Buying a home is a big investment. For some of us it may be one the largest purchases we ever make. Which is one of the major reasons why having your home properly protected is so important. Often your mortgage lender may even require to carry homeowners insurance before closing on a property.
A homeowners insurance premium is what you pay to the home insurance company to keep your homeowners insurance policy active and your home covered.
Several things factor in when calculating your home insurance premium cost. These qualifications can change from state to state and insurance company to insurance company.
Homeowners insurance premiums
In short, the homeowners insurance premium is the amount you pay to the homeowners insurance company to keep your home insurance policy in force. You pay your home insurance premium commonly monthly or annually. You can pay this amount directly to the insurance company or through an escrow account. This is commonly referred to as PITI (principal, interest, taxes, insurance (homeowners insurance). The taxes portion being your homeowners insurance policy.
The way homeowners insurance premiums are calculated can vary. Every state has their own rules and regulations regarding home insurance. As well as every home insurance company has their own rules and regulations as well. Some of the factors might be age, credit score, claim history, marital status, to name a few. The zip code you live in and condition of the home are also contributing factors.
The home insurance company will determine your risk as a borrow and take a look at your claims history. Usually with all insurance policies, if it’s determined you are a higher risk, you could potentially expect higher rates.
Factors that determine homeowners insurance premiums
With the number of factors that determine homeowners insurance premiums it’s a good idea to know what to look out for or ways to improve to potentially get lower rates. Knowing what goes into your insurance companies decision making can help you know why your bill is what it is. Below we go over a few of the basics when it comes to determining home insurance premiums.
Coverage amounts
The cost of your home insurance and the amount of coverage you need to protect it play a huge role in determining your home insurance premium. If you have a 5,000 square foot castle, it’s going to cost more to rebuild and or repair your home. This is directly correlated to the amount you pay for home insurance.
The location of the home
The zip code you live in will also play a major role in determining your home insurance premium. You may live in an area that is prone to storms or wild fires. The risks associated with the area you live in will come into play when determine your homeowners insurance premiums.
Personal insurance score
Some states use credit to determine insurance rates. Some do not, so please check with a local home insurance agent to find out the exact rules regarding this. If you do live in a state that uses credit you may have heard of credit based insurance scores. This is when the insurance company uses your credit history and claim history to determine your risk as a client. In most cases, the higher your credit score is, the lower your homeowners insurance premiums will be.
Age, build and size of your home and property
As mentioned above, if you have a larger than life home you may be looking at higher rates than your neighbor living in a smaller home.
If you have an older home that shows wear or potentially outdated security features, this can help in determining your rate. The materials used to build the home and protection features like smoke alarms and fire sprinklers can always be considered as well.
Most homeowners insurance companies appreciate when the home owner installs safety features that protect the home. Keep things up to date and in great working condition can always help.
If you live in California and have questions regarding home insurance premiums or just want to shop around for a better policy, please give us a call. Our agents are nice people and we have great home insurance rates! Call us today 916 313 6100
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