The importance of home insurance cannot be overstated. It not only protects your house and possessions; in some cases, it also protects you from certain liabilities. Generally, even if many homeowners are willing to assume some risks, most mortgage lenders will require
that they get home insurance. One question many homeowners ask is how much they should pay for home insurance. If truth be told, there is no simple answer to this question. Home insurance rates can vary vastly, depending on several factors. In 2017, the average home insurance premium paid
was $1, 211. Nowadays, you could pay more (or less), depending on several factors.
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Below are some of the factors that can impact your home insurance rate:
Price of the Home and Rebuilding Costs
If your home is a bit expensive, expect that it will cost more to insure. Primarily this is because it is more costly to repair or rebuild. In most cases, repair and rebuilding costs will depend on several crucial factors, including your house's style, the type of construction, whether it was custom-built or not, or if it has unique features like fireplaces.
Your Home's Condition and Age
You might need to pay a higher insurance premium if you own a vintage home. Old homes have features or construction materials that can be very expensive to replace, such as ornate trims or original sidings. Also, vintage homes may have outdated electrical or plumbing systems that many insurers consider as high risk. The condition of your home is another critical factor that can affect your home insurance. For instance, some insurers often take into account the roof. Keep in mind that leaks brought about by worn-out roofs can cause damage inside your home that can be very
costly to fix.
Safety Features and Home Security
Some insurers reward homeowners with a discount if they install safety and security systems to minimize the risk of home insurance claims. Some insurers also provide discounts on premiums if homeowners add fire alarms or other security systems to alert
local authorities. At times, even adding seemingly trivial security features like deadbolts and locks might also
merit a discount. However, before investing in any costly security feature, it is recommended that you consider the benefits of each feature against the cost. It is also important to remember that not all insurers will provide the same discounts.
Your Credit History
This might not be common knowledge, but how you use credit can impact your home
insurance premium. In some states, insurers use credit-based insurance scores as a factor when determining premiums.
While the insurance score is different from the setting score, it considers a few identical factors. If you want to improve your insurance score, consider using the same methods you used to improve your credit score, including paying your credit card bills on time.
Higher Deductibles
Homeowners have the option to choose a lower or higher deductible on their home insurance policy. Simply put, a deductible is the amount one pays towards a claim. For instance, let's say you have a $500 deductible, and your home incurs damage that costs $2,000. In the scenario above, you will pay $500, and the insurer will pay the rest once the repair bill has been approved. Higher deductibles minimize the insurer's risk, so insurance providers may also reduce the premium.
Bundling Insurance
Many insurers offer a discount to those who purchase different types of insurance from them. Some homeowners who buy auto insurance from the same company can save as much as 20% on the cost of their home insurance policy.
Wrap Up
Several factors can affect the cost of home insurance. Some involve decisions you make (i.e., buying additional coverage or adding security systems), while others are beyond your control (i.e., your house's age and size or where it is located). As a general rule of thumb, factor in all the critical elements so you can decide on the best home insurance policy to invest in while saving a significant amount in the process.
