34 Days of Homeowners Insurance
Day 008 | Why Did My Home Insurance Premium Go Up?
Why did my home insurance premium go up? Do you find yourself asking this question? Actuaries at insurance companies everywhere look at data from the past and try to predict the future. There are a number of factors and it goes deep. Here are 8 things that affect your homeowners insurance premium.
Current Homeowners Insurance
Have you had prior insurance? How long have you been insured with your current insurance company? Has your policy ever lapsed?
Longevity with an insurance company plays a part with some companies. Shopping for a cheaper premium every year or two isn’t always in your best interest.
Deductible
The smaller your deductible, the more premium you will pay.
The higher your deductible is, the less premium you will pay.
If you had a loss today what are you comfortable paying for? Remember, the deductible is what you’re responsible for. If you have a $2,000 deductible and it costs $12,000 to replace your roof, you would pay the first $2,000.
Loss History
Things happen. You can’t control mother nature.
The insurance company looks at how often you turn in claims.
Insurance is for the sudden and unexpected. There are times when it is necessary to turn in a claim. That’s why you and I buy insurance.
Protection Class
Fire Protection Class is a ranking used by the Insurance Services Office (ISO). There are 10 categories, 1 being the best. For instance, at the time of this post, inside Platte City city limits the Protection Class is a 4.
It comes down to where you live. The more rural area you live, typically the higher the Protection Class. The smaller the fire department means the response time may not be as quick. Your access to water will be more difficult (i.e. fire hydrants) and so on.
In short, here are a few key elements.
- Do you live inside or outside of city limits?
- How close are you to the nearest fire hydrant and fire station.
- Response time, equipment, and manpower of your nearest fire department.
Insurance Score
The insurance company uses your credit score and a formula to come up with an insurance score. Your insurance score is slightly different than your credit score. In a nutshell, your credit does affect your homeowners insurance premium. The theory is, the better your credit, the more likely a person will be to pay their premium and less likely they are to turn in a high frequency of claims.
It wasn’t my idea. Right or wrong, your insurance score is a factor.
Construction
The type of construction of your home can make a difference.
- What type of construction is your home? Is it a frame, brick veneer, stone?
- How old is your home?
- What condition is your home in? How old is your electrical, plumbing, heating and cooling systems?
All of the items above can influence your premium.
Roof
Is your roof a 5-year-old architectural shingle or a 15-year-old wood shake roof?
The type, material, and age of your roof matter.
Discounts
Who doesn’t like discounts?
Each and every insurance company offers slightly different discounts. Here are a few of the more common ones:
- Do you Bundle your auto and home
- Do you have multiple autos?
- Fire/Burglar alarm – another potential discount
Remember, this is a brief overview of what goes into your homeowners insurance premium. It goes much deeper than this.
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