Home insurance coverage can differ from policy to policy depending on a multitude of factors. Being aware of these factors that affect your premium can ensure that you are appropriately covered.
Your credit history, claims history and marital status can all contribute to your premium costs:
- Credit history—In most cases insurance companies will take your credit history into account when calculating your home insurance premium. Insurance companies will look at how good you are at making payments and how much debt you currently have. Typically, the better your credit score, the lower your insurance premium.
- Claims history—Any claims you’ve made at previous residences will be assessed by your insurance company when determining your premium. The type and frequency of the claims you’ve filed can lead to higher premiums.
- Marital status—Those who are married have been found to file fewer insurance claims than single individuals. Therefore, if you are married, you will generally have lower premiums.
The way you and your broker construct your insurance policy also determines your premiums. The following are policy items that have the greatest impact on the amount you pay:
- Type of coverage: There are three different coverage options you can purchase for your home insurance policy:
Actual cash value will replace your home or damaged belongings, minus depreciation. Depreciation is the decrease in an item’s value over time due to wear and tear.
Replacement cost pays to repair or replace your home or belongings without any deduction for depreciation.
Extended replacement cost is the most expensive coverage option—but, it will pay to rebuild your home even if the replacement cost exceeds your policy limit.
- Limit: Your policy limit is the maximum amount that your insurance will pay in the event of a covered loss.
- Deductible: Your deductible is the amount you pay in order for your insurance coverage to kick in to help cover a loss.
- Additional coverage: You may choose to purchase additional coverage for items or circumstances that may not be fully covered under a standard home insurance policy. Possible circumstances may include keeping more expensive items at your home (e.g. boats, fine art or jewelry), or living in an area more susceptible to disasters that aren’t already covered under your existing policy.
There are a few factors about your home that may affect your premiums:
- Home value—The value of your home can also influence the cost of your insurance. Typically, the greater the value of your home, the higher your insurance premiums will be.
- Age of property—Older buildings tend to have costlier premiums since the materials they’re built with may be more expensive and harder to replace. For example, if you have stained-glass windows in your home, that could cost more to replace than a standard window since stained-glass windows are far less common.
- Remodeling—Any improvements made to your home will lead to an increase in your premiums since renovations typically increase the value of your home—therefore increasing your home’s replacement costs. Although, repairs made to your roof, electrical or plumbing that increase safety or efficiency may allow you to receive discounts that can reduce your premiums. Always alert your broker about new home remodels to ensure they can be replaced if damaged or destroyed.
If your home is located in a high-risk area, you will commonly pay more for your home insurance. Homes that are considered at a higher risk for damage or loss are those located near coastlines, farther away from response teams (fire or police departments) or are in areas that are more susceptible to natural disasters.
If your home is being used for work purposes, you may need to purchase additional coverage. Most standard home insurance policies will provide some liability coverage and limited protection for business equipment you may keep at your home, but it may not be enough. To ensure you are sufficiently covered, you may choose to purchase additional coverage or add to your home insurance policy.
Attractive nuisances are potentially dangerous objects that could attract people, including children, onto your property. The most common attractive nuisances are pools and trampolines—if you have either on your property, you will pay more for your insurance premium.
Depending on your insurance policy, your dog may be covered under your home insurance policy if they are involved in a liability claim. But, some dog breeds that are marked “aggressive” may have limited coverage or none at all. The most common dog breeds that insurance companies are wary to cover are Rottweilers and pit bulls.
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It’s imperative to have a clear understanding of your policy and how it works to help you recover from a loss. Contact us today to review your policy to ensure it protects your home thoroughly.
© 2019 Zywave, Inc. All rights reserved. This blog is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.