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homeowners insurance rates

What factors determine homeowners insurance rates?

Insurance companies base their premium rates on the amount of risk an insured pose. The greater the risk of an insured filing a claim that the insurance company will have to pay, the more premium the company will charge that individual. When it comes to homeowners insurance, four areas affect your rates the most: home characteristics, home location, home contents, and past claims.

Home characteristics When property insurers underwrite your home, they will examine factors that increase or reduce the risk of a claim, as well as how much those claims might total. Obviously, the higher the value of your home and its contents, the more it will cost to insure. This is especially true if your policy provides for the full replacement cost in the event of total loss. You may also pay a premium if home construction costs are higher due to the cost and availability of materials and labor. The home’s structure will affect insurance rates. Homes constructed with brick exterior are less likely to suffer fire, hail or wind damage. The age of the home will also be a factor. Older homes will typically require higher coverage levels because they can cost more to replace, and because they may not have been built with the same safety codes and building materials of newer homes. The size and placement of your garage can also have an impact. Large garages are broken into more than one-car structures because they typically contain more valuable items to steal. Likewise, detached garages are more inviting to thieves than those attached to the main residence. On the other hand, attached garages bring greater fire potential because items stored —vehicles, gas cans, etc. —are flammable and a fire that starts in the garage can more quickly spread to the main residence. Home location. There’s an old saying that the three most important considerations of real estate are location, location, location. The same holds true when determining how much you’ll pay for homeowner’s insurance.

Where you live has a considerable impact on how risky your property is to ensure. Living in high-crime areas brings the risk of theft and vandalism. How close or far you live from a fire department gives insurers an indication of how much damage a home might incur before firefighters arrive. Companies will also examine the potential for hail, the wind, lightning damage, as well as whether your home is susceptible to earthquake damage. Living near forested areas can bring a greater risk of wildfire damage, while being on a coastline carries the risk of hurricane damage. Home contents Homeowners policies not only cover the property itself, but also the contents inside, including furniture, appliances, electronics, and clothing. Of course, any valuables that would be expensive to replace in the event of theft, fire or natural disaster will increase insurance rates. These would include jewelry, rare collectibles, and artwork.

In addition, companies will scrutinize anything within your home or on the property that increases the risk of a claim. For example, fireplaces and wood stoves will usually lead to higher rates because of the risk of fire damage. Companies will also take into account anything on the property that could injure a resident or guest, leading to a claim. Many insurance companies have raised rates on homeowners with trampolines and swimming pools because they can cause injury or worse; some companies have gone as far as to deny or cancel coverage for properties with these types of items. Certain pets, especially certain breeds of dogs, can also affect your homeowner’s insurance because of the potential to bite or attack a member of the family or a visitor. On the flip side, insurance companies may also reward homeowners if they have items on hand that minimizes the risk of damage. Examples include fire extinguishers, smoke detectors, and security systems. Past claims Just as with auto insurance, underwriters will review any homeowners or renters claims you ‘ve had to determine the potential for future claims. If you are the type of person that has filed multiple claims for small occurrences, you are considered a greater risk than a person who has never filed a homeowners claim. That’s because homeowners insurance was designed to cover major losses from fires and natural events, whereas small claims are typically preventable and