Insurance providers generally calculate the cost of your home insurance based on your risk level. The higher risk you present of filing a claim and/or causing your insurance provider money, the more you are likely to pay for home insurance.
Location
Your location can influence your home insurance premiums for a variety of reasons, such as the crime rate in your area and the history of natural disasters. A higher crime rate increases your likelihood of being the victim of theft and vandalism while a history of storms or natural disasters can mean more dwelling and personal belongings claims.
Credit Score
Your credit score is viewed as how reliable you will be for paying your premiums in full and on time. A low credit score may cause an insurer to raise your rates in order to cover their potential losses. You can build your credit score by paying off debts and credit cards. It can also help to set up automatic drafts so that you don’t accidentally miss a payment.
Value of the Home
The value of your home as calculated by the insurance provider is different than the price you pay for the home or its market value. Instead, home insurance goes by the total replacement cost value of your home, which is how much it would cost to completely rebuild the home after a disaster. This includes building and material costs. The rule of thumb is that you should carry at least 80% of your home’s total replacement cost value in home insurance or else you could find unexpected gaps in your coverage when it comes time to file a claim.
You can calculate the value of your home through a professional appraiser by calculating the value per square foot, the amenities and permanent fixtures.
Claims History
The claims history on your home insurance policy can also influence your rates. If you have a history of claims, you may pay more for home insurance due to the risk that you could file another claim in the future.
Coverage Limits
Not all home insurance policies are created equal. The more coverage you have, the more you may pay for it. Skipping out on home insurance coverage can leave you paying for more out of pocket after an accident, however.
Be sure to speak with your insurance agent about what is affecting your home insurance premiums and ways you can save money.
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