Factors to Consider when Purchasing Home Insurance

Many factors can have an influence on the price you pay for homeowners insurance. Your homeowners insurance premiums are based on a number of different factors, that when viewed as a whole, determine your risk level and premium amount. Proper knowledge and a little bit of research can add up to big savings in the long run.

April 30, 2008

While home insurance premiums can be pretty steep, you don't necessarily have to break the bank in order to secure coverage. Your homeowners insurance premiums are based on a number of different factors, that when viewed as a whole, determine your risk level and premium amount. Proper knowledge and a little bit of research can add up to big savings in the long run. Here are just some of the factors that affect home insurance premiums.

The Age & Condition of the Home

Insurance companies calculate premiums on a number of factors, but the age and condition of your home weigh pretty heavily. In general, they will inspect such things as the condition of the roof, plumbing, attached structures and the integrity of the home's wiring system. Since newer homes tend to be built according to higher standards and are generally in better condition than older homes, some insurers will offer significant discounts if your home is new or has had recent renovations.

The Construction of the Home

Certain types of homes are less expensive to insure because they are more resistant to damage. A mobile home or modular home presents a higher risk to the insurance company, whereas a brick home is preferable because of its resistance to wind damage.

Distance to a Fire House

Not only will the distance to a firehouse affect your premium, the specific fire department's response rating is also considered by many insurers. In general, the closer you are to a fire hydrant and fire department, the better your overall rating.

Safety Factors

Deadbolts, sprinkler systems and centrally monitored burglar and fire alarms can add up to significant savings.

Smokers

Smoking in the home greatly increases the risk of fire, and in turn can also lead to higher premiums.

Location

If your home is in a high-risk flood, earthquake, hurricane, tornado or mudslide area, you can expect to pay. While certain damage (i.e., flood and earthquake damage) is not generally covered by standard home insurance policies, supplemental catastrophic policies that cover these conditions are available, but can be quite costly.

Desired Coverage

Homeowner's insurance typically covers damage or loss to your home and its contents. The coverage also provides other benefits such as liability coverage, in the event that someone is injured on your property. Nowadays, items like identity theft are also being packaged into homeowner's policies. It's more important, now than ever, to read the fine print. Prices and coverage can vary significantly between packages that appear to be very similar. Be sure that you have the exact coverage that meets your individual needs.

Deductibles

The higher your deductible, the lower your home insurance premiums. By raising the deductible, you can significantly save on the cost of your homeowner's insurance.

Multiple Policies

Insurers will often provide discounts if you buy more than one type of coverage — such as auto and homeowner's — or if you stay with them over a period of time.

Payment Method

Whenever possible, pay your premiums upfront in one lump sum. Monthly and quarterly installments come with service charges. Recently, many companies are starting to offer discounts or waive their service charges for electronic payments, so be sure to ask about how your payment method will affect your policy costs.

Trying to determine how much you will pay for homeowners insurance can be a daunting task. Your best bet is to comparison shop a number of different insurance companies and make sure you understand the fine print before selecting a policy.