Everyone wants cheaper insurance for their home that provides the best coverage.
How does an insurance company calculate your homeowner’s insurance rates? What makes one house more expensive to insure than another? The answer may surprise you. Here are some of the things that are used to figure out your homeowner premium.
- How much would it cost to rebuild your home? Just suppose your home was destroyed by a fire or storm what would it take to rebuild from scratch? From the basement to the attic what would it cost to resurrect it from the ashes just as you remember it? Don’t be surprised if it is more than you owe on your mortgage. After all, inflation has a way of increasing the price of materials and labor, doesn’t it?
- What is your home made of? Wouldn’t you expect that an all brick home would cost more than one that has vinyl siding? Doesn’t it make sense that hardwood floors would cost more than builder grade carpeting?683
- Where is the fire department? Doesn’t it make sense that the closer you are to the fire department or a fire hydrant the sooner your fire could be put out? So too the further you are away the greater the chance your home could burn to the ground for a complete loss to the insurance company.
- How old is your home? Many older homes used materials that are very expensive to replace or upgrade. They also have old worn out electrical wiring that could cause fires. As you can imagine, newer homes have more affordable premiums.
- Your claim history: How many claims have you had in the last few years? Did you know that if you have several claims in the recent past, then you are considered a higher risk versus someone with no claims? This is why we suggest a higher deductible so that you can pay for smaller problems out of pocket.
- Your neighbor’s claim history: Why would your neighbor’s claims affect your premiums? Simply put, if a neighborhood has a history of lots of break-ins, vandalism, arson, etc., then your own insurance company will raise rates based on those statistics.
- What is your credit score? Yes, believe it or not, a better credit score implies lower risk to the insurance company.
- What kind of insurance policy will you get? Will you be getting an actual cash value or a replacement cost policy?
- Do you have expensive jewelry, artwork or collectibles? If you do, you may need to add insurance riders that are designed to protect your valuables in case they are worth more than the standard amount covered in your policy.
- What kind of pet do you have? We know you love your pet and that they would never hurt a fly! However, after looking at the statistics we find that certain dog breeds have more incidents of biting people than others. Therefore, clients that have a pet on the dangerous dog breed list, like a Pit Bull or an Akita, will pay a higher premium than those that don’t.
- How long have you been with your current insurance company? Insurance companies reward loyalty. The longer you are with them, better the price you will usually receive.
- Do you have a swimming pool? The risk of drowning incurs a higher premium than if you didn’t have a swimming pool.
- Do you have a trampoline? Did you know that billion dollars is paid out every ten years due to trampoline accidents? Don’t be surprised if a carrier will not cover you or will exclude the trampoline accidents from your policy.
- What discounts do you qualify for? Your agent will walk you through a series of questions that will tell us what home insurance discounts you qualify for. Examples of discounts include getting a discount for a monitored security system or for combining it with your auto insurance.
We have discussed 14 different things that are taken into consideration when calculating your homeowner’s policy.
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