Stop Paying So Much for Mold

If

you've received your home-insurance bill this year, you're probably surprised at how much it has gone up. Why? Don't blame Osama bin Laden. The reasons for the increase range from household mold to the sagging stock market. During the first half of the '90s, average annual premiums held steady at about $420, then crept up at about the rate of inflation. That all changed last year, when rates shot up 6%. This year industry analysts expect a rise of 7%--three times the increase in overall consumer prices. Increases will range up to 10% in Washington State and 30% along the North Carolina coast.

What's going on? "In the '90s, the severity and number of catastrophes — not just well-known events like Hurricane Andrew and the Northridge, California, earthquake but many smaller ones as well — increased dramatically," explains Insurance Information Institute spokeswoman Jeanne Salvatore. At the same time, home-repair costs are rising 7% a year. The stock market is no longer providing insurers a fat return on invested premiums. And then there's mold or, as many news stories call it, "toxic mold." Salvatore says, "We've always paid mold claims. What's new is multimillion-dollar jury awards." In Texas alone, prodded by significant publicity (including a New York Times Magazine cover story), the number of mold claims jumped 581% last year.

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Result: many insurers have stopped writing new policies in Texas and other states with big court judgments and other sizable risks, like beach erosion and floods. State Farm, which insures more than 21% of the nation's homes, has announced a moratorium on new policies in 20 states and imposed caps on the coverage it will provide in half a dozen more. Following the lead of auto insurers, which have determined that customers with good credit file fewer claims, more home insurers are checking your credit score. Customers with high scores (anything above 680 is considered good) benefit with lower rates. And insurers are checking the claims history of your house. They want to know that any problems, such as mold, have been resolved before they assume liability.

In this new environment, how do you buy new coverage or just keep what you've got?

SHOP HARDER. Most homeowners can find a company willing to write them a policy, but it takes more phone calls than before. Even if you find coverage quickly, comparison shopping can save you hundreds of dollars a year.

CHECK OUT PRIOR CLAIMS. Before you buy a new house, ask the sellers to get a copy of their Comprehensive Loss Underwriting Exchange (CLUE) report from ChoicePoint, the company that keeps the data. They should call (866) 527-2600 and ask for the $8 report, which will take a week or so to arrive. Come fall, there will be instant access on the Web, at choicetrust.com. You can't just pull a copy of someone else's report unless you apply for insurance on a new home and are denied. Then you will be considered "negatively impacted" and have a right under federal law to see the report.

KEEP YOUR CREDIT CLEAN. Insurers have determined that people who pay their bills on time are more likely to take care of their homes and cars. You can get your credit score for $12.95 at myfico.com. To boost your score, cancel cards you're not using, and try to keep your balances at less than half your credit limits.

RAISE YOUR DEDUCTIBLE. Doubling your deductible from $250 to $500 will slice 15% off your premium; raising it to $1,000 will lop off 25%. And it's a backhanded way to make sure your insurer doesn't fire you. These days, some carriers are refusing to renew customers who file several small claims. Keep your deductible high, and that won't even be a possibility.

LOOK BEFORE YOU LEAP. If you jump to a new insurer for a cheaper policy, don't cancel your old one for 59 days. That's how long the new insurer has to deny you coverage. And never let your policy lapse before getting a new one. That's a sure way to buy yourself a substantial rate increase-and a headache.

You can e-mail Jean, a MONEY magazine columnist, at moneytalk@moneymail.com