5 Warning Signs Your Homeowners Premium May Increase
In this final post of our month-long initiative focusing on insurance and how it impacts the roofing community, we are looking at why your homeowners insurance may increase. Insurance companies amend rates constantly in hopes of perfecting the balance between premium acceptance and claim payments; make sure you can prepare yourself for policy premium increases. Here are the Top 5 warning signs your homeowners premium may increase, even if you have not had a claim.
- Large Hail or Windstorm in Previous 12-24 months – If a large storm goes through a specific territory and the insurance industry decides it needs to amend the rate for that area, the rates usually will not go up right away. There is usually a 1- to 2-year delay until after the storm has passed. The actuarial department will assess the overall landscape, claim payments, denial, and benefit usage, and analyze the cost to the company over the years of policyholder history. This is ever ongoing, and takes time to implement. Rating actions are heavily scrutinized internally. The final determination may or may not result in an increase in rate but it will take time from storm to implementation. At that point, if rate action is needed, policies will only be rerated during the renewal period. A policyholder may not see an increase in their policy until over two years from when a particular storm went through town.
- Changes in Exposures – Harsh weather is one of many factors that go into rate increases (as mentioned above) but other types of claims will also play into your rate. Has there been an increase in claim activity in your neighborhood? Insurance policies attempt to estimate how often claims will occur in your area, but sometimes area factors can change your rate. It can be a personal change (if a car was parked in a driveway and is now primarily parked on the street) or it can be a societal change (if a once small suburban neighborhood is now growing in size); either way, the rate will go up.
- Poor Home Maintenance – Insurance carriers are becoming more proactive in their assessment of risk. Even if every home in a given area looks the same, what happens with that specific home can be wildly different. Outside insurance adjusters are not only factoring in what damage a home has been through but also evaluating the policyholders. Is the home messy? Is there an excessive amount of garbage around? Are there bugs? Are there leaks? Is there a lack of in-home maintenance? Is the foundation showing cracks? All these questions can be ascertained by a visual inspection. Ultimately they may cause an insured’s rate to increase.
- Improper Roof Care – An adjuster doesn’t even have to go into a policyholder’s home anymore; he can simply drive by and look at the exterior. The biggest thing they look for in a “drive by” is how well the roof is performing. In a previous post, I mentioned that insurance policies can have a rate decrease if a new roof is installed. The opposite is true as well; insurance carriers can increase rates or cancel policies if roofs are in poor or failing conditions. Insurance carriers would prefer not to cover a home when a roof looks like it is about to fail. Policyholders are known to get letters from insurance carriers mandating they either get a new roof or be declined coverage based purely on their existing roof. Roof and gutter maintenance should be done regularly to ensure that individual policyholder rates are not increased.
- Internal Insurance Carrier Changes in Risk – Insurance carriers will typically send written documentation when one or multiple benefits in a homeowner’s policy are changing. Sometimes, the changes are so subtle that a homeowner misses them and believes they have coverage when in fact they do not. The insurance company has re-evaluated their own exposures and has made a determination that, in order to offer a similar cost for the existing policy, coverage has to be amended or removed. Ultimately, the company’s risk appetite has transformed from an increase in losses (or potential losses)to liability exposure or an executive decision to alter company guidelines. I recommend a homeowner shop their insurance coverage before accepting the changes to their existing policy.