Although almost all homeowners have homeowners insurance, not everyone is familiar with all the intricacies of this type of insurance. Here are five little-known facts about homeowners insurance.
1. Credit Scores Can Affect Policies’ Premiums
Insurers take many factors into account when calculating insurance premiums. Most homeowners are aware that their claims history, home’s construction and the coverages they select impact how much their policy pays. Not everyone, however, realizes that their credit score can also impact their policy’s rates.
Your credit score may seem unrelated to insurance, but it’s been demonstrated that lower scores correlate to higher claims rates. A 2003 study by the University of Texas opens in a new window showed that drivers with lower credit scores were more likely to file claims against their auto insurance policies, and a later report from the Federal Trade Commission opens in a new window also found a link between people’s credit and the risks they represented to insurers. The link is true with homeowners insurance as well as auto insurance.
Because lower credit scores have been correlated with higher claims rates, most insurers charge people with bad credit higher rates. People with poor credit may end up paying 91 percent more opens in a new window for homeowners insurance than those with excellent scores. (Insurers aren’t allowed to consider credit scores when underwriting policies in Massachusetts, Maryland or California.)
2. Some Insurers Offer Discounts for Being Close to a Fire Hydrant
Another factor that many insurers consider is how close a house is to a fire hydrant or fire department. Being near one, obviously, makes it easier for firefighters to respond to a potential house fire. Since fires account for a large number of (and expensive) homeowners insurance claims, many insurers will provide discounts for factors that reduce the risk of fire — such as being close to a fire hydrant or fire department.
3. Certain Dog Breeds Cost More to Insure
Most insurance policies offer liability coverage for dogs, but some exclude certain breeds. Pit bulls, chows, great Danes, rottweilers and Alaskan malamutes are a few of the breeds that many policies exclude. If a policy doesn’t provide coverage for a breed, coverage may be available through a rider — but these add-ons increase the policies’ cost.
4. Insurers Can Only Cancel Polices for Specific Reasons
In order to protect homeowners, the reasons that insurers can cancel policies for are closely regulated. Insurance companies aren’t allowed to cancel policies just because they want to or the policy is no longer profitable for them. Policies that have been in effect for over 60 days can typically only be canceled for the following reasons:
- Premium payments haven’t been paid
- The policyholder committed fraud
- The application contained misrepresentations or lies
- The property is abandoned or allowed to fall into a state of disrepair
(Insurers can elect to not renew policies for other reasons.)
5. Claims Might Be Re-Opened After They’re Paid
Insurers typically send payments for claims after an adjuster has come to assess the damage. Sometimes, however, damage isn’t immediately noticed after an incident. In some cases, it might not be noticed until months later.
When additional damage that was caused by an incident is discovered after a claim is paid, the claim may be re-opened. In most cases, the additional damage must be reported within a year of the incident. (The exact requirements and timeframes for re-opening claims that have been paid vary from state to state.)
To learn more about homeowners insurance, contact us at Marine Insurance Agency. As insurance professionals, we’re familiar with the many intricacies of homeowners insurance, and we’re always happy to share our expertise.