Kara McGuire: How to shop around for home insurance

If there’s one financial task I love to put off, it’s shopping for insurance. But when my new premium for home insurance came in the mail, I knew it had to be done. I was staring at a 25 percent increase.

Chances are you also have seen homeowners rates go up. Premiums have been rising steadily, according to the Insurance Information Institute, a trade group for the insurance industry. It forecasts that rates will rise about 3 percent, to an average of $879 this year.

So if you decide to shop around, how do you begin?

First, determine if you’re marketable, suggests Gloria Thompson, an independent insurance agent with American Agency in St. Louis Park, Minn. If you have a history of claims, you may find it hard to find a good deal until the last claim is three to five years old, she said.

Another rate-raiser is poor credit. If your credit score has taken a hit in this tough economy, you’ll have fewer choices and higher prices.

J. Robert Hunter, director of insurance for the Consumer Federation of America, recommends heading to the National Association of Insurance Commissioners (www.NAIC.org) to check the complaints, eliminating the ones with the highest numbers.

Check a carrier’s financial health using InsData, found in the NAIC’s Consumer Information Source section. Thompson suggests checking a ratings agency such as A.M. Best (www.ambest.com) and going with a company that gets an “A.”

Back to pricing policies. You can go direct, calling big carriers, or work with an agent who sells policies for a particular company, such as American Family Insurance or State Farm. Or you can go independent, and find someone who will shop multiple companies for the right policy. Try the Independent Insurance Agents & Brokers of America’s “Find an Agent” tool (www.iiaba.net).

But don’t shop solely on price. Lowest-price policies might exclude what you need coverage for most. Some agencies like to sneak in liberal exclusions that reduce the incidents for which they’d pay out claims.

Comb through that policy — even if you’ve had the same insurance for years — to make sure you’re getting what you thought you paid for.

Other tips: