When you’re shopping for homeowners insurance, you’ll want to compare quotes and go with an affordable plan that satisfies your coverage needs. However, it’s also important to have a basic idea of how insurance premiums are calculated since they do impact the total cost of insuring your property.
Keep in mind that insurance premium rates for houses, condos, or manufactured homes can vary from policyholder to policyholder. Therefore, you’ll want to consider your unique circumstances and choose coverage that matches the amount of risk you’re willing to bear.
Read on to learn about selecting the right insurance policy and factors that help determine the cost of coverage.
Insurance Premiums -What Are They?
For an insurer to offer insurance coverage, they’ll charge a premium, which is the sum of money you are required to pay for the policy. You may pay your premiums in different ways, depending on your insurer’s specific terms. Common payment modes include monthly or semi-annually.
How are Insurance Premiums Determined?
Factors that may influence the calculation of your premiums include:
1. Your Deductible Amount
Your insurance deductible is the amount of money you pay toward a covered hazard. If you incur a covered loss, you’ll pay this sum out of pocket before the insured amount can kick in. It can be a factor in your premium calculations as it’s related to the risk you’re assuming as the policyholder. According to the National Association of Insurance Commissioners (NAIC), the higher your deductible is, the lower your premium rates might be.
2. Your Insurance/Claims History
Before an insurer agrees to cover you, they’ll usually look at your insurance records. As such, your history may determine the types of policies you can buy and how much it might cost you to insure a property, such as a car or house. Key aspects of your insurance history include:
- Claims history: How frequently you file claims can affect your premium levels
- Insurance score: This rate indicates a customer’s insurance risk levels
- Continuous coverage: Your insurer will consider any periods you went without insurance (the fewer, the better for you)
3. Where You Live
The type of claims that insurance companies receive in your location can influence insurance policy prices. Similarly, factors specific to where you live, such as your house’s proximity to a fire hydrant, can influence your insurance costs too, according to the Insurance Information Institute (III).
Is your neighborhood covered by a professional or volunteer fire department? Is your home in a coastal area? These factors may also affect your homeowners insurance premium.
4. Covered Personal Belongings
Any personal belongings in your home, from furniture and clothing to electronic gadgets, are typically included in standard homeowners or renters insurance; however, personal property coverage has limits.
The type and valuation of your belongings and valuables will determine whether you may need to get additional coverage, such as a scheduled personal property endorsement. Keep in mind that any expansion of your homeowners policy limit or coverage will increase your premiums.
5. Your Type of Home
The design and construction of the property you’re insuring also impact your premium rates. Typically, an insurer will look at factors like square footage, the type of construction material used, and even the age of your house to work out your insurance premium.
Understanding how insurance premiums are determined makes it a lot easier to compare quotes and pick the right amount of protection for your residential property. When you need to find coverage to suit your budget, talk to the professionals at Humble & Davenport Insurance today. Serving Renton and neighboring cities in Washington, we are ready to help you find suitable coverage today.