Understanding Insurance Issues

3 Factors That Affect Your Homeowners Insurance Premiums

Are you overpaying for your homeowners insurance? Many people feel like they are, but the only way to know is by requesting quotes from other companies. Every insurance company uses a similar model to calculate premiums, yet each company might provide a different policy cost. While many factors affect homeowners insurance premiums, here are three of the top factors that affect the price you pay.

Your Insurance Score

Most people are familiar with their credit scores, but many do not know that insurance companies use insurance scores when calculating premiums. An insurance score significantly affects the costs a person pays for their policy, and scores range from 200 to 997. Higher scores are better than lower scores, as the numbers represent risk. If you have a score of 997, the insurance company has virtually no risks with issuing you a policy. If you have a score of 200, the insurance company views you as the highest-risk person to insure, and you will pay higher rates. Insurance scores factor in previous claims, demographics, and many other things.

Your Coverage Types

The second factor that affects your costs is the coverage types you have for your home. If you have basic coverage without any extras, you will likely pay less. If you want to fully insure everything you own and have no risks, you will pay more for your policy. Insurance costs are highly based on the coverage a person has, but the deductible amount also matters. If you have a low deductible, you will pay more than you would with a high deductible.

The Condition, Age, and Components of Your Home

The condition, age, and components of your home also affect your policy's costs. Newer homes generally have fewer risks than older homes, so it might cost less to insure a newer home. Homes with fireplaces and wood-burning stoves have higher risks, so you might pay more if your home has one of these devices. If you have a swimming pool, you will pay more for your coverage.

To determine the costs of your policy, an agent will ask you many questions about your home. The purpose is to determine the risk level for insuring your property.

Other factors also play a role in your homeowners insurance rates, but these three have the most significant effects. If you have any questions about the costs of insuring your home, talk to a homeowners insurance agent at a company like ALTRE Insurance Agency Inc today.