How To Minimize Insurance Surcharges

As you may know, credit scores and claim history are big factors in determining your rate for auto and homeowners insurance.

What you may not know, is that when we quote rates for our clients on a new homeowners policy, if you have two or more claims, most markets will decline to offer coverage. Homeowners policies generally charge for prior claims, which can include the past 3 to 5 years depending on the company. The surcharges that you’ll experience vary by the number and type of claims made. Weather claims and catastrophic losses are usually not treated the same as theft or fire claims.  While auto policy renewals generally only charge for “chargeable” accidents, new auto policies can surcharge all prior claims including glass, towing, comprehensive, not-at-fault accidents, and claims that were reported but closed without payment.

In short, if you’re shopping for a new policy, carriers may look back and add surcharges for any claim you have made in the past 5 years. Because of this, we often suggest higher deductibles for home and auto coverage and deleting physical damage coverage for older vehicles.

Here are some suggestions for how you can minimize these surcharges and keep your future premiums low:

• Consider raising your homeowners deductible. If you have a $500 deductible, change it to $1000 at your next renewal ($1000 is the minimum new business deductible for most carriers). If your home is worth $350,000 or more, consider a $2500 or $5000 deductible. Put the savings away and only use your policy for catastrophic events.
• Set your comprehensive and collision deductibles to $1000. If you have an expensive car, consider a higher deductible; some carriers offer auto deductibles up to $5000. If you can afford a $75,000 car, you should be able to self-insure the smaller claims.
• When a vehicle is 7 years old or more, it’s time to consider dropping collision coverage. This will vary based on mileage, condition and value. After 10 years, consider dropping both comprehensive and collision coverage. However, you won’t be able to drop these coverages if your vehicle is financed.
• For younger drivers, consider older cars. New drivers often have fender benders. A major comprehensive or collision claim on your auto policy, coupled with the driver being a minor, may lead to a cancellation at your next renewal. Assign older vehicles with less coverage (i.e. no comprehensive or collision coverages) to these drivers, and self-insure the losses.
• Report claims to the agency, not the company. Many claims do not need to be reported to your carrier. Putting them on the record may increase your premium, especially when applying for new coverage. We can advise you on how to best proceed with a claim.

These tips are just a few ways to reduce the price of your premiums. Avoid surcharges that may compromise your current coverage or getting coverage in the future from a different company.

Updated July 21, 2023