Home Insurance Articles
The Neighborhood You Live In And Your Home Insurance How They Are Connected
2010-04-06
When you think of the coverage on your home, normally you would correlate it with the condition and square footage. But for most home insurance, zip code stats of the neighborhood you live in is equally important for several reasons.
Insurance companies will take into consideration the topography of your neighborhood. Topography is the study and mapping of the features on the surface of land, including natural features such as mountains and rivers and constructed features such as highways and railroads. Your home insurance premium may be affected if the streets are hilly, making it prone to flooding or mudslides; if it is near a forest and the climate is dry, fires may be a reality and many people live along fault lines with the daily threat of earth quakes. People who live along rivers also have potential flood risks. Being near a major highway or railroad may negatively affect the value of your property, too.
Another factor in determining home insurance coverage is related to your neighborhood demographics. Demographics include such variables as the residents' income, education, distribution, and statistics regarding birth, marriage, disease, and death. Presumably higher educated residents with high incomes will result in a safer neighborhood. Certain neighborhoods attract certain demographics. Urban, modern dwellings tend to have young professionals, while quiet, suburban neighborhoods may have more retired individuals and families. However, suburban homes have other liabilities involving swimming pools, yards, and even small guest houses.
In densely populated inner city neighborhoods, there are often high crime rates, which may be more expensive to cover for theft - but less expensive and less risky for natural disasters. Underwriting costs maybe be affected in inner cities because buildings tend to be older, with less adequate wiring. They are closer together and more susceptible to fires. They are more at risk for civil disorders. Living in an area consisting of mostly retired neighbors yields much less expensive homeowners insurance rates.
Legally, the demographics of your zip code should not affect your insurance coverage. This practice is called redlining, which is the denying, or increasing the cost of, services such as banking, insurance, access to jobs, etc, to residents in certain, often racially determined areas. Redlining may also involve low income areas. The term "redlining" was coined in the late 1960s by John McKnight, a Northwestern University sociologist and community activist. This has caused a lot of litigation and criticism of insurance companies in the last few decades. So before you buy a home research the neighborhood qualities, which may add sizable additional monthly expenses to safeguard your investment.