Home Owners insurance pricing ???

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1210sda
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Home Owners insurance pricing ???

Post by 1210sda » Thu Jan 15, 2015 7:49 pm

Hopefully there are a number of BH with a property and casualty insurance background.

Recently I received my HO policy premium notice. It was 35% greater than last year. I called the insurer (The Hartford) to ask what the reason was, and was told that the premium reflected their company's experience in my state (Texas) for the last year. (Even though I'm not near the coast (hurricanes) and not in tornado alley.)

1. Is this correct? is this the way insurance is priced ?
2. Any other fellow Texans who have had this high of an increase for 2015? What did you do? Did you switch Insurer?
3. I would like to shop around, but am somewhat reluctant to make a change from a company that I have used for many years. On the other hand......
4. My coverage A (dwelling) was very high for Hartford. They ran their program again and said the coverage was right. It's supposed to reflect the cost to rebuild in my area.
5. Other insurance companies that I have contacted in the past have a lower valuation for coverage A. Are they just "low balling" or is Hartford just too high?

Thanks in advance
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rustymutt
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Re: Home Owners insurance pricing ???

Post by rustymutt » Thu Jan 15, 2015 7:58 pm

Insurance companies go through state governments (Insurance commissioner) for price increases and reasons for them made clear. Yes they can, and do pass on losses in claim payouts. This is the time for you to get on the phone and call for rates at other providers.
Call a few and check into rates. This is how it must be done. Freedom of choice. They may want to drop a few Texas policy holders. Everything is bigger in Texas, and with the Hartford, it's getting bigger faster. Good luck finding a cheaper company.
They are out there.
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rustymutt
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Re: Home Owners insurance pricing ???

Post by rustymutt » Thu Jan 15, 2015 7:58 pm

I Removed double post
Last edited by rustymutt on Fri Jan 16, 2015 3:05 am, edited 1 time in total.
Knowledge is knowing that the Tomato is a fruit. Wisdom is knowing better than to put the tomato in a fruit salad.

Alan S.
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Re: Home Owners insurance pricing ???

Post by Alan S. » Thu Jan 15, 2015 8:58 pm

The Hartford explanation is likely a grossly oversimplified statement for a problem that has a combination of causes. In recent years insurers have realized that hurricane damages can extend much farther inland that the prior models indicated. Likewise, the price for insurance that the companies themselves purchase (reinsurance) against a large catastrophe is not under their control. Finally, there could be other losses the company is incurring as well.

You do not need to worry about the full story because there is no way to determine the real factors. A 35% increase is plenty large enough to start contacting either independent agents or direct writing companies for competitive quotes. A relatively recent pricing strategy used by many companies (eg State Farm) is to increase both base rates and credits to get to the final price. If their policy shows you are getting a huge credit for having your auto with them or for x years of loss free coverage, you will be very hesitant to move your insurance because you think these large credits will be gone for good. Not true. By shopping around, you can save plenty, and your real concern is the bottom line premium, not how the company arrived at it.

Another factor to recognize is the amount of dwelling coverage (Cov A) and how guaranteed replacement cost works. GRC coverage provides an additional amount to replace your home over and above the stated Cov A on the policy. This is typically capped at some % such as 20% or 25% of the Cov A amount. Therefore, the lower you can get Cov A as long as the additional % will replace your home, the lower your premium will be. You may also have to consider moving your auto along with the HO to get the lowest total premium.

It may help to check with some of your neighbors or friends in the area to see who they have their HO policy with. Companies go through competitive cycles in a state or local area and Hartford may have been competitive in the past, but may not be out of the ballpark now. It takes some dedication and time to thoroughly shop your coverage, but you may end up with considerable savings as a reward.

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Hub
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Re: Home Owners insurance pricing ???

Post by Hub » Thu Jan 15, 2015 9:08 pm

Very helpful Alan. I'm in TX also and have seen my premiums rise almost 50% over the past few years. Need to make a move.

dbltrbl
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Re: Home Owners insurance pricing ???

Post by dbltrbl » Thu Jan 15, 2015 9:21 pm

Insurance companies count on our inertia.Every 2 or 3 years get quotes. I was with same company for 35 years than I shopped accidentally, my premium om auto and home dropped by $ 900.00 per year. fast forward 4 years and I got quotes as my new/old company raised rates every year after first giving all good sounding reasons but I switched getting umbrella policy free and saving $ 400.00 per year. Long story short, keep shopping.

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Flobes
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Re: Home Owners insurance pricing ???

Post by Flobes » Fri Jan 16, 2015 12:11 am

I posted this tale in another thread a while ago. FYI it's a Hartford story.

Flobes wrote:I renewed my Homeowners Insurance last week. The annual bill had arrived in the mail with a 23% increase.

So I called.

After some number of minutes of explaining that the whole state gets this increase across the board, for perils that occur in only some parts of the state (but not where I live), blah-blah-blah, she said, "You are over-insured by $5000 over what we recommend."

And I said, I'm sure sarcastically, "Well how much could that save me?"

And she said, if you over-insure you are covered for up to the amount you have chosen. But if you insure per our company's guideline, we guarantee that number. And we will pay up to 50% over the insurance amount if our estimate does not cover the rebuilding of your home.

Incredulous, I reconfirmed three ways. And then asked, "What else should I know?"

And she said, I could raise my hail damage coverage from 1% of the total to 2% (the max in my state; some states you can raise to 5% she said). Since there's not been a hail event in this community where I've lived for 38 years, I said, "Great."

Poof: my rate increase is gone. And the house is a actually covered for more!

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1210sda
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Re: Home Owners insurance pricing ???

