Plan ahead for homeowners insurance
By Sandra Block
USA Today
Even in the best of circumstances, buying a home is a process prone to last-minute snags. There's a lien against the property. The closing costs are higher than you expected. The sellers need more time to move. The sellers move on time, but leave their pet iguana in the bathtub.
There are things you can do to cut the premium on your homeowners insurance, from the Insurance Information Institute: Raise the deductible: Boosting your deductible to $1,000 from $250 could cut premiums by up to 24 percent. Shop: Premiums vary sharply. Get at least three price quotes. Consolidate: Ask your auto- or life-insurance company if it also provides homeowners coverage. Some will reduce premiums by up to 15 percent for two or more policies. Don't overinsure: Exclude the value of your land when deciding how much coverage you need. Ask about discounts: Some insurers offer reduced premiums for homeowners who have modernized their homes. If you are 55 or older or have installed a burglar alarm or sprinkler system, you might also qualify for a discount. Group coverage: You might find lower rates through group insurance offered by alumni, professional or business groups. — USA Today
Most glitches can be resolved before the moving truck pulls up in your driveway. But increasingly, home buyers are encountering a more serious problem that may delay or derail the sale: They can't get homeowners insurance.
How to lower the cost of premiums
Stung by stock market losses and expensive claims, insurance companies are hunkering down. Some are refusing to issue a "binder" — a tentative agreement to issue coverage, which is needed to close a home purchase. Others are issuing binders, then canceling them after determining the buyer presents too much of a risk.
Some have stopped issuing new policies in a state or region. The problem is particularly acute in Texas and California, where insurers have paid millions in mold-related claims.
You can't get a home loan without homeowners insurance. Here's how to avoid an insurance crunch:
• Start early. In the past, home buyers could line up insurance with a phone call a few days before the sale closes. Now, real-estate agents are encouraging customers to start looking as soon as their offer is accepted. In most instances, that gives you a few weeks to work out any problems before you go to closing, says Cathy Whatley, president of the National Association of Realtors.
• Check your credit. Many insurers review an applicant's credit history before issuing a new policy. Insurance companies say people with bad credit are more likely to file claims. If your report is tarnished, insurers might refuse to cover you. To avoid rejection, order your credit report from the three major credit bureaus and check it for errors.
• Get a CLUE. When considering your application for insurance, insurers will review claims filed against the home you want to insure. If the owners filed a lot of claims in the past five years, you may be rejected, particularly if the claims were for water damage. Insurers view those as harbingers of mold claims.
You can avoid unpleasant surprises by getting a copy of the home's Comprehensive Loss Underwriting Exchange report, which shows the history of claims against the property. Only the owner of a home can get its CLUE report, so ask the seller to get one for you, says James Lee, chief marketing officer for ChoicePoint, which operates the CLUE database.
When reviewing a home's CLUE report, insurers try to determine whether the problem that caused a claim has been repaired, says Jeanne Salvatore, spokeswoman for the Insurance Information Institute.
They also look for patterns that suggest a risk of future claims, she says. A history of break-ins, for example, might indicate the home is in a high-crime area. Some insurers will charge higher premiums for that home, or refuse to cover it.
Insurers also will look at your history of filing claims, so it's a good idea to order your own CLUE report before you apply for insurance. That way, you'll be able to correct any errors. You can download a copy at www.choicetrust.com. The cost is $12.95. To order one, call (866) 527-2600.
• Plan to pay more. Home buyers who can find insurance are paying a lot more for it. In some parts of the country, insurance premiums have more than doubled.
For that reason, you should factor in higher insurance costs when deciding how much home you can afford, Salvatore says.
