Buying homeowners insurance is not easy. The process of buying homeowners insurance can be frustrating, complicated and confusing. Sometimes, it's difficult to accurately compare rates, since coverage isn't usually identical from insurance company to insurance company.
However, to help you understand the factors that insurance companies use to determine your homeowners insurance rate, I've listed the Top Ten factors that affect your homeowners insurance rates.
1. Geography. The further your house is from a fire station, the higher your premium will be. So, homes in cities, where fire stations are closeby, will have lower rates than homes in rural areas.
2. Construction. Homes built of non-flammable materials, like brick, stone and concrete, have lower rates than homes built of flammable materials like wood.
3. Age. The age of a home probably has less affect on rates than any of the other factors. Some older homes are extremely well built, and some newer homes are quite cheaply built. More important is...
4. Value. When you calculate the value of your home, leave out the value of your land. Only consider the replacement cost of the dwelling at today's prices.
5. Occupancy. A single family home will have lower costs than a duplex. But if you operate a business from your single family home, the premium will increase.
6. Contents. The value of your personal property is usually calculated by the insurance company as 50% of the dwelling value. So, if your personal property has value in excess of that amount, you need to increase the policy limits on Contents.
7. Liability Limits. Homeowners Insurance is a package policy with a minimum liability limit built in. I recommend that you increase your liability limits significantly above the minimum. Jury awards on liability claims can run into the hundreds of thousands of dollars. A minimum liability limit will leave you dangerously under-protected.
8. Additional Living Expense (ALE) Limits. ALE is usually 20% of the Dwelling limit. So, increase the ALE limit if you feel it is too low for your needs. It usually is.
9. Deductibles. The deductibles you choose will have a significant affect on your insurance rates. Generally, the higher your deductible, the lower your rate. Always choose the highest deductible your budget will allow. Then, set aside one deductible in your savings account to take the financial pressure off your deductible choice.
10. Claims History. If your home is free of previous insurance claims, you'll get the best insurance rates. If you have had previous insurance claims, the insurance company will consider those claims when they calculate your premium rate.
A change in any of these Top Ten factors can cause a change in your homeowners insurance premium. Make sure that you fully disclose the correct information about each of these factors to your agent. That way, you'll be most certain to get the lowest homeowners insurance rates you can.
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