So you open your mail and see a quote from ABC Insurance Agency “customized just for you!” You take a quick look and think “Wow, this looks great!”
Remember this saying- “If it seems too good to be true, it probably is”.
Because what you’re seeing may not be real. In fact most of those “customized quotes” are just guesses based on public information. The motive is simple: for you to call and ask further questions to get the real numbers. I’m not knocking this approach by any means- I just want you to be aware that what you’re seeing is NOT a firm number that you can take to the bank.
We see this type of solicitation more often for homeowners insurance, so let’s talk about how that works.
How the “customized” Ohio homeowners insurance quote is calculated
So first off, before someone screams “Invasion of Privacy”, the county auditor’s records/website are PUBLIC information. So anyone can look up tax records and get basic info about properties (owner, transfer history, sales price and general facts about the house).
Someone can easily look up all the houses in a neighborhood and use that information to send out “customized quotes”. Premiums are determined using the filed rates with the state department of insurance.
Here’s an example of how it’s done:
- Insurance company settles on a certain area of town, maybe a newer development. It finds all streets in that development and then all house numbers as well. So now they have a list of all houses in the development.
- Each address is located individually on the auditor’s website, along with owner’s name and mailing address and appraised value.
- The customized quote is actually a template that offers default coverage. All the insurance company needs to do is drop in the amount of coverage for the dwelling (e.g. appraised value) and the rest of the information populates (Coverage B- detached structures and Coverage C- personal property are based on a percentage of the dwelling coverage)
- An estimated premium is generated based on the filed rates.
Insurance companies have a “base rate”-that is the premium without any discounts or modifications. It’s “off-the-shelf” so to speak.
So, for example, the base rate for a frame house in your territory or zone (based on address) is $700. Chances are good that’s the annual premium you’ll see on the quote. But remember- this is an ESTIMATE.
What you need to do to get the “real” premium
If you’re not in the insurance industry, then honestly, you have no idea what actually goes into an Ohio homeowners insurance quote. I’m here to tell you that HUNDREDS of rating variables help determine the final premium, which includes YOUR individual information. It’s never a one-size-fits-all.
Honestly, I’ve seen so many of these flyers I laugh out loud. What you see is a total guess. And often, not that close to the real thing. But if you’re interested in exploring the quote further, here’s what else you need to provide to get real figures.
- Your identifying information- including Date of Birth and Social Security Number. Insurance score is a major component of rating an insurance policy in Ohio. Although there is much debate over the value of the insurance score, potential discrimination and legality (it is legal in Ohio), the fact remains it is used by the majority of insurance companies to determine your insurance premium. For more detail concerning how and why insurance companies use credit history in premium determination (along with helpful tips to improve your score), read “What You Need to Know About Insurance Credit Scoring” from the Ohio Department of Insurance.Â
- Homeowners insurance is determined using replacement cost, not appraised value. Replacement cost is the cost to repair or replace at today’s cost. Appraised value is used for selling and buying purposes. The two are NOT the same (with the exception of a brand new build). So the dwelling amount is likely to be way different (and probably higher).
- And speaking of replacement cost, the auditor’s site only includes basic information about a house and unfortunately is not always up to date. We need to collect detailed information about your house so we can produce an accurate replacement cost. Examples include- type of foundation, exterior wall material, type of roof, interior wall finish, flooring, number and type of bathrooms and additional features like decks, porches, and garages. Then, and only then, will we have the information to correctly determine the dwelling amount.
- Do you have any special items included on your current policy, like scheduled jewelry, guns or musical instruments? These are simply additions to the homeowners policy, but have a cost and therefore affect the final premium.
- And unfortunately, not every house is eligible. Ohio homeowners insurance companies have eligibility rules to insure the house. Examples include: property updates, approved animals, secured pools, correctly installed supplemental heating sources (think wood burning stove) and general appearance of the property.
As you can see, there’s a lot of information necessary to give you an accurate premium. But isn’t that what you really want and not a guess?
We’re all dazzled by the quick quote, but what you see is not necessarily what you get. Without detailed information, you don’t know if you have enough to rebuild your house should the worst happen nor whether the premium is realistic for your budget.