How is Home Insurance Calculated

The largest single investment most people make is in their home. You can protect your home, possessions, and liability with a homeowner’s insurance policy. The homeowner’s insurance policy is a package policy that combines more than one type of insurance coverage in a single policy. There are several types of coverage included in the homeowner’s policy: dwelling and personal property, personal liability, medical payments, and additional living expenses. The cost of this coverage is determined by many rating factors.

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How is it Determined?

You may be wondering how the total cost of your policy is determined. Here are some of the key factors.

1. Remodeling. You may not realize it but renovations or improvements you have made to your property can increase the value significantly, which in turn increases the premium.
2. Age of home.
3. Type of construction. Brick or masonry homes are considered sturdier, as opposed to wood frame homes, and do not burn as quickly as a wood frame home.
4. Where you live. How close do you live to a fire department? Do you live in a high crime area? Is your area prone to severe weather or flooding? The answers to these questions determine how much insurance generally costs in your area.
5. Your risk factors. Swimming pools, dogs, and trampolines are just a few of the items you may own that insurance companies consider liabilities, which will raise your rates.
6. Your history. If you have a long history of filing claims, your insurance company will charge more to insure you. Why? In their eyes, you are a proven risk and it’s likely you’ll file a claim while you are insured with them. A good rule of thumb is to avoid filing smaller claims if you can afford to pay for them yourself. This will help you keep a clean claims record.

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