6 factors that determine your home insurance rate
Home insurance is one of the most important things to consider when you own a home. Unlike auto insurance, though, home insurance isn’t mandatory. Knowing you really do need the coverage is the first step and knowing what you’re buying is the second.
Insurance underwriting is one of those mysterious things most people tend to gloss over and not spend much time thinking about. However, that mentality is what leads to many people paying more than they need to for insurance coverage. Over the life of a home, that extra payment can be a pretty big chunk of change. Others feel like insurance companies are fleecing them for money without understanding exactly why they’re paying a high premium, or why they may be denied coverage altogether.
These are the main factors that influence an insurance company’s decision on your home insurance rate:
1. Home value
This is the most obvious factor used to set your home insurance rate. Home insurance must cover the repair or replacement of your home and its contents. When it comes to determining what your home is worth, you will need to provide that value to your insurance company. That means you’ll have to spend some time figuring out exactly how much coverage to buy.
Be meticulous in cataloguing the value of your possessions, as well as have an accurate idea of how large your home’s livable space is. Tell the insurer details about the structure of the home in order for the underwriter to determine how much it would cost to replace it.
2. Valuables
While your basic home insurance policy covers the cost of your regular possessions, high value items need to be declared separately on your policy. Keep a catalogue of these items along with their receipts to make it easier when applying for coverage and when you’re making a claim.
3. Location
Where you live plays a role in determining your home insurance rate. Locations with high levels of crime or severe weather often see higher rates than those without. When buying your home, you likely tried to avoid certain neighbourhoods, but you may not be aware of environmental dangers like flood risk or storm frequency. If your home insurance quote is high, there’s a chance it might be because of weather risks.
4. Home claims history
Unless you’re buying a brand new home, your home is going to have a history. A home with a history of claims can negatively affect your premium even though you haven’t been living there. Get a list of the home’s claim history before you finish the homebuying process.
5. Your claims history
Insurance companies actually look into your claims history as well. If you have a record of home insurance claims, that won’t look very good and you'll get a higher rate. On the other hand, if you have a clean record you can sometimes get a discount on your home insurance rate.
6. Extra risks
Some features that people add to their property increase the home’s risk as well as its value. These include leisure items such as pools or trampolines, or extra structures like garden sheds.
Another extra risk that will affect your policy is whether you run a business out of your home. Declare that you use your home for your business if you regularly have guests over or use special equipment that could increase chances of an accident.
Determining the specific home insurance rate is done differently by every company. Some may weigh one factor more heavily than others. Shop around to find a policy that suits you at a price you can afford.