Shopping for homeowners insurance can be puzzling. You get asked all kinds of questions, and then the provider comes back with quotes. You already know you should comparison shop, and this process proves it even more. Quotes can vary tremendously from carrier to carrier. It begs the question: How do home insurance providers set premiums, anyway?
There are many risk factors that companies take into consideration, and each weighs those factors differently. Here are 9 common risk factors that can affect your home insurance premium that you can keep your eyes open for when you are searching for a home.
You probably considered location when purchasing your home, and insurance companies do the same when they calculate your premium. Your provider can look at a record of past claims in your area and estimate how likely you would be to file a claim. If you live in an area with high crime, you might expect your premium to go up.
2. Your credit and claims history
Providers likely will check your credit score and your claims history. They consider these items indicators of your potential insurance risk.
3. Replacement cost
This is the amount it would take to replace your home should there be a total loss. The size, composition and contents of your home are all factors in the total replacement cost. A larger, fancier home will cost more to replace than a more modest dwelling, so premiums will be higher.
Oil tanks have the potential for causing costly environmental hazards, so your provider may ask about the age and condition of your tank. There is much less risk associated with gas or electric heat.
There are a few factors insurers take into consideration concerning electricity. Insurers know from experience that circuit breakers pose less of a threat than fuses, and they know that some older types of wiring, such as aluminum, can increase a chance of fire.
Older plumbing is another risk factor. Galvanized and lead piping are indicators of an old system and could be more likely to crack or leak. Insurers prefer that homes have updated plumbing with copper or plastic pipes.
7. Wood stoves
More than 1 million Canadian families heat their homes at least partly with wood, according to the Canada Mortgage and Housing Corporation. National statistics on fires in Canada are hard to come by, but in Alberta, wood stoves and fire places were blamed for about 11% of fires in living rooms, according to the province’s annual statistical report.
8. Water accessibility
It’s no wonder that providers prefer that you live near a fire hydrant or fire station. The quicker the fire can be put out, the less damage is caused. Homeowners in rural areas could experience higher premiums because of this risk.
9. Age of your roof
Older roofs can be more susceptible to weather damage, which makes you more likely to file a claim. Insurers prefer newer, updated roofs. Generally, a roof should be updated every 10-20 years.
Fortunately, there are ways you can lower your premium. Bundling policies – particularly buying home and auto insurance from the same carrier, installing a monitored burglar or fire alarm, and keeping a claims free record are just a few ways to earn discounts from providers. A licensed insurance agent can answer questions about your coverage and help you find other ways you can save.
This article was written by Samantha Alexander, contributor to the HomeInsurance.com Blog. The HomeownersInsurance.com blog serves as a resource center for insurance consumers and homebuyers across the country.