Post by 1210sda » Fri Jan 16, 2015 10:05 am

Alan S. wrote:The Hartford explanation is likely a grossly oversimplified statement for a problem that has a combination of causes. In recent years insurers have realized that hurricane damages can extend much farther inland that the prior models indicated. Likewise, the price for insurance that the companies themselves purchase (reinsurance) against a large catastrophe is not under their control. Finally, there could be other losses the company is incurring as well.

You do not need to worry about the full story because there is no way to determine the real factors. A 35% increase is plenty large enough to start contacting either independent agents or direct writing companies for competitive quotes. A relatively recent pricing strategy used by many companies (eg State Farm) is to increase both base rates and credits to get to the final price. If their policy shows you are getting a huge credit for having your auto with them or for x years of loss free coverage, you will be very hesitant to move your insurance because you think these large credits will be gone for good. Not true. By shopping around, you can save plenty, and your real concern is the bottom line premium, not how the company arrived at it.

Another factor to recognize is the amount of dwelling coverage (Cov A) and how guaranteed replacement cost works. GRC coverage provides an additional amount to replace your home over and above the stated Cov A on the policy. This is typically capped at some % such as 20% or 25% of the Cov A amount. Therefore, the lower you can get Cov A as long as the additional % will replace your home, the lower your premium will be. You may also have to consider moving your auto along with the HO to get the lowest total premium.

It may help to check with some of your neighbors or friends in the area to see who they have their HO policy with. Companies go through competitive cycles in a state or local area and Hartford may have been competitive in the past, but may not be out of the ballpark now. It takes some dedication and time to thoroughly shop your coverage, but you may end up with considerable savings as a reward.


Thanks Alan. Since I have both Auto and HO with Hartford, it gets a bit more complicated. The auto has a "disappearing deductible" which wouldn't be available initially with a new auto policy. I suppose the best way is to look at the total package. What is the cost of both Auto and HO with new insurer vs what was it with the old insurer.
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prudent
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Re: Home Owners insurance pricing ???

Post by prudent » Fri Jan 16, 2015 10:26 am

You have to shop around for a package of homeowners/auto/umbrella. The "disappearing deductible" and "claims-free discounts" are just gimmicks to keep people from switching insurers. Remember, if you don't have an accident, it isn't saving you any actual money anyway. Insurance pricing is almost like cable - your current provider won't give you as good a deal as they will give to a new customer, so sometimes you have to become someone else's new customer to get the best deal.

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1210sda
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Re: Home Owners insurance pricing ???

Post by 1210sda » Fri Jan 16, 2015 9:46 pm

If someone has a replacement value coverage on their dwelling, and then it's completely destroyed but they choose not to re-build, how much does the insurance company pay them ?

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dolphinsaremammals
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Re: Home Owners insurance pricing ???

Post by dolphinsaremammals » Fri Jan 16, 2015 11:09 pm

1210sda wrote:If someone has a replacement value coverage on their dwelling, and then it's completely destroyed but they choose not to re-build, how much does the insurance company pay them ?

1210


I would be interested to know this also for flood and homeowner's insurance. I live on the coast, and when the house goes, as it may in my lifetime, from flooding, or from some other disaster covered by homeowner's insurance, I would be crazy to rebuild.

August
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Re: Home Owners insurance pricing ???

Post by August » Sat Jan 17, 2015 9:07 pm

It depends on the laws of the state. In most states, under many homeowner's policies, you would be paid the actual cost value or ACV immediately after the loss (provided of course the loss is covered). The remainder is paid after you spend the money on rebuild or on purchasing a new home. In other states, if there is a total loss the insurance company is obligated to pay the policy limits on the building.

In almost all cases, any mortgage company you have will be included on the building payments and thus will have a say over what happens regarding repairs (up to the financial interest they have in the property.)

Flood insurance in general works the same way, but has a lot of limitations regarding coverages as well as a maximum policy limit of $250,000 for homeowners.

All of the above assumes that no co-insurance penalty is taken on the settlement, which can greatly reduce what the insurance company will pay.

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1210sda
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Re: Home Owners insurance pricing ???

Post by 1210sda » Sun Jan 18, 2015 8:40 am

August wrote:All of the above assumes that no co-insurance penalty is taken on the settlement, which can greatly reduce what the insurance company will pay.


Thank You. Could you please describe the "co-insurance penalty" ?
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scifilover
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Re: Home Owners insurance pricing ???

Post by scifilover » Sun Jan 18, 2015 10:18 am

See page 10 of the following for coinsurance...
http://www.mullerinsurance.com/resource ... alForm.pdf

Note, these policy forms are standardized to a degree. They are created by the Insurance Services Office (ISO), which is an industry financed organization. Individual companies often change some of the terms, but not this kind of thing.

The policy form defines all terms...
ACV =Actual Cash Value = Replacement Cost less depreciation
RC= Cost to replace with like kind and quality which existed prior to the loss (Note, if building code requires 2X6 and building had 2x4s, the policy would pay for like kind and quality ie. 2x4)

If the structure is not replaced, then the limit of payment is ACV less deductibles.

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jeffyscott
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Re: Home Owners insurance pricing ???

Post by jeffyscott » Sun Jan 18, 2015 1:02 pm

1210sda wrote:4. My coverage A (dwelling) was very high for Hartford. They ran their program again and said the coverage was right. It's supposed to reflect the cost to rebuild in my area.
5. Other insurance companies that I have contacted in the past have a lower valuation for coverage A. Are they just "low balling" or is Hartford just too high?


It should not matter as long as you have guaranteed replacement cost, which will cover 20-30% above whatever they have estimated. You could also get an idea of new home construction costs (excluding the land cost) in your area by looking at builders models or something.

I think I saw a 30% range when I shopped a couple years ago. All were quite a bit more that what the builder was currently charging for building our home (the builder was still listing our model on their website and I was able to make an educated guess at the full price from their listed base price and our experience when we had ours built).
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