Any Downside to Homeowners' Ins. Changes?

[Purple Cat]

I switched homeowner's insurance last year on my mortgage holder's orders after basically discovering my then current homeowner's insurance company was engaging in a fraudulent practice. (y mortgage holder called it the same, strong term.)

 

My new homeowner's insurance company seemed great and far cheaper. This year, they raised my insurance rate by 20%.

 

I plan to call and ask why.

 

Is it industry practice to give a lowball quote the first year to get people to sign up and then escalate the rates the next year?

 

Is there any downside to changing homeowner's insurance? For 20% more a year, I find making phone calls for quotes well worth my time.

 

Thank you!

[Annie G]

I go through the same thing every year but with the same company. Every year the bill comes and it's too high. I call the agent and he says he'll work on it. Calls me back and has it to about what it was the previous year. No explanation- no lower coverage or higher deductible. We pay it and go through the routine again the next year. But it's enough of a difference to make that call worth it.

 

It's annoying. It's like when Domino's Pizza would run tv ads with a great price and then flash at the bottom that you have to ASK for that special when you call. How annoying is that? If you're running a special, just give it to me. When other stores run a sale, I don't have to remind them at the register that I want the sale price.

 

Dh and I haven't had an accident or ticket since we've been married. We've had exactly one homeowner's claim in our entire adult life. We've paid a lot of insurance premiums and I expect good service, not some run-around.

 

But yeah, companies often do give you a premium break the first year, just like cable companies do.

[Alenee]

Yes this is normal. :glare: Insurance companies know this too so it's a good thing to look around and make sure you're getting the best coverage/best rates.

 

The only downside that I can see so far is making sure you start the process at least a month before the next year's premium is to be paid, I'd even go with two months ahead. If you're too close to the due date, your insurance will request payment and receive it, then the company you switch to will request payment and receive it. Now you have a deficit in your escrow account. Trying to get that money back into the escrow account seems to me to be quite laborious. Some companies are great but others, not so much. And while this is all being worked out, your mortgage goes up until the deficit is filled.

[vontinney]

I go through the same thing every year but with the same company. Every year the bill comes and it's too high. I call the agent and he says he'll work on it. Calls me back and has it to about what it was the previous year. No explanation- no lower coverage or higher deductible. We pay it and go through the routine again the next year. But it's enough of a difference to make that call worth it.

 

 

 

In my "past life" I was an agent for a State Farm Agent here in VA for 10 years, so the experience I have is with their products and here in VA. That being said, Homeowners Insurance policies have an inflation index built into them. The idea is so that you don't become underinsured as the years go by. (The little old lady that bought her house in in 1957 and never increases her coverage will not have adequate coverage to rebuild her house at today's prices.). Since premiums are regulated by the states (meaning the premiums aren't supposed to be negotiable-to change the price you have to make a change to the coverage in some way), I'm thinking that your agent is backing down that coverage to whatever you had last year, and that's keeping your cost back to what it was last year. This is probably safe; the inflation index may be a little over-inflating if you've made no improvements, etc. Just make sure you have enough coverage to REBUILD your house...has nothing to do with the price you paid for your house or could sell the house for.

 

The downside to changing companies? You get renewal discounts if you remain claim free for XX number of years (it was 3 with State Farm when I was an agent). You also build a relationship when you stick with one company. Red flags tend to go up when someone has had a policy in effect for a year or less and they have a claim.

 

Just my .02. :)

[pageta]

We are in the process of switching companies because our current carrier (of 3+ years) DOUBLED our premium this year. I called around and compared prices and the varying factor seemed to be the replacement value of the house. The value our current carrier wanted to set it at was completely unreasonable for the neighborhood we live in - if we built a house for that price on our street, it would depreciate by 1/3 immediately when we moved in. We found another company (dealing with a local agent familiar with our street) and now have a far more reasonable replacement value that our house is insured for.

 

Our current company claimed that the premium was going up due to the tornadoes in TN and other states last year. We've had tornadoes wipe out entire towns in our county since we bought our house, but we have not had any unusual tornado activity in our state last year, so I didn't buy that line.

 

Our neighbors said their premiums had increased steeply this year as well.

[cjzimmer1]

Last year we had a huge increase (from about $500 to $800). The agent actually sent advance letters to his clients (he sells insurance for multiple companies) and let them know that this one insurance was having huge premium jumps. So we started shopping around to other places as well as exploring the options/price of increasing our deductible.

 

Because we have been with this same company for 15 years with no claims, we get a pretty hefty discount, plus another discount for also having our vehicles with them. After all the comparisons, we ended up staying with the same company because when we looked at the total for home and auto, the closest we could get would only save us $50 a year over our old insurance with the new premiums. So we decided it was not worth the hassle to switch for $50 and just paid the high premium.

 

About 2 months later we got a letter from the insurance company stating they had done an internal audit and our premium number had been calculated incorrectly. We got a check back for over $250. So in reality our premium only went up less than $50 that year and we saved quite a bit of money by NOT switching since the other companies would have ultimately been higher.

 

But it doesn't hurt to look around, I wasn't happy accepting the price increase until I realized I had been getting an exceptionally good deal in the past and even with the price jump, the price was still better than most places.

[Annie G]

In my "past life" I was an agent for a State Farm Agent here in VA for 10 years, so the experience I have is with their products and here in VA. That being said, Homeowners Insurance policies have an inflation index built into them. The idea is so that you don't become underinsured as the years go by. (The little old lady that bought her house in in 1957 and never increases her coverage will not have adequate coverage to rebuild her house at today's prices.). Since premiums are regulated by the states (meaning the premiums aren't supposed to be negotiable-to change the price you have to make a change to the coverage in some way), I'm thinking that your agent is backing down that coverage to whatever you had last year, and that's keeping your cost back to what it was last year. This is probably safe; the inflation index may be a little over-inflating if you've made no improvements, etc. Just make sure you have enough coverage to REBUILD your house...has nothing to do with the price you paid for your house or could sell the house for.

 

The downside to changing companies? You get renewal discounts if you remain claim free for XX number of years (it was 3 with State Farm when I was an agent). You also build a relationship when you stick with one company. Red flags tend to go up when someone has had a policy in effect for a year or less and they have a claim.

 

Just my .02. :)

 

I actually think he's still way overinflated the replacement cost of the house. Since it was built in 1880, it's difficult to say how much it would cost to replace. However, they have advised us to insure it for 4 times what we paid for it, which I think is way beyond what it would take to replace it here, even with the high ceilings and hardwood floors.

 

I wish I knew how to figure out how much to actually insure it for- even the contents are valued way beyond what we have in possessions. Better to be overinsured than under, but better yet to not overpay if it's not necessary.

 

Since you have experience, do you have suggestions on how we figure out how much insurance we really need on this property?