Home insurance is one of the inescapable expenses of being a homeowner, and it serves a useful purpose: if you own a home long enough, the odds are that you're going to eventually have a water leak, a break-in, storm damage, or some other loss that insurance will cover. However, such instances will hopefully be few and far between, and in the meantime, you don't want to pay more for homeowner's insurance than you have to. But if you're shopping for a new home or just new insurance and your rates seem higher than they should be, it can be hard to tell what's driving them up. Take a look at a few things that may be responsible for high homeowner's insurance rates.
Your Credit Score
You know that your credit history can make it harder or more expensive to buy a home, but can it make your homeowner's insurance more expensive as well? As it turns out, the answer is a resounding yes. In fact, studies show that homeowners with fair credit will pay 29% more for homeowner's insurance than homeowners with excellent credit. Poor credit increases the disparity to 91%.
If you live in California, Maryland, or Massachusetts, you're in luck. These states have laws in place banning the use of credit scores to determine insurance rates. Florida is another good state for those with less-than-perfect credit—although there are no regulations in place preventing Florida insurers from considering credit scores, most insurers in that state don't consider the information. If you live anywhere else, though, you should work on getting your credit score down before shopping for homeowner's insurance. Request a free credit report from each of the three major credit reporting bureaus and work on paying down debt, keeping your credit card balances low, and paying loan installments and credit purchases on time.
Your CLUE Report
Don't have a clue what a CLUE report is? You're not alone. But it's important to learn, because if your insurance rates are high for no discernible reason, your CLUE report may hold the answer. CLUE stands for Comprehensive Loss Underwriting Exchange, and it's a database used by insurance companies to track claims that you've made. It can also track claims made at a particular property, so a previous homeowner's claims might affect how much you pay for home insurance.
Like your credit score, the weight given to the information on your CLUE report depends largely on where you live and which insurance company you use. However, just one homeowner's insurance claim on your CLUE report can raise your rates by as much as 21%. You should also know that insurance agents sometimes note mere inquiries about damage on your CLUE report, which can also hike your insurance rates. Queries about damage are sometimes treated as an indicator that damage has occurred, even if you never file a claim. If you need to ask about a hypothetical damage situation, make it clear to the agent that there is no actual damage.
You have a right to look at the CLUE report on any property that you own, so if you suspect that information on the report may be causing your insurance rates to rise, ask your insurer for a copy. You can also dispute erroneous information on the report, which may help bring your rates back down. Unfortunately, if the information in the report is correct, there isn't much you can do to improve your CLUE report, other than not filing any unnecessary claims. The information on the report only goes back seven years, so eventually your report will improve.
If you're shopping for a home, ask the owner of the home you're considering to pull their CLUE report so that you can see it (only a property owner, insurer, or lender can access the report.) This can give you a clue whether insurance rates for that property will be high. It may also give you a picture of what kind of problems the house might have or whether storm damage or thefts are common in the area, so it's a useful piece of information for a home buyer to have.
Every insurance company is different, so don't be afraid to shop around. If you've done everything you can do to bring your rates down and they're still too high, another company that sets their rates differently may be your best solution. To get started, contact a representative from a company like Harris Insurance Services.