IF YOU HAVEN'T purchased or renewed your auto or homeowners insurance for a while, you might be in for sticker shock like Rhonda Richetta.
When the elementary school teacher bought a house five years ago, her annual homeowners premium was about $200. She anticipated paying more than that when she bought a new home this year in Little Italy because the house's value was higher. She didn't expect the premium her agent quoted - about $750 a year.
"I was flabbergasted," said Richetta, adding that she had never made any claims on her old policy. "My mouth dropped open. I said, `Why?'"
Richetta said the agent told her that was the going rate. She decided to shop around.
More consumers could be doing the same. Homeowners and auto insurance rates, after remaining stable or even falling in the late 1990s, have been on the upswing.
Nationally, rates for both types of insurance went up an average of 6 percent last year, and similar rate increases are expected this year, according to the Insurance Information Institute, an industry-sponsored nonprofit group.
In Maryland, increases have been steeper. Homeowners rates rose an average of 8.3 percent last year and 12.6 percent through mid-May this year, said the Maryland Insurance Administration. Auto rates jumped 4.5 percent last year and have risen 8 percent this year.
Experts blame the increases on the growing number of claims and the rising cost of repairs. And insurers are no longer making big returns on stock and bond investments, which helped keep rates stable during the 1990s bull market.
Sept. 11 has had an indirect impact on auto and homeowners rates by pushing up the cost of reinsurance - insurance for insurers - and by prompting insurers to review their business and bump up rates for less-profitable lines of insurance.
Rates are likely to undergo more change in Maryland, too, when new legislation takes effect in October. Insurance companies have been using a score, based on consumers' bill-paying histories, when determining rates for homeowners and auto insurance. That tends to raise rates for those with poor credit.
But Maryland's new law will prohibit insurers from using the score for homeowners policies and for auto insurance renewals. Insurers are expected to submit revised rate plans to the state this summer in light of the pending law. Some experts predict that homeowners rates will go up for those with good credit histories and down for those with poor records.
Insurance is a cyclical business, and until the time when rates become more competitive again, experts suggest ways to keep premiums down:
Raise your deductible. The deductible is how much you agree to pay out of pocket before the insurance kicks in. If you have a low deductible and can afford to pay more of the small repairs yourself, raise your deductible.
The typical homeowners deductible is $250, but you could save up to 12 percent on premiums by raising the deductible to $500 and as much as 24 percent by bumping it up to $1,000, according to Insure.com, an online consumers' guide.
Another reason to raise deductibles is that insurers are tightening standards and not renewing auto and homeowners policies if consumers file a certain number of claims, even small ones, within a few years, said Bob Hunter, director of insurance for the Consumer Federation of America. Since that discourages policyholders from making small claims, there's no reason to pay a higher premium for a low deductible, he said.
"People are often frustrated to learn that making claims [works] against you" either by causing premiums to go up or policies not to be renewed, said Steven B. Larsen, the state's insurance commissioner. In Maryland, though, an insurer can't refuse to renew a homeowners policy because the consumer made one or two weather-related claims in the past three years, he said.
Dump unnecessary coverage. If you haven't looked at your policies for some time, you may be paying for coverage you no longer need.
For example, your policy might cover rental car costs when your auto is in the shop. But if you're a two-car family, you might not need a rental car, said P.J. Crowley, vice president of Insurance Information Institute.
Or, your old car may be of little value, making it unnecessary to carry collision coverage.
A rule of thumb is to multiply the collision premium by 10 - drivers typically file a collision claim once every 10 years - and if the answer is equal to or higher than the car's value, drop the coverage, Hunter said.
Limit young drivers. "Teen-agers will send your insurance out of sight," said Barbara Poole, associate professor of finance and insurance at the American College in Pennsylvania. But parents can save money by restricting the type or number of cars a youngster drives, Poole said.
"If you have a really nice car and a junky car, have the teen only drive that [junky] car" and tell your insurer, she said.
