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5 personal things your agent wants to know about you

According to the Insurance Information Institute (III), one of the best ways to ensure you are not overpaying for insurance is to shop your policy. Before you get started, however, you should know that you likely will have to answer a lot of personal questions before you can get a final quote. So how exactly do insurance carriers use your social security number – and other personal information – that they ask you to provide?

Here are five questions your insurance agent will likely ask, and why:

What’s your social security number?
You may be surprised when your agent asks for your social security number. However, most carriers will not offer a final quote these days without it.  Insurance carriers use a homeowner’s social security number to run a “soft” credit check and obtain his or her credit score. According to the III’s article on credit ratings, actuarial studies have shown that insurance consumers who have a strong credit rating are far less likely to file an insurance claim. While it is a widely debated practice, it is a very common way for insurance carriers to assign risk (and premium dollars) to a particular policy.

What ZIP code is your home in?
Your home’s ZIP code tells an insurance provider a few things about your risk assessment. First, an insurance carrier can determine local building costs based off of your ZIP code. This, in conjunction with the square footage of your home, helps the insurer determine an accurate replacement cost of your home if it is damaged or destroyed. Secondly, your ZIP code tells a home insurance agent which fire district a home is located in. According to the Insurance Services Office (ISO), fire districts are “assigned a Public Protection Classification – a number from 1 to 10.” Homes in higher-rated fire districts (Class 1 being the best) typically qualify for lower insurance premiums.

What do you do for a living?
Insurance consumers who belong to professional groups may qualify for discounts offered by particular insurers. In addition, your home insurer wants to know if you operate a business out of your home. Since home-based businesses can increase liability risk, insurers will often exclude claims that arise out of business activity taking place in a home. This is especially true for owners of home-based day care businesses and self-employed individuals who host clients in their home regularly. According to the Travelers website, separate (and specialized) business coverage is available for these business owners.

What year was your home built?
Older homes pose particular risk to an insurance company, so the age of a home is very important when setting insurance premiums. Homes that are more than 30 years old, for example, often have outdated electrical, plumbing, and HVAC systems, which can increase claims probability greatly. An older roof that hasn’t been updated also presents a greater risk. “If you own an older home that has updated features, you should alert your insurance agent so as to possibly qualify for more preferred homeowners insurance policies,” said Jana Bell, Vice President of HomeInsurance.com.

Have you filed any homeowners insurance claims in the past?
If you have filed one or more homeowners insurance claim in the past 3-5 years, you will typically pay higher premiums for at least a few years. According to the III, “In general, an insurer will increase your premium by specific percentages for each chargeable claim made against your policy above a specific dollar amount.” This is because studies have shown that homeowners who file a claim are more likely to file subsequent claims, which causes insurers to compensate by setting higher premiums.  Insurers will likely know about claims before you even disclose them from a Comprehensive Loss Underwriting Exchange report. A CLUE report details insurance claims and losses on a specific property or by an individual.

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