For most people, their home is their most significant investment and their most valuable asset. Homeowners insurance is designed to protect that investment and ensure that the homeowner will not face a significant financial loss if something happens. Homeowners insurance provides coverage for a variety of events, including fire, theft, and natural disasters, and can also provide liability coverage if someone is injured on the property.
Homeowners insurance works by providing coverage for both the physical structure of the home and the personal belongings inside. The policy typically includes dwelling coverage, which pays for repairs or rebuilding if the house is damaged or destroyed by a covered event, and personal property coverage, which pays for the replacement of personal belongings that are stolen or damaged. The cost of homeowners insurance can vary significantly depending on various factors. While some of these factors are beyond the homeowner's control, others can be managed to help reduce the cost of insurance.
For this reason, we will discuss the various factors determining homeowners insurance costs. These include:
1. Credit History
One factor that can significantly impact the cost of homeowners insurance is the homeowner's credit history. Insurance companies use credit scores to assess risk, with lower scores indicating higher risk. Homeowners with poor credit scores may be charged higher premiums than good ones, as insurance companies view them as a higher risk for filing claims.
The credit score is calculated based on payment history, outstanding debts, length of credit history, and types of credit used. Homeowners must maintain a good credit score (preferably above 630) by paying bills on time and keeping credit card balances low to ensure they are not charged higher insurance premiums.
2. Claims History
Insurance companies will review a homeowner's claims history before providing a quote. Homeowners who have filed multiple claims in the past may be viewed as a higher risk for filing future claims and, therefore, may be charged higher premiums.
Homeowners must be mindful of filing claims and only do so when necessary. Homeowners should also consider the cost of the claim and whether it is worth filing a claim or paying out of pocket to avoid future premium increases.
3. Location
Insurers consider a property's location because certain areas are more prone to risks, such as natural disasters or high crime rates. For example, a home in a flood zone may have higher premiums than one in an area with low flood risk. Also, homes in areas with high crime rates may have higher premiums as they are more likely to experience theft or vandalism. Insurers use data and analytics to assess the risks associated with a property's location and adjust premiums accordingly.
4. Dwelling Coverage
Dwelling coverage is the portion of a homeowner's insurance policy that covers the cost to repair or rebuild the home's physical structure if it is damaged or destroyed by a covered peril, such as a fire or severe weather event. The dwelling coverage needed is typically calculated based on the cost to rebuild the home, not its market value. Homeowners should regularly review their dwelling coverage to ensure it is adequate to cover the cost of rebuilding their home in the event of a total loss.
5. Age of Home
The home's age can be a factor in determining homeowners insurance premiums because older homes may have outdated electrical or plumbing systems or structural issues that increase the risk of damage in the event of a covered peril. As a result, insurance companies may charge higher premiums for older homes. Homeowners can mitigate these risks by updating their home's systems and ensuring they are up to current building codes to get lower premiums.
6. Marital Status
Marital status is not typically a factor in determining homeowners insurance premiums. However, if one spouse has a poor insurance history or credit score, it may affect the overall premium for the household. For this reason, both spouses must have a good insurance history and credit score to ensure the lowest possible premiums.
7. Deductible
The deductible is the amount of money the homeowner must pay out of pocket before the insurance company begins to cover the cost of a claim. A higher deductible will result in lower monthly premiums, while a lower deductible will result in higher monthly premiums. Homeowners can adjust their deductible to find a balance between their monthly premium and the amount they are comfortable paying out of pocket in case of a claim.
Conclusion
Homeowners insurance is a worthwhile investment for anyone who owns a house, so homeowners should make sure they are getting the policy that will best protect them. There are different levels of coverage, deductibles, and premiums, so do your research and ask questions to ensure you understand what you are paying for and how it will protect your home. This way, you can rest easy knowing your home is protected from unexpected events like natural disasters, theft, or accidents.
Brand and Britt Insurance has what you need if you’re looking for homeowners insurance! We offer comprehensive coverage to suit any homeowner's needs, coupled with reasonable rates. Call us today at 770-963-6427 to get a quote!