Buying homeowner’s insurance is necessary. Without it you run the risk of having to pay quite a bit out-of-pocket in the event something happens to the home or its contents. But no one enjoys having to pay more than they need to. Knowing what can impact the cost of home insurance may help you determine what you can do to save money.
The Home’s Age
The age of your home will help determine how much money you’ll have to pay for insurance coverage. If your home is new, or nearly so, it won’t cost nearly as much to insure as an older home would. The reason is that everything that is man made has a shelf life and eventually wears out. That includes such things as wiring and plumbing, which could go bad and cost a lot to fix.
The Home’s Value
How much a home is worth has a definite impact on how much you’ll have to pay for insurance. The more value you have in your home, the higher your premiums will be. The reason is self-explanatory; the more costly the home or possessions are, the more money it will take to replace them if you have to file a claim.
The Home’s Construction What the home is constructed of will also have an impact on insurance rates. If the home is constructed of brick instead of wood, it will withstand high winds better than a wooden house, thus the potential for storm damage is decreased, and so will your insurance premiums. There is a caveat, however, to a brick home–if you live in an area that is prone to earthquakes you may actually pay more in insurance premiums for a brick home because they won’t ‘give’ during a quake.
Location
As was mentioned previously, the home’s location impacts the cost of insurance coverage. There are, however, other reasons that make location important. If you live in a high-crime area, your rates will be relatively high. They will also be high if the price of building material is costly, or if you don’t live within a reasonable distance (as determined by the insurance industry) of a manned fire station.
Past Claims
If you have a history of insurance claims filed on your homeowner’s policy, your rates will be higher than if you have never filed an insurance claim. For this reason, some people hesitate to file claims for small amounts or choose to carry a very high deductible.
Potential Liability
Potential liability issues can raise your homeowner’s rates considerably. The insurance industry considers things such as a swimming pool or a trampoline to be liability concerns. You can alleviate some of the cost by making sure the pool or trampoline is enclosed inside a fence and kept locked except when they’re being used. In some cases, owning a breed of dog that’s considered to be aggressive can also add to your insurance costs.
Security
If you take steps to increase the security of your home, you can significantly reduce your insurance costs. Installing storm doors and windows to reduce the potential of damage due to storms will lower your insurance payments. If you also install deadbolt locks to help prevent a break in, you won’t have to pay as much for insurance. A security system that rings into a manned home security company or a police station will lower costs, as will motion lights or solar lights along walkways.
Deductibles
For various reasons people prefer to carry high deductibles on their homeowner’s insurance. The obvious reason is to save money on premiums–it is a common practice within the insurance industry to lower rates as you raise your deductibles. Another reason to carry a high deductible is to avoid filing multiple small claims, which could cause the company to raise your rates.
Eligibility for Discounts
Another common practice within the insurance industry is to offer special discounts for qualified customers. In order to be eligible for these discounts, you may have to belong to an organization or business that offers enough customers to the company that they’ll be willing to reduce their rates. You may also qualify for reduced rates if you stay with the same company for an extended period of time, because most insurance companies will reward long-time customers with lower rates.
Your Credit Score
One of the most important factors that will affect how much you pay for homeowner’s insurance is your credit score. If you have a high credit rating, your insurance rates will be lower than if you have credit problems. The reason for this is that the insurance industry has compiled statistics that show people with higher credit scores are less likely to file claims than those with a lower credit rating.
About the Author: This is a guest post by Casey Lynch. Casey writes about home insurance for HomeInsurance.org.
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