Aug 4, 2021
Two numbers in your life can mean the difference between a great deal on home insurance and overpaying by hundreds of dollars, a new study says.
Premiums are rising across the board by an average of 4% in 2021, according to insurance agency Matic, but your age and your credit score might see you suffer more than others.
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Thankfully, there’s something you can do about both problems. Here’s how to find out whether you’re paying too much for homeowners insurance and lock in a better rate.
The high cost of a low credit score
In the study, Matic found homeowners with low or middling credit scores were facing much higher premiums and much higher price hikes.
Those with the lowest scores paid an average of $300 per year more than people with great credit and saw an average hike of $85 this year.
| FICO Score | Avg. premium 2019/2020 | Avg. premium 2020/2021 | Change |
|---|---|---|---|
| Less than 580 | $1,327 | $1,412 | 6.4% |
| 580-669 | $1,237 | $1,304 | 5.4% |
| 670-739 | $1,164 | $1,208 | 3.8% |
| 740-799 | $1,082 | $1,133 | 4.7% |
| More than 800 | $1,061 | $1,098 | 3.5% |
What’s the connection? Many insurers rely on credit data to set the premiums you pay, as research suggests the factors that lower your credit score (debt, late payments, collections and bankruptcies) also increase your risk of filing an insurance claim.
While a few states don’t allow companies to use an applicant’s credit score when calculating their premiums, your insurer might still be allowed to tally up an “insurance score” based on similar data in your credit report.
If you don’t know your credit score — and you should, if you want to get a decent loan or save money by refinancing your mortgage — you can check it online for free.
You have a few options to boost a lackluster score, but the biggest factors are your payment history and outstanding debt.
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Seniors struggling with high rates
While the over-63 age group isn’t paying the highest premiums — that fate falls to the 43-to-55 bracket — they are paying way more than they have to.
Matic found that seniors are overpaying by an average of $751 per year simply because they aren’t actively monitoring, reviewing and adjusting their insurance policies.
| Age bracket | Avg. premium 2020/2021 | Avg. savings 2020/2021 |
|---|---|---|
| Under 27 | $919 | $329 |
| 27-34 | $1,047 | $389 |
| 35-42 | $1,133 | $454 |
| 43-55 | $1,243 | $625 |
| 56-62 | $1,221 | $573 |
| Over 63 | $1,183 | $751 |
Some insurers do offer loyalty discounts to people who renew with them, but the savings are often miniscule compared to the benefit of shopping around for a lower rate.
One of the best opportunities for savings on a home policy is living in the home for more than 20 years, Matic says, and people who can capitalize should ensure their insurer is rewarding them properly.
And it’s not just seniors overpaying for their insurance coverage. Matic notes that even people younger than 27, who are paying the lowest premiums overall, could find savings of around $330 a year by comparing offers.
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Sigrid is a senior associate editor on the Moneywise team, where she has also worked as a reporter and staff writer.
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