PROPERTY REASSESSMENT AND YOUR INSURANCE: WHAT REALLY DRIVES PREMIUM COSTS

The following information was released by the State of Delaware:

The Delaware Department of Insurance (DOI) and its Consumer Services and Investigation team are working to make consumers aware that property reassessments do not determine homeowner's insurance premiums. Recently, Delaware homeowners have expressed concern that statewide property reassessment will cause their homeowner insurance premiums to rise. This advisory explains what insurers use to calculate premiums and just as importantly, what they do not use.

Defining Replacement Cost or Actual Cash Value

You have the option to choose to insure your home and belongings for either replacement cost value or actual cash value. Replacement cost value is the amount it would take to replace or rebuild your home or repair damages with materials of a similar kind and quality. Actual cash value is a form of insurance that pays damages equal to the replacement value of damaged property minus depreciation.

Reassessment Does Not Determine Your Insurance Premium

The Department and its Consumer Services surveyed insurance carriers and found that no carrier is increasing or adjusting rates due solely to the recent property assessments. The property assessment has updated the value of your home from a tax perspective, but your insurer has long valued your property accurately based on your insurance needs.

Property assessments affect property taxes, not insurance rates. Insurance companies do not use county tax assessments to set premiums. Premiums are calculated based on the replacement cost of your home, not its market value. Even if your property value has increased based on the property assessment, the change alone does not raise your insurance cost.

Each home has its own risk profile, and insurers price policies accordingly. Because your home insurance policy should cover the replacement cost value or the actual cash value, when the cost to replace the home goes up the amount of coverage will as well. This means that if your home gets damaged in a fire or natural disaster, you should be fully covered for the new amount of the home, helping you to get repairs or a new house.

Insurance Commissioner Trinidad Navarro encourages consumers to review their homeowner's policy annually to ensure their coverage matches their needs. "There are several actions Delawareans can take to potentially help lower premiums. First, ask your insurer how your replacement cost value is calculated, this determines how much it would cost to rebuild your home. Make sure to update safety features regularly such as roofing, wiring, and smoke detectors to reduce risk and potentially lower premiums. Lastly, shop around if your premium changes for reasons unrelated to the reassessment. The Instant Insurance Guide: Home found on the DOI site, covers basics on property insurance and is free to download."

Tips That Can Lead to Savings

Even in today's economy, it's possible to lower your homeowner's insurance premium without losing coverage. Here are some tips that can lead to savings:

Shop around

Bundle multiple insurance policies

Increase your insurance deductible

Improve your home security

Make home improvements

Review coverage annually

Ask about savings

Take advantage of group insurance (such as AAA or AARP membership)

About the Consumer Services Division

The goal of the Insurance Commissioner's Consumer Services Division is to protect, advocate for and inform consumers of their rights and options when it comes to insurance.