Many people do not understand all of the factors a homeowners insurance company considers when determining insurance rates. While not all of these factors are changeable, some can be to help lower your rates.
Learn about five important factors that affect your homeowners insurance premium.
1. Home Location
The exact location of your home can greatly affect your homeowners insurance premium. As expected, homeowners in areas of the country that experience frequent natural disasters, such as along the Gulf Coast, often pay more for homeowners insurance than those in regions less natural disaster-prone.
However, you can also expect to pay more for insurance if you live in a high-crime area. The odds of the insurance company having to eventually replace stolen home items increases when a home is where burglaries are common.
On the contrary, if your home is close to a local fire department or fire hydrant, expect to pay less for insurance than with a home without a fire station or hydrant.
However, while you cannot change where your home is, many insurance companies will provide discounts for homeowners who install security systems in homes in high-crime areas.
2. Roof Age and Type
Homeowners insurance companies also consider the style, condition, and age of your roof when calculating your premium for several reasons. First, a newer roof properly designed to withstand local weather hazards is less likely to need expensive repairs after a bad storm. In addition, newer roofs are less likely to develop leaks that can lead to costly water damage.
For example, do you live in an area of the country prone to hailstorms, such as Colorado? Home insurance companies are likely to offer you insurance premium discounts if your home is equipped with a class 4 impact resistance–rated roof.
In addition, insurers in some states prone to high-wind storms provide premium discounts when homeowners have roofs with high wind-resistance ratings. Also, most insurance companies in states prone to wildfires offer discounts when homes have fire-resistant roof materials.
How much your roof age and type affects your insurance premium can vary greatly. Some homeowners see a premium reduction of up to 35 percent after investing in roof upgrades.
3. Presence of Fire Hazards
Most homeowners insurance companies don’t want to have to cover the cost of rebuilding an entire home and replacing its contents after a home fire. For this reason, insurance premiums often increase when known fire hazards are present in the home.
A few home fire hazards that can increase homeowners insurance rates include:
- Wood siding. Homes with wood siding typically cost more to insure than those with brick, stone, or other more fire-resistant siding options.
- Wood-burning stove or fireplace. These home-heating devices can raise insurance premiums.
- Untreated wood shake roof. These roofs can catch fire so easily that some insurance companies refuse to insure homes with this roof type.
Do you want to avoid the premium rate increase that can occur when your home has a wood stove or fireplace? Install a smoke detector near the heating device, keep a fire extinguisher in your home, and prove to your insurance company that the heating device was installed by a professional contractor and meets local fire code requirements.
4. Credit and Claims History
When calculating an insurance premium, homeowners insurance companies do not only consider the home, but also the homeowners. Two homeowner factors they consider when calculating insurance rates in most states include credit history and claims history.
Credit history factors that can affect premiums include how much debt you currently have, how often you have made outstanding debt payments on time, or if you have recently applied for new credit. Surprisingly, your credit score is not usually considered.
Your claims history includes any homeowners insurance claims you made at past residences. People who have filed no or few homeowners insurance claims in the past typically pay lower premiums than those who have a previous claims history.
5. Chosen Insurance Deductible
Most homeowners insurance companies offer an array of deductibles, which are payments you must make before your insurance company will cover the remaining cost of damage to your home or another cost from a home insurance claim.
Many people opt for very low deductibles because they do not realize just how much their insurance premiums can drop when they raise their deductibles just slightly. For example, raising a $500 deductible to just $1,000 can lead to premium savings of up to 25 percent or more.
When shopping for a new homeowners insurance policy, obtain quotes with a variety of deductibles. You can see just how much you can save on your premiums by opting to pay a higher deductible.
If your homeowners insurance premium is higher than you would like it to be, then use these facts to determine what changes you can make to your home insurance policy to obtain a lower rate. Contact the homeowners insurance experts at L.A. Insurance for help obtaining affordable homeowners insurance today.