It happens to almost every homeowner eventually. You open your home insurance renewal notice and find that your premiums jumped over what they were last year. Once you get over the initial shock, it's time to review your coverage and the changes to your premiums carefully to determine what caused the increase. When you know what the trigger is, you can work with your insurance agent to try to bring the premiums back down.
Filing an insurance claim for damage related to your house can trigger increases in your premiums. The effect of multiple claims, if any, is based on a combination of factors including whether it was a weather-related event or other act of God, if the claim reveals a new risk the insurance company didn't know about and whether you could have done something to prevent or minimize the damage. For example, if a tree falls on your house in a storm, you couldn't have done anything about it, and the event is unlikely to jack up your rates. However, if you drive your car through your garage door, or your dog bites someone, you may be covered for the claim, but you may pay the price later on.
If you add something to your house that poses an increased risk, you will likely see your rates go up. For example, if you install a wood stove, or have a pool built in your backyard, the risk of damage to the house or personal injury increases and the insurance company will want to take it out on your premiums. Other potential premium-jackers include trampolines, dogs and not keeping up with house repairs and maintenance.
Decrease in Credit Score
One of the little-known factors in how much you pay for insurance is your credit score. Insurance companies want to make sure you can pay your premiums, so they check your credit history to see how reliable you have been in the past. If your credit is bad, you will likely pay more for your insurance. If the insurer runs your credit again later on and finds out that your credit score is going south, you may find yourself with a higher premium when you renew.
Although acts of God, such as hurricanes and tornadoes, don't normally affect your insurance premiums, large-scale disasters can. An insurance company that has paid out millions of dollars in disaster claims may need to raise premiums across the board to stay solvent. A company can also raise rates in certain geographic areas that have been recently prone to disaster, such as the insurance premium increases on the Gulf Coast after several hurricanes devastated the area in the span of a few years.
Angie Mohr is a syndicated finance columnist who has been writing professionally since 1987. She is the author of the bestselling "Numbers 101 for Small Business" books and "Piggy Banks to Paychecks: Helping Kids Understand the Value of a Dollar." She is a chartered accountant, certified management accountant and certified public accountant with a Bachelor of Arts in economics from Wilfrid Laurier University.