What Affects Homeowners Insurance Rates?

If you own a home, there is really no getting around it: you need homeowners insurance. Yes, it can be expensive, and the likelihood that disaster will strike is pretty slim for most people. Even if your mortgage lender does not require you to purchase homeowners insurance, doing so is a smart decision for many reasons. The high cost of homeowners insurance may put you off, but insurance companies set those rates for a reason. Here are some of the things insurance companies factor into your coverage cost, and how you can save on your policy.

• Physical characteristics of building. Home insurers consider things like age, building materials, and  infrastructure when they calculate your rate. As you may have guessed, older homes usually cost more than newer homes to insure, given the effects aging has on a home as well as older homes' lack of newer, safer facilities. A home insurer may even require you to replace plumbing, wiring, or roofing, or update your heating or air conditioning before insuring your home.
• Local services. A key component home insurers use to estimate your policy rate is how accessible your home is by emergency responders like fire companies and the police. Distance to the nearest fire hydrant is also a factor. After all, the faster the a fire engine can get to your house to put out a fire, the less your insurer will likely have to pay on a claim.
• Area crime statistics. Since your home policy will likely cover personal property, the amount of thefts that have historically taken place in your area will factor into your coverage costs. Obviously, insurance companies do not want to pay more out on claims than they take in on premiums.
• Vulnerability to disaster. If you have owned a home in a disaster prone state such as Florida, you are well aware of this one. Some people live in such hazardous areas that many insurers will not even insure their homes. If you live an area that has seen its share of hurricanes, earthquakes, tornadoes, or other natural disasters, you can expect to pay more for home insurance than those in less vulnerable areas.
• Extent of coverage. This depends on what you want as well as what kind of policy your insurer is offering. What you pay for coverage relates directly to the extent of home, content, and personal liability you wish to purchase.
• Additional coverage options. You may want to include optional coverage in your home insurance policy, such as flood, earthquake, or additional liability insurance. Such additional coverage will, of course, result in additional costs.
• Deductible. As with other types of insurance, the amount of money you are willing to pay out-of-pocket on a claim has a direct impact on how much you pay. The more you opt to pay, the less you will pay on your premium.
• Your credit. In some states, insurance companies consider your credit rating in their assessment of your policy. A poor credit rating is likely to cause potential insurers to view you as a risk. This may mean a higher rate for you, or even denial of coverage.

Ways to whittle your rate

The most important thing you need to know when shopping for home insurance is exactly what kind policy best suits your needs. Why buy a policy with all the bells and whistles when all you need are the basics? If you need help determining your ideal coverage package, seek out advice from objective sources like your state's insurance department or consumer advocacy group publications. The Internet and your local library are also excellent resources, especially if you need help deciphering industry jargon. After you have figured out what you need, shop around, as insurance companies often have differing rates for the same types of coverage. With a minimal amount of leg work on your part, the ideal homeowners insurance policy at the right price is close within reach.