Doug Heller
Doug Heller, insurance expert with the Consumer Federation of America, an association of non-profit consumer organizations. ConsumerFed.org
Many insurance policyholders are facing rate hikes in excess of 20%, and others are being dropped by their insurers entirely. The rising costs of repairing homes and vehicles is partly to blame…and climate-related risk is a growing concern across much of the country—the Southeast’s hurricanes and the West’s wildfires get most of the attention, but hail (in the West and Midwest) and tornadoes (in the Midwest and South) cost insurers as well.
Reality: There’s no way to avoid rising insurance costs, short of selling your home and vehicle or reducing coverage. And if your insurer pulls out of your region, there’s nothing you can do to prevent your policy from not being renewed.
But some factors that affect premiums and nonrenewals are within your control. You already know some things you can do to chip away at insurance bills. Examples: Install home-security systems, deadbolt locks and fire-suppression devices to qualify for discounts on homeowners insurance…drive conservatively to avoid tickets and accidents to get lower auto insurance rates…and periodically shop around for new coverage. But these aren’t the only options.
Here are eight beyond-the-obvious factors that affect insurance—from our Bottom Line expert Doug Heller…
Your insurer may be spying on you from the sky. Homeowners insurance companies are purchasing data from third-party companies that use drones or satellites to examine policyholders’ properties from above. When these insurers don’t like what they see, they increase premiums or don’t renew coverage. Worse: Homeowners often are not given the opportunity to correct the problems…or even to point out that the insurer’s interpretation of the aerial image was flawed. Example: Skylights occasionally are misidentified as missing shingles.
What to do: If there are damaged or missing shingles on your roof or there are overhanging tree branches, correct these issues before your insurer gets around to spying on your property. If there’s an old trampoline or treehouse in your yard, have it removed—insurers consider these liability risks. Declutter your yard—one homeowner’s policy was not renewed because his insurer considered the auto parts visible in his backyard a sign of a poorly maintained property, even though he was restoring an old car.
If your policy is not renewed: Reach out to your insurer to ask why and whether you can correct the issue—but also start shopping for new coverage immediately. It is likely that your insurer won’t back down, and if you don’t have a new insurance policy in place when your current one expires, your mortgage lender likely will “force place” you into very expensive coverage that provides sub-par protection or, worse, protection only for the lender and none for you, even though you pay for it.
There’s something troubling about your swimming pool. Insurers consider swimming pools liability risks. You might decide that having a pool is worth paying higher premiums and facing elevated risk for nonrenewal. But insurers tend to consider pools with diving boards particularly dangerous.
What to do: Consider removing the diving board or skipping one altogether when you have a pool installed.
The age of your home might be costing you money. Old homes have higher insurance rates than new ones because they have components that can lead to claims, such as roofs that might leak or wiring that might cause a fire.
What to do: If you’ve had the roof or wiring in your older home replaced, let your insurer know. The age of these key components, not the age of the home itself, is primarily the reason for the higher insurance rates.
Your car might be reporting your driving habits to your insurer. You’ve probably heard about those auto insurance programs where policyholders agree to let insurers digitally monitor their driving so they can earn attractive rates. Troubling: Insurers have quietly begun digitally monitoring policyholders who never signed up for this surveillance. If your car connects to the Internet, it might be reporting how fast you drive and other details to the automaker, which might sell that information to companies that sell it to insurers. It recently came out that General Motors has been doing this—and GM certainly is not alone.
What to do: Use the website VehiclePrivacyReport.com to get a sense of what information your vehicle collects about you and with whom it is shared. Don’t enroll in “connected car” services such as GM’s OnStar unless it is important to you. Skim through your vehicle’s infotainment system menus and/or app for a setting that lets you opt out of sharing your info with third parties. If you can’t find this, enter the make of the vehicle and the phrase “opt out of data sharing” into a search engine—this might lead you to opt-out instructions.
Your professional and educational milestones affect your insurance rates. People in blue collar jobs tend to pay higher rates than white collar workers…and people in entry-level positions tend to pay more than those in management. Also, the more advanced your degree, the lower your rates are likely to be.
What to do: If you are paying more because of your job or education, shop around—not all insurers consider these factors. If you get a promotion or go back to college, contact your insurer and ask if updating this in your file will lead to lower rates. Similar: Your age affects your rates—teenage drivers and older drivers pay more than middle-aged drivers. You can’t change your age, but insurers vary in terms of when they start to raise older drivers’ premiums—it can be as early as age 65 or as late as 75. That makes it all the more important to shop around for coverage every year or two when you’re in your late 60s and early 70s—your current insurer might be holding your age against you, but another insurer might not.
Some used Hyundais and Kias have an unwelcome insurance problem. Nearly five million Hyundais and Kias built in the 2011 through 2022 model years lack modern theft-deterrent technology. Result: They can be expensive to insure. Even though software upgrades and aftermarket security devices reduce the odds that these cars will be stolen, insurers don’t consider the matter resolved.
What to do: Before buying a used Hyundai or Kia from this era, contact your insurance company to ask how much it would cost to cover the vehicle.
Small insurance claims can take a big insurance toll. You already know that filing claims—even small ones—can lead to higher premiums and increase the odds that your policy won’t be renewed. Less well-known: In most states, simply calling your insurer to ask about the possibility of filing a claim can have this effect, even if you decide not to make the claim. In fact, your insurance claims and claim inquiries are likely to be added to your Comprehensive Loss Underwriting Exchange (CLUE) report, a file insurers access when you apply for coverage—and that means making or asking about claims with one insurer can lead to higher quotes from other insurers as well. This puts policyholders in an unfair predicament—they pay premiums so they can file claims under the terms of their insurance policies…but taking advantage of this right could end up costing them money.
What to do: One way to minimize this insurance gotcha is to increase your deductibles. Having higher deductibles means that you won’t be tempted to make small claims, because your policy won’t cover them. Raising a policy’s deductibles lowers that policy’s premiums. Of course, higher deductibles also can lead to more out-of-pocket expenses.
Your credit score affects your insurance rates. Credit scores play a major role in determining home and auto insurance rates—if your credit score suddenly plummeted, your premiums could literally double. Exceptions: Insurers in California and Massachusetts cannot legally consider credit score when setting rates or deciding on homeowners or auto coverage…and insurers also are restricted from considering credit history for auto insurance in Hawaii and homeowners insurance in Maryland. A handful of other states also have some protections in place against the consideration of credit scores, but the vast majority do not.
What to do: Monitor your credit scores even if you don’t expect to apply for a loan anytime soon. Periodically request free copies of your credit reports from the major credit bureaus—Equifax (Equifax.com), Experian (Experian.com) and TransUnion (TransUnion.com)—and correct inaccurate information.
