5 Factors Raising Your Home Insurance Premiums
Homeowner’s insurance: if you’re buying a home, you have to have it to protect yourself—and your savings—from life’s big surprises. But the insurance premiums don’t always come cheap.
Your premiums will affect how much you pay for the cost of homeownership each month, but by how much depends on several factors.
There are some things you can do to keep your costs down without sacrificing the coverage you need.
1. Coverage Amounts and Deductibles
At a basic level, your coverage amount and deductible will have a big impact on how much you pay monthly.
Your coverage level is the maximum amount you can use to repair or replace damage to your home and possessions—and to cover medical expenses after an accident. The deductible is the amount you pay for damage after making a claim, before the insurance kicks in.
The higher your deductible, the lower your insurance premium.
To keep your costs low, make sure you aren’t over- or under-insured. While having less insurance coverage than you need could hurt you in the long run, having too much will raise your monthly premiums.
Keeping a high deductible will lower your monthly costs, but you’ll have to pay it upfront before getting assistance if you file a claim.
2. Home Age, Features and Materials
The age of your home, property features and even building materials can affect your homeowner’s insurance premiums.
For example, since older homes tend to develop problems in these areas more frequently than newer ones:
- Electrical wiring
Some renovations to ward against common problems may keep your insurance down, but check with your provider first.
Certain features of your home (regardless of its age) can also impact upon your insurance premiums—like swimming pools and hot tubs—and can raise your rates, while other features can get you a discount. For example, adding an alarm system, gated entrances and security fences may benefit your premiums.
Insurance costs may also be linked to the materials used in the construction of the property. For example, wood shingles or siding could be considered a greater risk than those made from other materials, as they can catch on fire more easily and can contribute to water problems.
Some home insurers use data about which neighborhoods have more claims than others, and they increase their rates accordingly.
They also often look at the distance of your home from the nearest fire station and whether the area is prone to earthquakes and flooding (in which case, the policy may not include coverage without an additional rider and premium).
Consider these factors and their impact on the cost of your homeowner’s insurance before purchasing your home.
While some states, such as Michigan and Pennsylvania, have laws prohibiting insurance providers from blacklisting customers due to the breed of their pet, insurance providers in other areas may still raise your rates—or deny you all together—if your pet is on their restricted list.
To combat this, shop around with different insurance companies. Many “pet-friendly” insurance companies do not deny customers based on their pets and may offer better rates.
5. Credit Rating
Your credit score can affect your home insurance premiums.
Often, homeowners with lower credit scores will pay higher insurance premiums.
To avoid the ding, keep your credit scores in check by paying your bills on time and avoiding high debt accumulation.
While it won’t apply to everyone, other factors can also influence your rate:
- Operating a business from your home
- Living in an area prone to natural disasters
- Owning expensive items that require extra coverage