Property and casualty companies offer several lesser-known credits that can lower your premium
You probably know that measures like smoke detectors, a security system, and insuring both your home and car with the same company can lower your home insurance premium. What you may not know is that property and casualty companies offer several other and lesser-known credits that may reduce your premium even more.
"Mitigating loss is a big part of who we are and what we do," says Sean Meehan, second vice president of property strategy and design at Travelers Insurance. "Yes, we pay claims. But at the same time, we want to help prevent claims, which lowers premiums in the long term."
Madelyn Flannagan, vice president of agent development, education and research for the Independent Insurance Agents & Brokers of America (IIABA), agrees: "Insurers give a discount to encourage people to be more careful and to better understand the homes they're insuring."
Don't miss these 10 little-known credits that might lower your home insurance premium!
- Gated Communities
- New Wiring
- Impact-Resistant Roofing
- No Claims
- Homeowners Association
- New Ratings Models
- New House or Renovation
- No Smoking
- High-Tech Sensors
If you live in a gated community, both you and your insurer may be glad to know that you have a layer of security separating your house from home invaders. Your insurance company might be willing to give you a credit for reducing their risk.
"That definitely falls under loss mitigation," says Meehan. "If you live in a gated community, it's a lot less attractive to a thief than a place that doesn't have that security."
IIABA estimates that consumers may receive a credit of five to 20 percent for living in a gated community.
It's a simple formula: house + old wiring = fires.
The U.S. Fire Administration estimated in a 2006 report that home electrical problems result in 67,800 home fires, 485 deaths, and $868 million in property losses in a typical year and that home wiring causes double the number of fires as electrical appliances.
So it's a good idea to get new wiring installed if your live in an older house. And if the house is old enough, you might even qualify for a new wiring credit.
"New wiring, if it's installed right, is much safer and less likely to cause any type of outages, shortages or fires," says Meehan. "It can be an insurance eligibility issue, too, because a lot of companies are not as keen to write old knob-and-tube wiring because of the fire risk. It could limit your options."
IIABA thinks you could get a 10 percent credit for new wiring.
Insurance companies are very concerned about their customers' roofs. They are impacted by wind, rain, hail, and debris from hurricanes, and once they're compromised, damage costs on a home insurance claim can increase drastically.
This is why, as more and more impact-resistant roofing materials have hit the market, insurance companies have been increasingly willing to offer homeowners rate discounts as an incentive to buy a new roof. You might also be able to get a tax deduction for the upgrade.
Be aware that your company may require an approved laboratory to test your roofing material before it will issue a credit, which IIABA estimates could range between five and 10 percent.
Remember how some auto insurance companies offer good-driver discounts to consumers who have not had an accident? Home insurance companies offer an equivalent credit.
Insurers save money when their customers don't have any claims, and they've become more willing to share some of those savings with those customers by reducing their insurance premium.
"That's a fairly new discount, but almost every year we're seeing more companies add it," says Flannagan. "People who have been claims-free for 10 years can get like a 20 percent discount. I think a lot of companies are trying to reward longevity."
And if you've been insured for a certain number of years, you might still qualify for a long-term customer discount when you renew even if you've had a claim.
According to IIABA, you might be able to snag a 20 percent credit for not having any claims.
As odd as it might seem, some home insurance companies offer customers credit (five to 10 percent, according to IIABA) for being part of neighborhood homeowners associations (HOA).
"I've heard that it's because of the security aspects of HOA communities, with things like community watch," says Flannagan. "Plus, people may have to maintain their home in a certain way in order to meet the requirements of a homeowners association's restrictions and covenants."
Interestingly, you may not even have to be a member of the HOA to take advantage of this credit. Insurers consider your house less risky simply because of your neighbors' involvement in keeping your community safe from vandals and thieves.
This one is less controllable by consumers. Real estate is a dynamic market; neighborhood values go up and down, as well as construction costs, and home insurance actuarial experts take these factors into account when doing the math involved in developing models for insurance companies to manage their risk.
Because your insurance rate is determined using these models, it follows that the rate can also change. Sometimes insurers use new models to establish lower rates that attract new customers.
"Many insurance companies have tiered rating now, and if you don't quite fit into the perfect mold because of something that might have been on your credit report, you could be paying more than necessary because you haven't cleared that up," says Flannagan. "Even your address can have an impact on it, because when you bought that policy, CLUE, or Comprehensive Loss Underwriting Exchange, reports might not have been part of the underwriting, but now they are."
Call your agent to find out how much credit you might receive in this case. You might even be able to save money by applying for a whole new policy with the same company.
Unlike auto insurance rates, home insurance rates are often lower for homeowners buying a new house or renovating their old one.
New pipes don't leak; new furnaces don't malfunction; new wiring and electrical panels don't cause fires; and new roofs, chimneys, and foundations don't result in expensive claims.
"We offer homebuyer discounts," says Meehan. "The logic behind that is, you've had it inspected by a professional and a lot of times they've detected -- and you've arranged to have an electrician fix -- all those wiring issues. Usually, when you buy a new or even an existing home, that loss mitigation has been done because of the inspection process. It gives us a better understanding of what's going on in that home."
If you're think about renovating your house, talk to your insurance agent first. He or she might be able to provide suggestions for tweaks to the project that will maximize your savings on home insurance.
IIABA estimates that you can get a credit for up to 25 percent for buying a new house or renovating the old one.
Although the number of smokers has fallen in the U.S., smoking is still the number one cause of home fire deaths in this country. It was, according to the USFA, the cause of 18,900 residential fires in 2007, which killed 595, injured 1,200, and resulted in $327 million in residential property loss.
As home insurance companies usually raise rates when a smoker is in the household, so they offer discounts (of five to 15 percent, says IIABA) for households with no smokers.
"Yes, most companies do that," says Flannagan. "With home insurance, it is one of those underwriting questions that does provide a credit for some policies in some states. It's not a rating tier, however; you don't go to a nonsmoker rate for home insurance the way you do with life insurance."
Home insurance companies tend to favor retired customers. Why? They often spend more time at home, where they can detect home hazards in progress—such as a gas leak, pipe break, or smoldering electrical panel—and stop them.
You might qualify for a mature insured credit if you or your spouse is 55 or older and retired, and your house is your permanent residence.
"There is some data out there to support that people who are retired and therefore home more are able to avoid loss or identify loss sooner," says Meehan. "During the day, if you're working and have a pipe break, you won't know it until you get home. But if there is someone home at the time, they go, 'Oh, pipe broke,' call people, boom; the loss is minimized. It's a five-minute water run versus a five- or six-hour water run. You're mitigating the loss immediately."
IIABA says this credit ranges from 10 to 25 percent.
Most of us think of a fire alarm or security system when we think about sensors keeping our homes safe. Insurance companies, though, are particularly interested in a new generation of home sensors able to detect water or natural gas leaks before they cause damage and turn into claims.
There are two types of water sensors: passive leak detectors—which are inexpensive, stand-alone devices that issue an alarm and/or flash a light when it detects moisture—and active leak detectors—which not only signal a leak but also shut off the water source. You can install active systems on individual appliances or as a whole-house solution. Gas detectors, in contrast, are mostly passive.
"Gas and water sensors are a great credit," says Meehan. "The big-box stores helped create the culture of improving and protecting your home because you can go to Home Depot and Lowe's and just buy this stuff. That drove companies to create solutions that people can self-install."
Your credit for these sensors may be between five and ten percent, according to IIABA.