Home insurance rates vary among homeowners due to various factors, so there's no quick and easy way to answer questions surrounding what any given homeowner's premiums will be. Insurance agents price policies largely on where the home is located, what type of home you buy and its condition. But many other subtle factors come into play such as your credit and claims history. Here's an overview of what you need to know about how insurers calculate your
homeowners insurance rate.
How Is Home Insurance Calculated?
Each insurance company has their own way of calculating insurance rates. While the above factors are broadly used in the industry, rates may vary among different companies. The main theme running through all these factors is risk of damage. If you live in an area where hurricanes are common, for example, you'll pay higher rates than areas that never witness such extreme catastrophes.
The best way to get precise numbers is to contact a list of insurers, get quotes and then compare them to make your decision. Aside from the factors already listed, here are other items that may affect your monthly insurance costs:
• Your financial history - negatives include debts and tax liens.
• Insurance score - based on various factors reflecting your financial health.
• Age of your home - older homes will require more repairs which drive up costs.
• Home renovation - bringing the structure up to modern codes will lower premiums.
• Roof condition - every roof needs to be replaced at some point.
• Pets - certain dog breeds lead to higher maintenance costs.
• Wood burning stoves - a source of air pollution, which can raise insurance rates.
• Marital status - married couples tend to file less claims, which is considered positive.
• Swimming pool or hot tub - you'll pay higher insurance rates due to higher risks.
• Home business - you may need special insurance to cover certain equipment.
The location of your home plays a significant role in how your insurance rates are calculated. Living near a fire station lowers risks and rates, while living near a body of water such as a lake or ocean raises risks and rates.
Home Replacement Costs
If your home is damaged or completely destroyed by a disaster, your standard policy will cover home replacement costs. But certain disasters such as flooding and earthquakes require special extra coverage beyond your standard plan. Your
homeowners insurance rate will affect repair costs as well, as higher premiums have higher payouts. Don't assume everything imaginable is covered if your house burns down, since only certain items will be covered up to limits specified by the policy.
The reimbursement you receive from your insurer will reflect the cost of rebuilding the exact same type of home. So if you decide on a modern renovation, you'll be paying higher out-of-pocket costs, unless you expand your policy prior to the disaster. Remember that the standard policy only covers rebuilding the home itself and doesn't apply to the land value. Paying a professional appraiser to inspect your home damage is the best way to get the most accurate estimate for replacement costs to compare with your insurer's appraisal estimate.
Looking at Deductibles
A deductible is the amount you pay out of pocket before coverage kicks in. It's up to you as a homeowner to determine your deductible costs leading up to filing a claim. Higher deductibles equate with lower premiums. Many insurers recommend
homeowners to pay at least a $500 deductible. Living in an area where natural disasters regularly occur can mean paying separate deductibles for different types of damage.
How is
home insurance calculated? It's different for every homeowner. The above factors all play a significant role in determining your monthly premium. For the best rates you need to provide relevant details to an insurance professional who will do the math for you. Contact the experts at
Fuller Insurance in Southern California today for more insights on how home insurance is priced.
