Many factors impact the final cost of homeowner’s insurance, and understanding how rates are calculated can help you get the coverage you need at a reasonable price.
> Location <
Your neighborhood may be the biggest factor in determining your homeowner’s insurance rates. The cost to insure identical houses in different areas can vary widely.
Some elements of your location that an insurer will consider:
* Risk of natural disasters: Living in a flood plain or an earthquake-prone area increases your insurance costs.
* Crime rates: Homes in high-crime areas are more likely to be burglarized or vandalized, so insurance rates are also high. Research the neighborhood before buying. Installing burglar alarms and deadbolts may earn you up to a 5% discount.
* Fire and Police presence: Areas with only a volunteer fire department face higher insurance rates than those with a paid department. On the other hand, living close to fire and police departments can lower your rates.
* Building costs: Materials and labor costs also vary widely by location. The more it costs to rebuild in an area, the higher your insurance costs will be.
> Your Home’s Construction <
The materials used to build your home factor into the likelihood that it can withstand a disaster. For example, a brick house is more likely than a wooden structure to survive a tornado or even a fire.
In earthquake-prone areas, buildings with a metal frame qualify for reduced rates because they are more likely to remain standing after an earthquake.
> Age of Your Home <
Compared to new homes, older homes tend to be in poorer condition and contain old, potentially unsafe electrical, heating and plumbing systems. The increased risk of loss also increases your insurance costs.
Updated systems may lower your rate. In addition, smoke detectors and sprinkler systems often qualify for a discount of up to 5 percent.
> Personal Factors <
In addition to the building and location, insurers look at the homeowner’s lifestyle.
Believe it or not, your pet can impact your insurance rates. If your policy includes liability coverage (and it should), you will pay a premium for owning a pet that is considered a high risk to injure someone.
Pools, hot tubs and trampolines are all considered potentially dangerous, and owning them increases insurance costs. To keep costs low, install a locking fence around a pool or hot tub, or a safety net around a trampoline.
Smokers cause thousands of fires each year, so smokers in a home result in higher insurance rates. Many companies offer up to a 5% discount for a non-smoking household.
> Other Ways to Lower Costs <
* Insure your home and auto with the same company.
* Ask if your insurer offers senior discounts.
* Raise your deductible. Just be sure you can afford it if disaster does strike.
Finally, talk to your insurance agent to determine which factors have the biggest impact in your area.