Money Management - June 2003

Homeowner’s Insurance Costs

And How to Control Them

by David Dahan

In the face of a rising number of catastrophes and increasing claims of toxic mold, insurers have continued to raise rates for homeowner’s insurance policies. With costs to Nevada homeowners escalating, it is important to heed advice for contending with rising insurance rates.

Losses for insurers that provide homeowner’s policies have increased dramatically in recent years. Mold claims, which were virtually unheard of a few years ago, cost insurers more than $1 billion in 2001. As a result of multi-million dollar settlements, many companies eliminated coverage for mold damages altogether.

Rates for homeowner’s insurance policies have been escalating for about two years. Increasing costs for home repairs, as well as a number of natural disasters and other catastrophic events, have unfortunately triggered insurers to raise rates. The general downturn of the economy has also added to the trend of rising insurance rates. The current state of the insurance market does not necessarily favor consumers, but unreasonable rate hikes can be avoided. Here are some suggestions:

Don’t file claims for minor damages or repairs that you can take care of yourself. In the current insurance environment, filing a claim will most likely result in a rate increase.

Consider raising your deductible. Raising your deductible to $1,000 or more could save you as much as 20 percent on your premium.

Practice regular home maintenance and repair. This may help you avoid costly repairs down the road.

Fix leaks and check for necessary plumbing repairs. Water leakage is the main culprit for black mold, which can cost thousands of dollars to clean up.

Homeowners can often save money by equipping homes with smoke detectors and by installing certain home security devices.

Ask your insurance carrier for discounts. A wide array of discounts are available – you just need to ask for them.

Maintaining good credit will also help you save on auto and home insurance.

Don’t buy more coverage than you need. In most cases, you don’t need more than the cost of rebuilding your home.

Choose an insurance agency that works with a number of carriers and can offer several options for coverage with competitive rates.

The effects of increasing homeowner’s insurance rates could extend beyond the consumer, further damaging the state’s economy. While increasing insurance rates have not affected home sales in Nevada, many fear steep increases could harm the real estate industry. Mortgage lenders require coverage for the value of a home. Difficulty in finding affordable insurance coverage might hamper the home-buying process and could result in fewer home sales. This could, in turn, have a major impact on the local home buying market.

Analysts expect the cost for insuring homes to increase by approximately 9 percent in 2003. While this increase translates into a relatively reasonable $40 for the average homeowner, many policyholders are justifiably concerned about higher insurance costs. Some insurance brokerage firms have made obtaining reasonable rates for customers a top priority. By doing this, they are enhancing the well-being of their customer base, which indirectly will affect the economy and overall spending habits.

When it comes to insurance rate increases, it’s important to be wary and to be educated in the proper areas to avoid any unnecessary hardships.

David Dahan
David Dahan is CEO of Orgill/Singer & Associates Investments & Insurance, an independent, full-line insurance brokerage headquartered in Las Vegas.