The cost of any insurance coverage is the result of a number of risk factors. In other words, the more likely you are to have a loss in the eyes of an underwriter, the more your coverage will typically cost. With auto coverage, as one example, you can control some of those risk factors by changing your driving habits, buying a less expensive vehicle and so on.
The risk factors for a homeowner’s policy, though, are harder to control, at least in the short term. But understanding the considerations that go into pricing a homeowner’s policy can be instructive, especially if you’re planning to relocate sometime soon.
First, there are different levels of coverage. In increasing order of cost, actual cash value coverage will replace your home or belongings, minus depreciation. Replacement cost, as the name implies, pays to repair or replace without a deduction for depreciation. And extended replacement cost will rebuild your home even if the total exceeds policy limits, which is why it’s the priciest option.
Underwriting a homeowner’s policy actually starts with you, not the home. Things like your credit history (the better your score, the lower your premiums), claims history and even marital status (married people file fewer claims) will all impact your premiums.
It’s pretty obvious that the value of your home will affect your insurance costs, but so will its age … older homes typically cost more to repair. And many home improvements add to your home’s value, but also to its replacement cost and to the cost of your coverage as well. There are exceptions here: improvements to roofing, electricity or plumbing that increase efficiency or safety can actually have a beneficial effect on your premiums.
Realtors talk about location, location, location … and that affects your insurance as well. From the relative crime level in a given area to distance from the coastline – or even distance from first responders or fire hydrants – a wide range of location-based factors will figure into your insurance costs.
Are you familiar with the term “attractive nuisance?” This doesn’t mean your preschooler, but something on your property that’s potentially dangerous and might attract others. Pools and trampolines are the main examples here, and if you have either one you will see higher premiums as a result.
Finally, there’s Fido. Your dog, and any liability that results from its actions, may be covered under your policy. But check it carefully: certain breeds including Rottweilers and pit bulls, fairly or not, have a reputation for aggression. Some insurance policies will specifically exclude them.
Questions about homeowner’s coverage? Contact Consolidated Insurance.