, and not having certain ones can expose you  to a huge risk of loss.

Two very basic examples are the issue of additional amounts of coverage to replace the house in the event of a major or total loss, and coverage to bring the house up to current building codes in the event of a covered loss.  Do you know if YOUR homeowners policy covers these exposures?  If so, how well does it do? 

By having a dozen different companies that do homeowners insurance, we have the ability to match the coverage to your unique needs.  And unlike the lizards of the world, we really want to insure your home, and we’ll do it with an A rated insurer who we know and have a good relationship with.  If you have doubts, don’t stick your head in the sand….call us!

The horse has left the barn, but….

Since our recent spate of storms, we’ve been getting a lot of calls from people on flood and earthquake insurance.  While the horse may have left the barn, there are still horses in the stable, and looking into these two options is still a good idea.  Here’s a little information for you.

Both earthquake and flood insurance are excluded under Homeowners policies.  Earthquake coverage can be added to most homeowners policies, but flood cannot.  Flood insurance is an additional policy.

Earthquake insurance isn’t that expensive.  It can be as little as $50 to $60 per year to add earthquake coverage.  Two notes:  earthquake has a separate, and larger deductible than your other coverages; usually a percentage of the building amount.  Also, brick homes cost more to cover because they’re more susceptible to damage.  Most companies have a moratorium on new coverage for a few days after an earthquake, but that time has passed for us on the Virginia tremblor.

Flood insurance is underwritten by the federal government, regardless of the insurance company name on the policy.  The rates are all the same, so you don’t have to ‘shop’ your flood coverage.  The policy covers a tightly defined version of ‘flood’, and does not cover contents in your basement other than a few necessities like a heating unit.   If your home is located  in a low hazard zone coverage can be as little as $200 per year.  If you want more information on flood, the best idea is to give us a call.  We can do a rate for you and give you more information.

Hopefully, we’ll be on dry, solid land for a long time to come.  But with the way the weather has been trending, its better to be educated, and prepared.