Homeowners Insurance Cost Too Much? Check Your Bad Credit
Average costs vary state to state, with Idaho at the lowest cost on average, $518 per year, and Florida homeowners paying the most, $1,933 per year.
Weather, a home's size and its neighborhood are all factors when companies price homeowners insurance. But there's an-under-the radar factor that can move homeowners insurance upward: bad credit.
According to InsuranceQuotes.com, homeowners with lousy credit can pay up to 91% more. Even having mediocre credit can hurt you with homeowners insurance — bringing payments 29% more, on average, then those of consumers with excellent credit.
Again, prices vary on a state by state. In West Virginia, for example, people with poor credit pay 208% more than those with stellar credit. Virginia, Ohio and Washington, D.C., also post high rates on homeowners insurance for consumers with bad credit.
Consumers with a toxic credit score catch a break in three states: California, Massachusetts and Maryland. In those states, insurance companies are barred from using credit to calculate homeowners insurance.
In some states, weather trumps credit. For example, in Florida, where homeowners' insurance rates are twice the national average, hurricane risk is a much bigger factor than credit, Adams notes.
To insurers, the equation is all about risk — the less of it the better.
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"This is another example of why credit is such an important part of your financial life," said Laura Adams, a senior analyst at InsuranceQuotes.com. "Maintaining a good credit history suggests that you're a less risky customer and can lead to several hundred dollars in annual homeowners insurance savings."
To try and curb rising homeowners insurance rates due to bad credit, make sure to check your credit score on a regular basis (you can get a free copy of your credit report at annualcreditreport.com.)
Check for errors and unpaid bills and resolve those issues as soon as possible. Contact your insurance company as your credit rating improves. You may be able to cut a new deal based on a better credit rating, but you'll never know for sure until you talk to your insurer.