You may find ways to spend less, but beware of potential risks in today’s marketplace
By Tobie Stanger
If you haven’t filed a homeowners insurance claim in a long time—or ever—and are seeing your premiums soar, switching to another insurer sounds like a no-brainer. Even if you’ve had a claim in recent years, it’s worth shopping around to see if you can get a better price elsewhere.
But before you call an insurance agent for quotes from new companies or search online yourself, be aware that the current marketplace for homeowners insurance has made switching coverage more complex than in the past. Prices are rising dramatically, and frequently.
“With insurers raising rates so aggressively, it is more likely than usual that the premium quote you are offered today will increase when your policy renews,” says Douglas Heller, director of insurance for the Consumer Federation of America, a Washington, D.C., nonprofit consortium of consumer groups, including Consumer Reports.
That warning shouldn’t stop you from shopping or switching homeowners carriers. Consumer Reports has long maintained that loyalty to homeowners and auto insurers is overrated, and that it’s wise to compare coverage regularly. Indeed, our perennial advice to shop—and ideally to choose an insurance company that CR has rated highly—has particular resonance right now. In fact, with rates going up for both homeowners and auto coverage, it wouldn’t hurt to shop for both every year.
But there’s a right way to switch your homeowners insurance in the current market. Below we offer six tactics to make changing carriers work in your favor—and general rule if you’ve filed claims in recent years.
What’s Different About Switching Homeowners Insurance Now
Homeowners insurance prices have risen far more quickly in recent years than in the past. By one estimate, premiums could jump by an average 7.1 percent in 2023, following an unprecedented runup of 12.6 percent in 2022. That’s compared with a historical annual average of about 5 percent.
“Premium hikes are rampant right now,” Heller says
Insurers are boosting their prices mainly for the part of the policy that covers the cost to rebuild or replace your home’s structure. Companies are trying to recoup huge recent losses mainly stemming from major natural disasters like hurricanes Ian and Ida, and from pandemic-related construction-cost inflation. Investment gains, the traditional driver of insurer profits, also haven’t been that robust for the industry. So they’re seeking higher rates than normal across the country, not just for areas hit by floods, storms, and wildfires. And regulators, which in most states review those changes, are agreeing to them.
Here’s where things get tricky. The company you switch to now for its great rate might raise that premium significantly when you renew next year.
“Some of those prices aren’t as permanent as you’d hope,” says Bill Martin, CEO of Plymouth Rock Home Assurance Group, which is based in Boston and sells homeowners and auto insurance in six northeastern states.
Is that a bait and switch? No, it’s actually business as usual—but with more potential for sticker shock. While some companies have already run their big proposed rate hikes by regulators—a process that can take several months—others might not yet have put their proposed increases through that procedure. So the premium price a new company gives you may simply not reflect a major planned rate hike–and a coming hit to your pocketbook.
You can capitalize on that pricing lag as long as you’re aware it could be short-lived, Heller says. “If you can find a good rate now through shopping, jump on it, because it might not be there tomorrow,” he says. “You can always shop again if your new company’s rates jump.”
Who Should Switch Homeowners Insurance Now?
It’s definitely worth shopping if your rates have zoomed lately. “When you notice an unusual spike—anything above 15 percent—call your agent and say, ‘Let’s look into this,’” says Brent Thurman, principal owner of Keystone Insurance Services, an agency based in Orem, Utah.
But acting on a nagging feeling that you can do better elsewhere makes sense, too. “If you’ve seen rates increasing and you’ve been with the same company for a while, it’s time to shop around,” says Alaina Hixson, director of sales and operations of insurance products at Churchill Mortgage, based in Brentwood, Tenn.
Notably, a recent CR member survey found that a lot of homeowners stick to their current carrier for years, even decades. Yet among those who switched within the five-year period covered by the survey, 40 percent said they did so because they got a better price.
Should You Switch Homeowners Insurance If You've Had Claims?
While you certainly can shop for coverage at any time, you might not find much in the way of savings if you’ve made a few claims within a couple of years. Sometimes just one claim, especially if it involves water damage, can hurt your chances of finding less costly coverage. More typically, a new insurer will penalize you with higher rates—or decline to insure you—if you’ve had two or more claims.
That doesn’t mean you shouldn’t try, especially now, when premium prices vary much more than usual. “Even if you have a higher-risk claims history, there may be companies that offer a better price than your current company,” Heller says.
Be aware that not mentioning recent claims when you apply for coverage won’t keep a new carrier from finding out about them. Homeowners and auto insurance claims going back as long as seven years are shared in a database called Comprehensive Loss Underwriting Exchange (CLUE), owned by LexisNexis Risk Solutions, a private company. Insurers that pay for access can look up your claims history. (You’re entitled to a free copy of your CLUE report annually; take advantage of that to dispute entries or correct errors.)
