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You can get better deal on home insurance
By Jenny Callison
Enquirer Contributor, Cincinnati Enquirer Front Page Stories
March 2, 2003
Noticed an upsurge in the cost of homeowners insurance recently? The rise took
many people by surprise, because insurance rates had remained constant for a
period of several years. Unfortunately, rate increases are expected to continue
in 2003 and beyond.
The reasons for rising rates are many: a flood of catastrophic losses, increased
costs for repairs and replacements, the continued aging of U.S. housing stock
and the emergence of claims for mold contamination.
Robert P. Hartwig of the Insurance Information Institute said mold claims cost
home insurers more than $1 billion in 2001, a five-fold increase over 2000. He
also cited an increase in both the frequency and severity of catastrophes during
the 1990s. Those included Hurricane Andrew and the Northridge, Calif.,
earthquake along with wildfires, floods, tornadoes and other weather-related
disasters.
Even though catastrophic damages occur in every part of the country, mold claims
have become the major cost driver in some states. Large jury awards to property
owners have fueled the trend.
"In 2001 alone, homeowners insurers paid out $8.9 billion more in losses and
expenses than they received in premiums, the second worst year on record,"
Hartwig writes.
Said Brian Maze, spokesman for State Farm Insurance Ohio headquarters in Newark:
"As of last year, we were paying out $1.23 in expenses for every premium dollar
we took in. We've not had a profitable year for our homeowners segment since
1987 or 1988."
Homeowner rates rose an average of 9.5 percent in 2002; industry officials
expect a similar increase this year.
"Some insurance companies have seen more dramatic increases, but based on what
we've seen, a 91/2 percent increase for 2003 would be a reasonable national
estimate," said Mitch Wilson, spokesman for the Ohio Insurance Institute. "In
Ohio, we anticipate a 16 percent increase."
What can homeowners do to minimize the impact on their wallets?
Here are some tips from the Ohio Insurance Institute and Bottom Line, a
consumer-oriented Web site.
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Shop around for insurance.
Contact several agencies and insurers to discuss coverage, costs, claims
handling and service. Provide identical information to each so you'll get a
fair comparison. Then check out each company's financial ratings to determine
its stability. Ask friends and family for recommendations. Surf the Internet
for company information.
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Protect your home inside and
out from possible trouble spots.
That means keeping fire extinguishers at the ready; removing dangerous tree
branches; maintaining appliances, furnaces and fireplaces as well as your
roof, downspouts and gutters; replacing old wiring; making sure walkways,
steps and railings are safe; and discouraging crime with good locks and
security lighting.
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Ask your insurance company
about available discounts for multiple policies, new construction, monitored
security systems and for longevity - an incentive for you to remain with your
current insurer.
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Raise your deductibles. By
increasing the amount you pay at the time of a claim, you become responsible
for smaller losses. While this may mean that you shell out for some repairs
and replacements, it will lower your annual premiums and reduce the number of
claims on your record.
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Check on group coverage
possibilities. You may be eligible to join with work colleagues, your alumni
associates or a business/trade group to negotiate package rates that will be
more favorable.
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Don't over insure. The cost of
your land is included in your home's market value, but don't factor its cost
in to your insurance purchase.
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Choose guaranteed replacement
cost. This policy pays to replace damaged property or loss regardless of its
age and condition, with materials of similar kind and quality. It's a better
value long term than an "actual cash value" policy, which pays depreciated
value.
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Keep your credit record clean.
Insurance premiums are based increasingly on the policy holder's credit
rating.
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If you're in the market for a
house, check its insurance claim record by asking the sellers to get a copy of
their comprehensive loss underwriting exchange (CLUE) personal property
report. Such a report is available through ChoicePoint and costs $12.95.
Contact ChoicePoint at (866) 527-2600 or
www.choicetrust.com.
Another thing that Tristate
homeowners can do is be grateful that their homeowners policies are relatively
affordable. Even with the projected 16 percent rate increase, Ohio insurance
rates should still be at or near the bottom of U.S. averages, Wilson said.
Current industry figures rank the Buckeye state 50th out of the 51 states and
Washington, D.C., in home insurance premiums. Kentucky ranks 36th, and Indiana
ranks 41st.
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