When one decides to buy home insurance cover, there are several questions that arise in his or her mind. The first question is, how much a home insurance cover is going to cost me or to put it in other words, what will be the premium amount I would be paying to the house insurance company for coverage. This is a very logical question since it plays a crucial role in determining the degree of protection and coverage needed for your home, taking into consideration the budget you have and other associated economic factors.
The answer to the aforementioned question can be sought after we understand the factors that play a role in determining the premium of the house. Let’s take a look and understand these factors –
As you might have rightly guessed, the value of your home has an important role to play in determining the home insurance premium. Thus, it is advisable that you assess the value of your home correctly as per current market rates. This will help you choose the right home insurance policy that covers all the essential requirements. When an undesired event occurs, finding yourself with an insufficient house insurance coverage is the last thing you want. Additionally, the contents of your house also contribute to the house insurance premium depending on the coverage within the policy. Thus, if you have a lot of valuables with significant monetary value, it is advisable to go for a home insurance policy that offers coverage for those valuables.
The next premium determining component for house insurance is “risk”. Home insurance premiums vary across companies as they have different methodologies of determining the perceived risk. Risk essentially is the probability of you filing a claim with the home insurance provider. Various aspects contribute to the risk assessment. The past claim history associated with the homeowner as well as the property is evaluated to determine the premium figure. If there are several claims during the past three to five years of significant severity, the home insurance company will increase the premium. Also, if there is a trend of similar claims, you might need to pay more premium since it strains the home insurance company financially.
A study observes that a significant number of home insurance claims arise from weather and natural calamity related damage. Therefore, if you reside in an earthquake-prone location, you may be charged a higher home insurance premium. There are also other location-based factors such as proximity or prevalence of a crime-prone area, coastal area location and so on. These increase the aforementioned risk perception that drives home insurance premium. Another important factor is the age of the home. If your home is newly built, it will have a robust plumbing and electrical systems. Thus, a new home is likely to cost you less for insurance.
These were the factors that can help you understand the cost associated with your home insurance. With this understanding, you should be able to determine the right insurance cover for your home.