Homeowners warned against cutting corners on insurance
Homeowners insurance is a necessary expense for consumers, especially with millions of Americans gearing up for yet another hurricane season.
Homeowners insurance is a necessary expense for consumers, especially with millions of Americans gearing up for yet another hurricane season.
An Associated Press report focuses on a growing trend where Americans have been trying to reduce costs during the recession by cutting back on all kinds of insurance, whether for their autos or their homes.
Even people who don’t cancel their policies outright are reported to be courting greater risks by seeking out cheaper policies that could leave them underinsured if disaster strikes. Still, Phoenix homeowner Justin Gregonis told the AP that by carefully shopping around for new auto and homeowners policies, he was able to save $1,200 a year.
“I was willing to go with whoever was going to get me the best rate and have the best coverage. Insurance in itself is just basically like playing the lottery. It’s just a gamble, but you have to have it,” the wire service quoted Gregonis as saying.
Instead of going without insurance, homeowners have some options to consider when it comes to saving money.
For example, the Augusta Chronicle recently ran a column advising consumers that they can save money on policies by having a functioning burglar alarm system as well as smoke detectors. According to the article, smoke detectors alone can cut 5 percent from the cost of premiums, while more advanced fire sprinkler systems can result in savings of up to 20 percent, as well as extra peace of mind.
The Chronicle column also noted that savings are likely by keeping the same insurer for longer periods of time and maintaining multiple policies, such as for car, life and homeowners insurance, with the same company.
People at or near retirement age are also said to frequently be eligible for discounts on their homeowners policies, while individual insurance companies may offer additional price reductions for various purposes.
The temptation to eliminate or scale back coverage is understandable considering a general trend toward higher prices this year. Part of the reason is due to an economy that has harmed the bottom lines of insurance companies across the country, but another factor is the large storms and other severe weather events that have occurred in different states in recent years.
According to a Houston Chronicle report, the Texas Office of Public Insurance Counsel was dismayed to hear that that at least one major insurer is planning to raise rates by an average of 5.5 percent across the state. The proposed rate increases will be especially felt in hurricane-prone coastal areas, especially considering the millions of dollars in claims that were paid out in the aftermath of Hurricane Ike.
The newspaper noted that residents of Harris County can expect a 15.6 percent increase in policy prices, while Galveston County residents will see prices increase by 9 percent. Another reason for the price increase is said to be higher costs for building materials and labor, along with the need for companies to spend more on reinsurance policies to cover their own financial interests.
Homeowners in another hurricane-prone state, Florida, are also waiting to see what will happen to their own policy prices in light of a recent veto by Governor Charlie Crist of legislation that would have given large insurers more power to raise rates on consumers in certain parts of the state.
While the veto may shield them from sudden rate increases in the short term, critics of the veto are warning that large companies may be more likely than ever to cease their business operations in the state, leaving homeowners with fewer options at a time when costs have generally been on the upswing.
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Posted: July 10, 2009
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