A home insurance policy protects your home from damages caused by unforeseen events, including thefts, vandalism, and natural disasters that might render your home unfit for living either on a temporary or permanent basis. The home insurance premium is a pre-determined amount of money that you need to pay to your insurer at regular intervals to ensure the continuity of your home insurance plan.
The following are the three important factors that play a key role in the calculation of your home insurance premiums.
1. The Amount of Coverage
The amount you pay for home insurance premium is directly affected by the coverage amount (i.e., the maximum limits to which your policy will cover your home). Generally, the higher your coverage limits and the more robust your coverage is, the more you will pay for home insurance premiums.
2. The Location of Your Home
Your home’s location is one of the biggest indicators of insurance cost. The location of your home largely determines how much you’ll pay as your home insurance premium. For example, if your home is located in an area that is prone to wildfires, tornadoes, storms, or other disasters, the area will be considered as high risk by insurers, and you’ll pay more premiums than if your home is located in an area with a more stable climate. Also, if you live in large cities with a high cost of construction materials, your home insurance premiums may be higher.
- The Size, Age, and Type of Your Home
Apart from your policy’s coverage amount and your home’s location, the size, age, and build of your home are factors that are considered by insurers when calculating the cost of your home insurance premium.
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Size: If you live in a large home, your homeowners premium is more likely to be higher than if you live in a small home. This is because a large home will cost more to rebuild or repair than a small home in the case of a disaster. This means you will need higher dwelling coverage limits if your home is large.
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Age: Apart from the size of your home, the age of your home is also considered by insurers when calculating premiums. Older homes are generally considered riskier to insure as the building materials are more likely to be obsolete and may incur more losses than modern homes.
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Type: Lastly, how the home is built is considered when calculating the insurance risk. For example, homes built with a timber frame in an area with unfavorable weather may cost more to insure as the chances of getting damaged or destroyed are higher than a home built with concrete.
The factors above are considered by insurers when calculating home insurance premiums. However, there are other factors that are used to calculate risk and pricing. These factors are kept confidential by insurance companies. Also, insurance pricing is highly volatile and changes constantly, making it hard to determine every factor that determines home insurance costs.
What determines home insurance costs can change from one day or insurer to another, depending on various factors. Other factors, such as area claim history, personal claim history, and neighborhood crime rate can also influence insurance costs. If you need help with your home insurance policy, contact the experts at Scautub Agency in Scotia, New York today. We will be happy to discuss all your insurance coverage needs with you.