Don’t be duped: How to check your North Carolina home insurance bill [The Charlotte Observer]

Charlotte Observer (NC)

Home Insurance Loophole

If you own your home, check your bill: Half of all insurance policies in North Carolina have a loophole disclaimer that leaves the customer paying up to hundreds of dollars more per year than state officials intend. We investigated to bring you answers.

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Half of homeowners in the Charlotte region are paying more each year — $352 extra, on average — than the state’s approved maximum cost for home insurance.

Your insurance company has to follow some rules in setting the price you pay for coverage. North Carolina regulates the cost of insurance to make sure homeowners across the state pay fair rates.

But there’s a legal way home insurance companies can charge you more than state regulators’ agreed upon maximum for your premium.

It’s called consent to rate, and such policies have become increasingly common in North Carolina over the past decade, recent research shows.

Statewide, about four in ten policies charge more than state-set limits by using consent to rate, a recent analysis by The Charlotte Observer found. In the Charlotte region, they account for 49.9% of all home insurance policies.

Here’s how to check your bill and what to know about consent to rate.

What is consent to rate in North Carolina?

Consent to rate was designed to give insurance companies flexibility, says David Marlett, managing director of the Brantley Risk and Insurance Center at Appalachian State University.

Insurers in North Carolina calculate your cost of coverage according to factors like location, construction type and the age of your home.

But, when properties “don’t quite fit the model,” Marlett said, insurers can ask the homeowner for their consent to rate, meaning they will be charged more than what would otherwise be the maximum under state regulation. Without this option, he said, some consumers wouldn’t be able to find coverage.

“You can tell the consumer ‘Look, we can’t insure you at the rate approved by the state. However, we will insure you for a certain percentage above that, but you have to agree,” he said.

Prior to 2019, insurers were required to send a letter to North Carolina customers detailing the higher rate and get the policyholder’s signature before implementing it.

Now, the insurer makes a disclosure on the declaration page of your new policy or renewal letter, and customers signal their consent by paying.

“It’s less paper and less signatures,” Marlett said.

How can I tell if I have a consent to rate policy?

Insurers legally must disclose that you’re on a consent to rate policy and tell you how much more they’re charging you on your home insurance premium compared to the state limit.

You can find the disclosure on your policy renewal letter, on or right before the declarations page, as well as on any endorsements to your policy. It’s required by law to be printed in bold font, in all caps and in large type. It might say something like this:

In accordance with G.S. 58-36-30(b1), the premium based upon the approved rates in North Carolina for residential property insurance coverage applied would be (amount). Our premium for this coverage is (higher amount).

If you’ve made a payment on that policy, you’ve signaled your consent to that rate increase.

Can I negotiate my insurance to be lower?

You can start by calling your insurer, the NC Homeowners Alliance suggests. They may offer options to adjust your coverage or lower your costs. You can ask your agent why your premium is higher than the regulated rate.

If you’re not satisfied with their response, your best option is to shop around, experts told the Observer.

“If you get multiple quotes, you can get a better sense of if you’re getting a fair price,” Marlett said.

The North Carolina Department of Insurance also encourages consumers to evaluate different options when it comes to insurance.

But make sure you’re “comparing apples to apples” when it comes to coverage and costs, says Barry Smith, N.C. DOI spokesman.

For example, an insurance company may offer a lower annual premium but higher deductibles, meaning your out-of-pocket cost will be higher if you have damage to your property. Premiums also may be cheaper if the insurance policy covers less — for example, a lower amount of coverage to rebuild your house, in the event of a total loss.

The DOI also suggests checking to see if you’re eligible for any discounts on your policy. You can get discounts for installing an alarm system, for owning a new home or for buying home and auto insurance from the same company.

There are also other ways to save on your bill, said Michelle O’Connor, president of Charlotte-based O’Connor Insurance Associates.

Two tips she recommends to customers: paying a higher deductible — if you can afford it — and thinking twice before filing a small claim.

That’s because, from an insurer’s view, filing a claim makes you riskier to insure. After filing, your insurance company will likely charge you a higher premium going forward. So for small repairs or minor damages, the increase in your yearly bill may outweigh the cost of just paying for the fix yourself, O’Connor said.

“From the consumer standpoint, if you have to turn in a $50,000 claim, it doesn’t matter if you’re paying $200 extra a year,” she said. “Turning in small claims is where you can make a mistake.”