If you have to purchase homeowner's insurance for the first time, you need to understand how your insurance rate is calculated. This will help you better understand what aspects of your home are driving up your premium, and which aspect of your home are leveling it out. Here are the five primary factors that insurance companies use when figuring out what to charge you for homeowner's insurance.
#1 Your Location
The first factor that insurance companies look at is where your home is located. Where your home is located tells insurance companies a lot about the risk of insuring your home. They can find out, just based on your address, the risk your home has of being robbed. They can also figure out the risk your home has of becoming a victim of arson. They base this information on natural and local data about crimes in your zip-code.
Furthermore, your address also tells insurance companies your risk of your home being damaged by a natural disaster. Your address lets them know if your home is at risk of flooding, tornadoes, hurricanes or wind storms.
This is one factor that you don't have a lot of control over if you have already purchased your home.
#2 Construction Quality Of Your Home
The second thing that insurance companies take into consideration is when your home was built, the type of materials that were used to build it, and the square footage of your home. If your home is on the older side and was built using older materials, it will cost more to insure than a newer home built with stronger construction materials. Once again, insurance companies rely on date to determine how these factors should affect your premium.
If you take steps to increase the construction quality of your home, by, for example, upgrading the wiring, these types of home improvement projects could decrease your premium.
#3 Cost To Replace Your Home
The third factor that insurance companies take into consideration is the cost that it would take to replace your home. The more it costs to replace your home, the more you should expect to pay for homeowner's insurance.
This factor is not based on what you paid for your home, but rather on what it would take for a construction crew, today, to build your home over again from scratch.
#4 Personal Property
The fourth fact that insurance companies take into consideration is one that you have a lot of control over, the value of your personal property. Your homeowner's insurance is designed to cover the cost of replacing your belongings if they are ever lost, damaged or stolen.
The higher the value of your personal property, the higher your premium will go. Be sure to do an accurate inventory of your personal property to ensure that you are paying for the correct amount of coverage.
It is also important to note that for extremely expensive items of personal property, such as artwork or jewelry, you sometimes have to add on additional insurance to cover those items.
#5 Personal Liability
Finally, insurance companies also take into account what factors in your home affect your liability. Your homeowner's insurance policy will also cover any liability claims against you.
You have a lot of control over this factor. For example, if you have a pool or trampoline on your property, expect to pay more for insurance coverage.
When you shop around for homeowner's insurance quotes, remember that each insurance company (like Divers-Savage-Mcpherson Insurance Agency) will take a large range of factors into consideration to determine what premium to charge you. Some of these factors you will not have a lot of control over, such as the age and location of your home. Some factors, such as personal property and your personal liability risk, you will have more control over. Find out how all of these factors affect your overall rate when you get your insurance quotes. This will help you find the best rate now for homeowner's insurance and will help you determine future steps that you can take to lower your overall insurance costs.