Reduce Your Insurance Costs – Improve Your Credit Score

Like it or not, your credit score probably affects how much you pay for financial products and services than any single characteristic. Use of consumer credit information extends well beyond the traditional uses of loan underwriting.

Of the 10 home and auto insurers we represent, 8 use “insurance scores” – a variation of a consumer credit score – as a rating factor. Another considers credit information when underwriting. Only 1 of the 10 does not consider credit information.

Insurance companies have proven a strong correlation between higher credit scores and lower insurance claims. Most state regulators – including Maine’s – have agreed that insurers may offer lower rates to people with better scores – and higher rates to those with lower scores.

You Don’t Have to be Rich to Have a Good Credit Score
Contrary to popular opinion, income and savings are not factors in determining your credit score. It’s about managing finances: paying bills on time, being prudent with debt, and building credit.

A wealthy person who doesn’t use credit cards, has no car loan or mortgage, but who is sloppy about paying monthly bills probably has a worse score than someone of modest means who manages and pays debt prudently.

Tips to Improve Your Score

1. Get a copy of your credit report. They are available free once a year from each of the three major credit reporting agencies. However, you must use this web site rather than the individual agencies’ sites to get the free reports.

Check your report for errors, omissions and potential identity theft. Make sure that all your loans are shown; you want to show that you are good at managing all your accounts. Paying bills on time is critical to a good score.

2. Manage credit cards properly. If you don’t pay off your card every month, pay it down to less than half the maximum available balance.

Taking out new credit cards is a good way to drag your score down. Don’t take on a new card unless the interest rate A LOT lower and you plan to pay it off within the year.

3. Don’t cancel a credit card once you’ve paid it off – this surprises most people. Cut it up if you don’t want to use it, but don’t cancel it. Your credit score rewards longevity and restraint in using available credit.

4. If you plan to apply for credit in the near future, don’t use credit cards for groceries and other routine payments. Credit rating companies only see the balance on the day they check. They don’t know if you pay it off every month or not.

Of course, other factors -claims history, for example – affect your insurance costs. A clean driving record will lower your auto insurance costs; buying more coverage, or insuring a more expensive car will increase them. A larger home, or one without a nearby fire hydrant, will be more expensive to insure. But insurance score can play a surprisingly significant role in the price you pay for insurance. Managing yours can help you to control your costs.

For more information, call Noyes Hall & Allen Insurance.

EVERY Property is in a “Flood Zone”

Many people fail to purchase flood insurance when they buy a property. Some believe that their Maine homeowners insurance will cover flood damage. It won’t. Others think that because their lender hasn’t required them to buy flood insurance, they’re not in a “flood zone“.

Every Property Can Sustain Flood Damage
Some properties are more flood-prone than others, of course. Ocean- or river-front property is more likely to flood than homes located on higher ground. The good news is that it’s relatively inexpensive to buy flood insurance if you live in a low risk area.

What is a Flood?
The word “flood” conjures up images of rising rivers and streams, or ocean storm surges. Those are floods of course, but so are: snowmelt runoff; dam breaches; heavy rains; and flash floods. All of those things can and do occur in Maine. Here’s a list of past flood disasters in Maine, which doesn’t include some notable recent events.

Remember the heavy rains of August, 2008 that flooded several southern Maine areas? Many property owners in the affected areas had never experienced flooding before.

Mandatory 30 Day Waiting Period
Let’s say you’ve heard weather forecasts of heavy runoff from snowmelt. Concerned about your property, you call to buy flood insurance to protect your home. The government knows that many people who would buy such coverage may be in imminent danger. That’s why they require a 30 day waiting period for coverage to take effect – unless you’re buying property and coverage is required by your lender.

That means now is the time to think about buying flood coverage – not when the river’s rising.

Flood insurance is only available through the National Flood Insurance Program, a government program managed by FEMA, and available through virtually any Maine insurance agencyContact Noyes Hall & Allen Insurance for a quote. For more myths and facts about flood insurance, download this brochure.

Outdoor Oil Tanks and Homeowners Insurance

Maine’s DEP recently issued a statement warning homeowners who have outside oil tanks to take steps to prevent leaks. During a recent Channel 6 news piece, Peter Blanchard from the Maine DEP explained that snow and ice dropping from the roof can cause the nipple to break between the oil filter and the tank.

Approximately 80% of Mainers heat their homes with oil. It is unknown how many of these oil tanks are outdoors. The DEP recommends installing a shield over the filter to protect it from damage. They’ve even produced a video about it. This is more than a good idea; homeowners with outside oil tanks are required by code to have a protective shield.

Blanchard points out that his department responds to almost 500 oil spills every year. Cleanup costs can run from $10,000 to over $100,000. By contrast, oil tank covers cost about $75.00.

What if the worst happens? Does your homeowners policy cover you? Our agency has not had such a claim, so we don’t have any “real world” experience to report. However, most homeowners policies exclude pollution damage unless it’s caused by one of 16 named perils. “Weight of ice and snow” is only a covered peril for property located INSIDE a building. That doesn’t sound promising. “Falling objects” is another covered peril. Would an insurance company consider snow dropping from a roof to be a “falling object”? Who knows for sure. The New York Insurance Department is equally unsure. So, we agree with the DEP’s advice: $75.00 worth of prevention is worth $100,000 of cure.

For more information, call the DEP at 1-800-482-0777.

Believe it or Not: An Insurance Company with Empathy

Kudos to Progressive Insurance for reaching out to Kentucky ice storm victims via email. In addition to offering help in reporting and tracking claims, Progressive asks clients to call if they need extra time to make a payment in the wake of the storm.

In addition to sending emails, Progressive utilizes a special catastrophe web site that their customers can access for information about their policy, their claim, and other FAQs.

We applaud Progressive for this response, and our thoughts go out to midwesterners dealing with the ice storm. We’ve had our share here in Maine, and we know that this is a very challenging time. Stay safe!


Attention Renters: $0.50 a Day Makes All the Difference

This morning’s news brings the latest report of an apartment fire rendering families homeless and with only the clothes on their backs. Unfortunately, these things happen too frequently. Even more unfortunately, people who rent apartments often do not buy renters insurance. These policies start at about $150 per year, and can prevent a bad situation from becoming devastating.

A Renter’s Policy Covers a Lot More Than You Think

 including the costs of:
  • Replacing your “stuff”. If you bought Replacement Cost coverage, your insurance will pay for you to replace your belongings with brand new replacements. No depreciation is applied.
  • Temporary housing. While you’re displaced, your policy covers the increased expense of housing, food and other living costs.
  • Liability. Sometimes, the negligence of tenants can cause a fire to the building. A renters policy could protect you against resulting lawsuits.

Apartment FireYour Landlord’s Insurance Doesn’t Cover You

Too many people fail to buy renters coverage because they think that their landlord’s insurance covers them. This is absolutely false. Protecting yourself for about $0.50 seems like a pretty good deal, doesn’t it? It’s literally a case of “better safe than sorry”.

For more information, check out our web site or the Insurance Information Institute.