Home Insurance Articles
How Companies Calculate Your Basic Home Insurance Premium
2010-04-04
A basic home insurance premium is calculated using a number of factors. These include the age of your home, the methods used in its construction, and area considerations such as weather and crime rates. All of these factors play into what level of home insurance coverage you will need, and how much it will ultimately cost you. Although no one wants to make a claim on their home insurance, having it is typically required by your lender if your house is mortgaged, and not having it at a crucial moment could mean that you lose more than simply piece of mind. Here is a more detailed look on what affects your premium and why.
The first item on any insurance provider's list is going to be the age of the home and its construction type. A newer home will be constructed out of more fire-retardant materials, and will also lose less energy due to improper seals on the house. As well, newer homes will often include items such a sump pumps in high water-level areas and carbon monoxide detectors, which will protect both the home and its occupants. Any item or feature of your home which lowers the chance that the company will be called on to pay for damages, and the lower your home insurance premium will be. Simply put, the lower the risk for the home insurance provider, the better for you.
Risk also factors into the location of your home. A home located in a high-traffic area which sees a great deal of car thefts, muggings, and home invasions will obviously pose a greater risk to insure than a home on a quiet residential street. Municipal police services will often feature crime mapping information, either at local stations or on the Internet, which can give you an idea of the crime rates in your neighborhood before you begin your search for reasonable home insurance.
Weather also plays a factor in home insurance coverage and the ultimate price. A home located in a high-earthquake area or one prone to fire will be harder to insure than a home in a temperate climate with no severe weather issues. In some cases, insurance for weather-related problems will fall under a separate policy or insurance provider, but often higher levels of coverage for basic damage from water or fire can be obtained from your home insurance provider initially. When calculating your home insurance premiums, a provider does its best to look out for their own best interests. Anything which makes your home more likely to generate a claim will also result in a higher monthly payment. Anything you can do to increase the safety and security of your home should provide a discount.