Strategies for Switching Homeowners Insurance Now
Here are tips for saving money when you want to switch homeowners insurance companies.
• Talk first with your own insurer. Before you bolt, give your current carrier a chance to provide a better rate. Even if the price doesn’t improve for the coverage you want, you’ll now have a baseline for comparison with other insurers.
Ask your carrier what new discounts you might be eligible for. And inquire about what changes in your life or on your property could lower your premium. For instance, installation of safety and security systems like sprinklers and burglar alarms, and even quitting smoking, can reduce what you’ll pay.
In most states, credit history influences homeowners insurance prices. So if your credit score has significantly improved, ask your insurer to do a credit review. The company usually won’t initiate this without your request. “This is not necessarily an automatic part of the insurer’s renewal offer process,” says Linda Grissett, owner of LG Insurance Group, an independent insurance agency based in Marietta, Ga.
• Shop for auto and homeowners policies with the same company. Look for coverage for both at the same time, and buy both from the same company. Experts tell us this practice, called “bundling,” generates the biggest insurance discount among the many that carriers offer—bigger, in fact, than the 5 to 10 percent price break for being a loyal customer over many years. “Insurance carriers want the bundle,” Hixson says. “It makes the most sense for them to package it all together.”
With bundling, an insurer will typically offer you significant discounts for both policies—for instance, 20 percent off your auto insurance and 30 percent off your homeowners coverage. If you add in boat and motorcycle insurance—and maybe an umbrella liability policy—you might be able to save even more.
• Beat the bushes. Use a variety of channels to shop for new coverage. Contact insurers directly through their websites, or through third-party search engines like Insurify, Policygenius, QuoteWizard, and TheZebra, which provide initial quotes from a variety of insurers. (Your state’s insurance department may publish rate comparisons, too.)
Seek input from an independent agent who represents a variety of companies. That person may have a lot of flexibility in finding you a money-saving policy.
Take the time, too, to check out “direct writers” like Amica or State Farm, or entirely web-based companies such as Branch and Hippo, which employ their own agents to connect with new customers. They can pass on savings by avoiding commission-based agents. (Consumer Reports’ exclusive survey-based homeowners insurance ratings include several direct writers, and three such companies top the list).
• Switch when the savings are big. Unless you’re unhappy with the service you’ve received from an insurance carrier, don’t switch for a few percentage points’ difference in price. “It may not be worth switching for a small savings, given that you still might face a big increase in the future,” Heller says. “But most folks should be able to find savings that are more than a couple of percent of the premium if they shop.”
• Compare apples to apples. The typical homeowners policy includes coverage for the replacement cost of your dwelling and other stand-alone structures on the property, your personal property (home contents), liability coverage to insure against lawsuits, medical payments for nonresidents injured on your property, and additional living expenses (ALE) in the event you’re displaced from your home while it’s being restored or replaced. But the limits on those coverages may differ, so make sure you’re seeing the same coverage for every carrier you consider. An insurer with a low limit might be willing to increase it for an extra fee, so you can make a better comparison.
Make sure, too, that you’re properly comparing add-ons, such as a rider for pricey electronics and collectibles. And check that the deductibles are equal in policies you’re comparing.
• Vet the company. Price shouldn’t be your only consideration when switching homeowners carriers. Most insurers are covered by state guaranty funds, which pay policyholders’ claims if an insurer goes under. But if a company that’s covered by the fund falters, policyholders might not get their claims resolved in a timely way. Heller, of the CFA, says that’s more of a potential issue with smaller, regional companies. “Generally, the larger brand name companies maintain a solid financial foundation,” he says.
His advice: Check the company’s financial ratings if you’re considering a smaller, less-known company. A.M. Best and Weiss Ratings are two well-known names in the field that rate insurers on their financials. Stick with a company that at least earns an overall “A” rating from A.M. Best; you can get that information from an insurance agent or from the insurance company itself. For Weiss, which uses a different ratings structure, a “B” rating is adequate. You can go directly to the Weiss website to look up a company’s rating.
Heller also recommends that if an insurance broker suggests an insurance company that you’ve never heard of, inquire before signing up if it is a licensed and regulated insurer—and reject it if it’s not. And, he says, avoid so-called surplus lines companies. “These are largely unregulated—often foreign—insurance entities that do not participate in the state guaranty funds that pay policyholder claims if a company goes bankrupt,” he says.
Consumer Reports members can consult CR’s survey-based homeowners insurance ratings, which take into account nearly 60,000 CR members’ experiences with 24 insurance groups—about 65,000 individual experiences in all. We judge those companies for claims handling, premium price, nonclaims customer service, help and advice, and other factors that have an impact on consumer satisfaction.
Consumer Reports is an independent, nonprofit organization that works side by side with consumers to create a fairer, safer, and healthier world. CR does not endorse products or services, and does not accept advertising. Copyright © 2023, Consumer Reports, Inc.