10 Factors That Can Affect Your Homeowner’s Insurance Premium
August 7, 2024
What Is a Home Insurance Premium
Home insurance premiums are the fees you pay to your insurance company in exchange for coverage—you can think of them as a subscription to an insurance plan. In other words, your home insurance premiums are how much your home insurance costs. Home insurance premiums are typically paid monthly or yearly.
How Home Insurance Premiums Are Calculated
Homeowner’s insurance premiums are calculated by your insurance company using a number of different factors. These factors include:
- The age and construction of your home
- Your home’s location
- How much your home is insured for
- The type of coverage you purchase
- Your claims history
- Credit rating
- And more
Insurance companies use dozens of different factors to calculate premiums; that’s why two houses of similar value might have very different premiums. Let’s take a closer look at some of the factors that can affect homeowner’s insurance premiums:
10 Factors That Can Affect Your Premium
1. Replacement Cost of Your Home
The more valuable your home is, the more it will cost your insurance company to replace it in the event that it becomes damaged beyond repair. Though your home insurance will offer coverage for your personal belongings and personal liability coverage, your home is generally by far the most valuable asset being covered. The higher your home’s replacement cost, the higher your home insurance premiums will be.
2. Your Insurance Deductible
Your insurance deductible is an amount of money that your insurance company will not pay out when you make a claim; in other words, it’s the amount of a claim that you have to cover yourself. The higher your deductible is, the less your insurance company will have to pay when you claim; this means your premiums will be lower. Following the same logic, a lower deductible will mean a higher home insurance premium.
3. Having a Mortgage
Having a mortgage can lead to higher premiums than if you don’t have a mortgage. People without a mortgage tend to have more financial stability, and are thus more able to make repairs and replace appliances when necessary. Additionally, their home is an asset that they own, giving them a financial incentive to improve and maintain it.
4. Your Home’s Location
Crime rates, the types of crimes in the neighbourhood, proximity to fire hydrants, and several other location-based factors can all affect your premium. The saying “location, location, location” is as true in insurance as it is in real estate.
5. Possessing a Wood Burning Stove
Wood burning stoves are more likely to lead to house fires than other types of stoves; owning a wood burning stove can drastically increase your premiums.
6. Your Home’s Age and Condition
An older home may be more prone to electrical fires and other hazards; when these hazards occur, the damage can also be more severe. Your home’s condition plays an important role here—modern wiring and construction can make a big difference in the price of your insurance, even if you have an older home. As a rule of thumb, older homes and more run down homes have higher insurance costs.
7. Remodelling and Renovation Work
Remodelling and renovation work can lower your insurance premiums if the work you’re doing reduces the risk of your house being damaged. Renovating your wiring, for example, can decrease the risk of house fires.
On the other hand, renovating can increase your insurance premiums because the renovations increase the overall value of your home, which increases its replacement cost. Some renovations, like adding a pool to your home, can also increase the risk of damage to your home.
8. Pools, Hot Tubs, and Swim Spas
Pools, hot tubs, and swim spas all increase the risk of water damage. They can also drastically increase the risk of liability claims because of the increased risk of someone drowning on your property.
9. Your Marital Status
Married couples share responsibility for the upkeep of the home, making it more likely your home will be well-kept. Additionally, married couples are statistically less likely to make insurance claims. These factors can make insurance premiums lower for married couples.
10. Your Claims History
The less you claim, the less likely you are to make future claims; many insurers offer a no-claims discount on their premiums.
11. Your Credit Rating
Today, more than ever insuring companies look to rating by personal peril. Your credit score can provide the homeowner with lower premiums, adversely it can also cause premiums to rise. Ask your broker if your current provider is giving discounts for a good credit score.
Conclusion
There are a number of other factors that can affect home insurance premiums, from whether or not you have a home-based business to how close you are to a fire station. Different home insurance providers will consider and weigh each factor differently.
Looking for an insurance broker in Winnipeg to help you find the right insurance policy for your home? Contact the team at Nation West; we can help.
