About Real Estate: Homeowners can take steps to curb rising insurance costs
Many owners are facing a huge increase in their annual insurance premiums, but savvy consumers can easily trim hundreds of dollars off the bill by making a few changes.Q. We were shocked when we received the bill for our homeowner#146;s insurance renewal and found that our annual premiums are going up nearly 15 percent, even though we have never filed a claim and our home is worth much less than we paid for it six years ago. What gives? How can we cut the cost of our coverage?
A. Millions of homeowners across the U.S. are sharing your shock, if not downright outrage, about steep increases in the cost of their insurance coverage.
One reason behind the big rise is the unusually large number of tornadoes, hurricanes, snowstorms and even earthquakes that have hit the nation this year. Insurers are trying to recoup some of the cost of the billions of dollars in cash payouts made after those catastrophes, and raising rates is a quick and effective way to do so.
Another problem is that, while home values in most areas have dropped sharply, the actual cost of labor and materials needed to rebuild after a fire or other disaster has continued to climb between 5 percent and 10 percent in each of the past several years. Because premiums are tied to local rebuilding costs rather than to property values, you cannot afford to skimp on coverage simply because your home is worth less, or you#146;ll run the risk of being underinsured if you must make a claim.
Still, there are a number of ways to keep the cost of your homeowners insurance under control. The easiest is to call at least three or four other insurance companies and independent agents to see if you can arrange comparable coverage for less. Just make sure the companies that provide the quotes are financially stable and have a low #147;closed complaint ratio.#148;
The complaint ratio essentially measures a particular company#146;s number of consumer-filed grievances against the industry#146;s overall average, and is a good indicator of how well insurers treat their policyholders when a claim is made. You can find information about most insurers#146; financial status at the website operated by the nonprofit National Association of Insurance Commissioners, www.naic.org.
You might need to increase your coverage if you have recently completed a major home expansion or made some expensive upgrades. But also realize that some costly improvements can actually lower your annual insurance premiums.
For example, replacing old cast-iron pipes with copper #8212; or an old roof with a fire-retardant new one #8212; can prompt an insurer to reduce charges because it lowers the company#146;s risk of a costly payout. So can upgrades to a home#146;s electrical system, or the simple installation of a new furnace.
Most insurers also will offer at least a 5 percent discount if you have working smoke detectors in your home, and another 5 percent or 10 percent if you have a security system. Combining all of your other needed insurance, such as your life or automobile policies, with the same insurer also could save some cash.
Some insurers even offer discounts to those who work from home or are retired, figuring that the policyholder will be around the house more often and thus reduce the chances of a burglary or fire.
Finally, consider raising the policy#146;s deductible. Increasing your deductible to $1,000 from $500 could slash more than 20 percent from your annual premiums, said a representative for the Insurance Information Institute (www.iii.org), and also will discourage you from making the types of small but frequent claims that could jeopardize your other discounts or perhaps even lead to the cancellation of your policy altogether.
Q. Do credit bureaus like Experian and Trans-Union actually decide who gets approved for a loan, or is that decision left up to the bank?
A. It#146;s entirely up to the bank or other creditor.
Credit bureaus collect information about a consumer#146;s payment history, outstanding debt and the like, and then update the data about once a month. Lenders review that information when an application for a mortgage or other credit is filed, and then decide whether the person qualifies based on the creditor#146;s own in-house standards.
Q. We want to buy some new furniture, and our newspaper is filled with advertisements from retailers who are offering some really good holiday deals on things like sofas and tables. Is this the best time to buy them?
A. Probably not. Furniture prices usually drop even lower in January, when most retailers start to clear showroom and warehouse space for the new annual models and patterns that traditionally begin to arrive the following month.
Furniture design doesn#146;t change much from year to year, so you could save even more money if you#146;re willing to wait another 30 or 60 days to buy the 2011 models at their closeout prices.
Ÿ For the booklet #147;Straight Talk About Living Trusts,#148; send $4 and a self-addressed, stamped envelope to David Myers/Trust, P.O. Box 2960, Culver City, CA 90231-2960.
$PHOTOCREDIT_ON$© 2011, Cowles Syndicate Inc.$PHOTOCREDIT_OFF$