What Do Insurance Companies Look At When Determining Home Insurance Costs?

The American dream in 2019 is vastly different than the American dream twenty years ago, but one thing facet of it remains the same: home ownership. Most American citizens hope to own a home at some point in their lives. Whether you are buying your first home, or your third, you still should seriously consider investing in a homeowners insurance policy. Let’s take a closer look at why home insurance is so important and what insurers look at when determining the cost of your policy.

Unlike car insurance, you don’t legally need a homeowner’s insurance policy to buy a house. Now, if you are taking out a mortgage to purchase your home, odds are good that your lender will require a homeowners insurance policy. Whether you are legally required to or not, purchasing a homeowners insurance policy is always a good idea.

Home insurance provides fiscal protection for both the homeowner and the mortgage provider in the event the property is damaged in any way. Now, it is important to point out that while most home insurance policies do cover things like fire, theft and tree damage. Most do not offer protection for flooding or earthquake damage. If you live in an area that is prone to flooding or earthquakes you should look into separate policies for those issues.

As with any insurance policy, insurers take a variety of variables into account when determining the cost of your policy. While we can’t go over every factor, we will take a look at a few of the most important factors that insurers consider when determining your homeowners insurance policy cost.

Credit Rating
The first thing every insurance company looks at when determining policy costs is your credit rating. The better your rating, the less you will have to pay for your policy. That means if you know you are going to purchase a house soon, you should avoid taking out any loans or making any major purchases in the months leading up to closing. It’s also worth checking your credit score beforehand so you have some idea of what to expect.

Location
Another major factor that insurers consider is the physical location of the property that you are trying to insure. If your home is in an area that is prone to severe weather events, it is going to cost more to insure it. By the same token, if you live in an area that has history of being relatively safe, you will pay less!

Do your research before purchasing a home. If you find an amazing 10,000 square foot mansion for way less than it should be, there is probably a reason for it. Oftentimes you will end up paying more in insurance than you saved on the home over time if you decided to buy in a high risk area. Take the time to do your math and research the area you will be living in.

Age
Insurers also take into consideration the age of the house when determining a homeowners insurance rate. Older homes tend to be more expensive to insure because they come with a host of safety issues that newer homes just don’t have. Older homes tend to be made with more wood, which is a fire hazard. They also tend to leak which can cause structural issues down the line.

Older homes have their own charm, but that charm does come at an additional cost. We’re not saying that it’s a bad idea to purchase an older residence, but you should take all the costs into account before making that decision.

Purchasing a home is a major life step! Be sure to protect that investment by purchasing the proper homeowners insurance policy. If you want to learn more about your current policy, or inquire about a new one, we encourage you to reach out to TGS Insurance at www.tgsinsurance.com.

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