Factors that affect home insurance premiums

Factors that affect home insurance premiums

| October 02, 2023

Getting home insurance is not just a wise financial move, but it's often necessary since mortgage lenders usually require it. And while it's super important to have enough coverage to safeguard your investment, let's face it, the cost of premiums can be a bit overwhelming. However, there are quite a few strategies that can help you reduce your home insurance premiums without skimping on coverage.

Demystifying Your Home Insurance Policy

First thing’s first, take a closer look at your insurance policy. Home insurance typically includes various kinds of coverage. There's dwelling coverage, which safeguards your home's structure; personal property coverage which protects your belongings; liability coverage for legal costs if someone gets injured on your property; and additional living expenses coverage, which covers temporary housing costs if your home gets damaged.

It's super important to regularly check these coverages to make sure they match your current situation. For example, if you've recently sold some valuable items, you might be able to lower your personal property coverage. On the flip side, if you've bought valuable items or made significant home improvements, you might need to up your coverage.

Decoding the Types of Coverage

Let’s break down the different types of coverage in a typical home insurance policy:

  • Dwelling Coverage: This is the heart of any home insurance policy. It covers the cost to repair or rebuild your home if it gets damaged by things like fire, wind, or hail.
  • Personal Property Coverage: This one covers your personal belongings, both inside and outside your home. So, if your furniture, electronics, or other personal items get damaged, destroyed, or stolen, this coverage will help replace them.
  • Liability Coverage: This covers you if someone gets injured on your property or if you or a family member accidentally damage someone else's property.
  • Additional Living Expenses: If your home gets damaged to the point where you need to temporarily move out while it's being repaired, this coverage will help pay for things like hotel bills, meals, and other costs.

Understanding these coverages can help you figure out if any can be removed or adjusted. For instance, if you live in an area with a low risk of earthquakes, you probably don't need earthquake coverage, which is usually an optional add-on.

Evaluating Unnecessary Coverage

Sometimes, there may be coverages included in your policy that just don't apply to you. For example, if you don't have a swimming pool, you won't need liability coverage for pool-related accidents. Similarly, if you live in a condo, some coverages included in a standard home insurance policy might already be covered by your condo association's insurance.

Thinking About Your Deductible

Your deductible is the amount you pay out of pocket before your insurance kicks in. Raising your deductible can lower your premium, but make sure it's an amount you can comfortably afford in case you need to make a claim. For example, if you can comfortably handle a $1,000 out-of-pocket expense, increasing your deductible to $1,000 can lead to lower premiums.

Assessing Your Home's Value

It's crucial to make sure your home's insured value is spot on. Over-insuring your home leads to higher premiums while under-insuring can lead to inadequate coverage if you need to make a claim. Your home's insured value should be based on the cost to rebuild your home, not its market value. Factors like its size, construction type, and location can affect the cost of rebuilding your home. It's a good idea to reassess your home's value periodically, especially after making significant home improvements.

Taking Home Security Measures

Security System: Installing a security system is a super effective way to protect your home from burglars, and it can also lead to insurance discounts. Insurance companies often offer discounts to homeowners with monitored security systems because they reduce the risk of burglary and subsequent claims. Monitored systems, which are watched 24/7 by a professional security company, are especially effective because they can quickly respond to emergencies and notify the authorities if needed. The discount offered for installing a security system varies by insurance company but can be quite significant.

Security Cameras and Motion Sensors: Security cameras and motion sensors can act as major deterrents to potential burglars. Security cameras can capture video footage of any suspicious activity around your home, while motion sensors can detect movement and trigger alarms or lights. Having visible security cameras and motion sensors can make burglars think twice about targeting your home. Plus, modern security cameras and motion sensors can be connected to your smartphone, allowing you to monitor your home remotely. Many insurance companies offer discounts for installing security cameras and motion sensors because they reduce the risk of burglary and vandalism.

Reinforcing Doors and Windows: Your home's doors and windows are common entry points for burglars, so it's super important to make them as secure as possible. Installing deadbolt locks on all exterior doors, adding security bars or grilles to windows, and using reinforced glass or security film can help prevent break-ins. Deadbolt locks are stronger than standard locks and are harder to pick or force open. Security bars or grilles can prevent burglars from breaking through windows, while reinforced glass or security film can make it more difficult to shatter the glass. Making these upgrades can lead to insurance discounts because they reduce the risk of break-ins and subsequent claims.

Maintenance and Regular Upkeep:

Roof: Regularly maintaining your roof can help prevent water damage, which is one of the most common home insurance claims. Make sure your roof is in good condition by regularly checking for missing or damaged shingles, cleaning your gutters, and addressing any issues promptly. A well-maintained roof can lead to insurance discounts because it reduces the risk of water damage and subsequent claims.

Plumbing: Leaking pipes and plumbing issues can lead to water damage, which can be costly to repair. Regularly inspect your plumbing system for leaks, and address any issues promptly. You can also install a water leak detection system, which can alert you to leaks before they cause significant damage. A well-maintained plumbing system can lead to insurance discounts because it reduces the risk of water damage and subsequent claims.

Electrical System: Electrical issues can lead to fires, which are another common home insurance claim. Regularly inspect your electrical system for any signs of wear and tear, and address any issues promptly. You can also hire a licensed electrician to perform a thorough inspection of your electrical system. A well-maintained electrical system can lead to insurance discounts because it reduces the risk of fires and subsequent claims.

Heating and Cooling System: Regularly maintaining your heating and cooling system can help prevent fires and other issues. Make sure to change your air filters regularly, have your system serviced annually, and address any issues promptly. A well-maintained heating and cooling system can lead to insurance discounts because it reduces the risk of fires and subsequent claims.

Final Thoughts

It's super important to have adequate home insurance coverage, but it's also important to make sure you're not overpaying for it. By taking steps to reduce your home insurance premiums, you can save money without sacrificing coverage. Regularly reviewing your policy, making necessary updates, and implementing home security measures can lead to significant savings. Additionally, regularly maintaining your home can not only lead to insurance discounts but can also help prevent costly repairs in the future.

Remember, it's always a good idea to talk to your insurance agent or company to see if there are any additional ways to save on your home insurance premiums. They may have additional discounts or recommendations that can lead to even more savings. Plus, they can help you assess your coverage needs and make any necessary updates to your policy.

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