We all know about rate increases with an insurance company but here are two little known reasons your Homeowners Insurance policy keeps going up.
1. Age of Dwelling Discount.
Since Hurricane Katrina, there have been insurance companies entering the Louisiana Homeowners Insurance market. A majority of these companies have an appetite for new homes usually built in the last 5 years.
If your home was built in the last 5 years, your homeowners policy was heavily discounted but the rate will not stay the same.
You have a disappearing “Age of Dwelling” Discount.
Basic example using the year of policy 2016.
Your house is built in 2009.
The base premium is $1500 with a 25% credit because your house is 7 years old (built 2006)
Each year, your house is one year older and your discount diminishes.
At renewal for 2017, your discount would be 15% because your house is now 8 years old.
The reduced Age of Dwelling discount would increase the premium.
2. Inflation Guard Endorsement
On some Homeowners Insurance policies this is an optional endorsement you can add so the replacement cost of the house increases with inflation and the cost of materials to rebuild a house.
On most of the new homeowners insurance companies they automatically include the inflation guard endorsement.
Usually 1-3% increase of the dwelling amount will result from an Inflation Guard Endorsement.
You purchase a policy for the dwelling amount of $250,000.
Each year the policy dwelling amount increases 3% at renewal (could be more check your policy)
2016 Dwelling amount 250,000
2017 Dwelling amount 257,500 (3% increase)
2018 Dwelling amount 265,225 (3% increase)
On the Two Examples above you made no claims and the company didn’t take a rate increase but a policy purchased for $1500 for 250,000 of dwelling coverage three years ago is now $1,789 and the house is insured for $265,225 instead of $250,000.
What are your options?
1. There is nothing you can do to combat the Age of Dwelling Discount because your home is getting older every year.
You can get a quote with another Homeowners Insurance company with a lower quote premium to see if you can get back to where you were when you initially purchased the policy.
2. You can contact your agent and request a reduction in the dwelling coverage amount back to the value of when you purchased the policy.
Only do this if you believe the replacement cost of your house has not increased since you purchased your policy.
3. Request a copy of the inspection report from your insurance company or insurance agent. The majority of companies we represent will inspect a home after we bind the policy. The report will include
- estimated square feet
- construction type (brick or frame)
- one or two story
- estimated age of roof
In the report you should also see a recommended replacement cost value
What do I need to provide to the insurance company to confirm the replacement cost of my house?
You can ask your agent to provide you a Replacement Cost estimator report.
Most Insurance companies give access to their agents to run this replacement cost indicator report for their clients.
If this report confirms the original replacement cost, you should be able to reduce your dwelling coverage back to the original requested amount.
If your Homeowners Insurance company or your agent refuses this request, this may be a good time to check the current homeowners insurance market to determine you are getting the best rate currently available in your area.
TIP: If you have been insured with the same insurance company for over 5 years you should review the estimated replacement cost with the insured value on the policy.
Sometimes we see an inflated insured value on the policy due to the inflation guard and you are really paying too much for your homeowners insurance.
Or it is possible construction materials and the cost to rebuild your house has exceeded the insured value on your policy and you are under insured.
It is important you have a good agent to discuss your policy coverage and review it.
If its been over 5 years since you talked with your agent, it may be time to do a policy review.
If you would like me to review your current homeowners coverage to determine if you are still properly protected, give me a call at 504.348.3131.
My name is Tim D’Angelo and I would like the opportunity to talk with you about your insurance protection.
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