When it comes to protecting your home with insurance, understanding the factors that influence your premiums is important. Home insurance premiums can vary significantly based on various factors. In this post, we will discuss the top 10 factors that can affect your home insurance premiums:

Location

The location of your home plays a significant role in determining your insurance premiums. Homes in high-crime areas or regions prone to natural disasters such as hurricanes, earthquakes, or floods will generally have higher premiums.

In Nebraska, the main threat we have when it comes to the possibility of claims is often weather-related. Tornadoes, hail, and high winds are all factors that we deal with, primarily in late spring, summer, and early fall.

Because of this, many insurance companies have changed home insurance policy coverages with a separate, often higher, deductible for wind and hail losses.

Home’s Age and Condition

The age and condition of your home can also impact your insurance costs. Older homes or homes in disrepair may be more expensive to insure due to a higher risk of damage or maintenance issues.

Other factors included when quoting insurance for an older home include the type of electrical in the house and the type of wall and ceiling construction.

While many homes have been converted to a circuit breaker panel for electrical, others may still have knob and tube wiring. If this is the case for a home you may be purchasing, there will be limited options to find coverage, as most companies will prefer or likely require that the house be converted to a circuit breaker panel.

Homes that still have walls and ceilings made from lath and plaster may require a higher amount of dwelling coverage because of this.

Coverage Limits

The amount of coverage you choose for your home insurance policy will directly affect your premiums. Higher coverage limits mean higher premiums, so balancing adequate coverage and affordability is essential.

Most standard insurance companies will use many factors to determine the correct amount of replacement cost coverage for your home. One primary factor used is the finished square footage of the house.

Once the replacement cost is determined, this is typically what you will need to insure the home for if you choose that company.

Deductible Amount

Your deductible is the amount you must pay out of pocket before your insurance coverage kicks in. Choosing a higher deductible can lower your premiums, but it’s essential to ensure you can afford the deductible in the event of a claim.

Home Security Features

Installing security features such as smoke detectors, burglar alarms, deadbolts, and security cameras can lower your insurance premiums by reducing the risk of theft or damage.

Typically, suppose you have a security system with alarms that report to the police department and fire department without you having to make a call. In that case, you may receive a discount on your home insurance. The process to receive this discount is usually just sending your insurance agent a copy of the contract or agreement with the security company.

Credit Score/Insurance Score

In many states, insurers use credit scores to determine home insurance premiums. Maintaining a good credit score can result in lower premiums, as it is often seen as an indicator of financial responsibility.

In most cases, insurance companies are looking at various factors to determine your insurance score. Many companies are trying to determine what your payment history looks like. They have learned that customers who are diligent and consistent in making payments for other bills (cell phone, car payment, etc.) are often more likely to pay their insurance on time and consistently.

Claims History

Your claims history can impact your premiums. If you have a history of filing multiple claims, insurers may consider you a higher risk and charge higher premiums.

Type of Coverage

The type of coverage you choose, whether it’s basic coverage or additional endorsements for specific risks, will affect your premiums. Adding coverage for valuable items, such as jewelry or art, will increase your premiums.

It is usually best to sit down with an agent to discuss your concerns regarding the exposures that might cause damage to your home. And sometimes, adding endorsements is inexpensive based on the amount of coverage you get. For instance, increasing liability coverage from $300,000 to $500,000 on your home policy may be well worth the small amount of additional premium that will be due.

Home’s Construction Materials

The materials used to build your home can influence your insurance costs. Homes made of fire-resistant materials may have lower premiums than homes made of wood, which is more prone to fire damage.

Discounts

Many insurers offer discounts that can help lower your premiums. These discounts may be available for factors such as bundling multiple policies, having a good claims history, or installing safety features in your home.

Taking advantage of a multi-policy discount (typically auto and home with the same company) is usually the quickest way to save on your insurance premiums.

It is also important to ask about companies that have started to see the advantages of technology and smart devices that can help with claims prevention. For instance, if you are willing to install a water shutoff device in your home, you can take advantage of a discount to help offset the installation cost.

Conclusion

There are a lot of decisions to make when buying a home, or changing insurance companies. I hope this post helps you understand some of the factors that are used to help determine the premium for home insurance.

Understanding these factors can help you navigate the complexities of home insurance and make informed decisions to protect your home and belongings.

By considering these factors and working with your insurance provider, you can find the right coverage at a price that fits your budget. Remember, you must review your policy regularly and adjust as needed to ensure adequate coverage for your home.