How Local Conditions Impact Home Insurance Premiums

Marty has just purchased his dream home. It took him a long time to save up and get it done. Marty feels good being a homeowner – but he needs to be a responsible one. Thus, Marty does what any sensible homeowner would do – call an insurance agency. But when he does, he’s bombarded with all sorts of questions regarding his new home. Marty finds out that his answers are going to influence how much he has to pay out as a premium!

Marty may have been caught off-guard, but you needn’t be. In this blog, we’re listing some of the local factors that impact home insurance premiums. We’ll cover a few extra points too so that you know what to expect when you make that call.

Your Home’s Location

One of the biggest influences on home insurance premiums is your home’s geographical location. If you live in an area prone to hurricanes, like Louisiana, your premiums are bound to be higher. The same goes for places susceptible to wildfires. Therefore, insurance companies will have to pay more in case a disaster occurs. For example, in 2017, Louisiana homeowners paid almost thrice as much for their premiums than homeowners in Oregon.

Another hyperlocal factor is whether you stay in a city, a suburb, or a rural area. If you stay in a city, your premiums will be higher since your home was probably more expensive. The cost can be lower if you live near an active fire station. But if you live in an area that has a high crime rate, especially related to property crimes, your premiums can be higher. Essentially, if you live in an area that’s exposed to higher rates of disasters or crime, your premiums will be higher, too.

The Cost to Rebuild

How much would your home cost to rebuild where it’s located? Insurers will assess the building materials used, their quality, and other such factors to understand your home’s rebuild value in the context of where the home is. Age, architectural style, square footage, number of rooms, and more, all play a factor. Your premiums will also be based on the amount of dwelling coverage you need. Your average annual premium will be higher as your coverage amount increases. The larger your home is, the higher your premiums will be.

Another point to note here is the level of coverage. Aside from repair and building, there are other aspects covered by a standard homeowner’s insurance policy. That can include personal belongings, such as furniture, clothing, or equipment. It could cover liability against lawsuits or other related costs, such as medical costs in the event someone is injured in your home. It can also cover additional living expenses to cover the cost of living somewhere else during home repairs, in the case of extensive damage. Most of these costs vary widely from place to place, and some reflection of that is bound to be seen in the premium. Each of these has a maximum amount that can be covered. If you choose to increase these amounts, your premiums can also increase.

The Condition of Your Roof

If Marty’s roof is in good condition, he’s in for some good news. Why? That’s because a roof that’s new and strong will reduce your premiums. That’s because a new roof has a greater chance of protecting your home from the elements. The same goes if your roof was built using fortified materials. But an older roof will attract higher premiums, as well as one that’s in bad shape. That way, your home’s roof specifically plays an important role in calculating premiums. For the same reason, most insurance policies have restrictions on roofs that are older than 20 years. The condition of the roof is also looked at in the context of the local conditions. For instance, in places liable to get heavy snowstorms, the roof may need to be reinforced better than one without snow.

Financial Factors

1.     Your Credit History

Credit checks are conducted to assess how much of a risk you are to insurers. Good credit means you’re less of a risk. Homeowners with a low credit score are assessed to be more likely to file an insurance claim than those with a high credit score. Due to this logic, insurance companies are ready to offer lower insurance rates to those with a good credit score. Of course, your location doesn’t impact your credit score. That said, some studies show the importance of location in getting access to financial products and services.

2.     Your Claims History

If you have a history of filing many insurance claims within a three-to-five-year span, it can affect your premiums. Most insurance companies will view a frequent claims record as a big red flag. Theft, dog bite, and water damage claims can be particularly harmful to your policy rates.

3.     Your Policy Deductible

When you file an insurance claim, your policy deductible is the amount you’re supposed to pay out of pocket. This is separate from what your insurance company will pay for the same damage. The higher your policy deductible is, the lower your premiums will amount to. When deciding on this amount, keep in mind that you must choose a figure that you will be able to pay in case your home is burglarized or damaged. For some, it’s doable for them to pay for smaller losses out of pocket. They can choose to file claims in the case of extensive property damage. For them – opting for a higher deductible makes sense. The risk varies from place to place, and your deductible decision can do so too to optimize the premium you end up having to pay.

Other Factors

There are so many more factors at play here. These include the number of insurance policies you’ve taken. If you have a bundle of multiple types of insurance policies, such as auto and homeowner, your premiums will differ. If your home has certain safety and protective features, that’s an added benefit, too. Your premiums will also be affected by whether you own a swimming pool, a trampoline, or a breed of dog that’s prone to causing accidents!

Of course, at the end of the day – the biggest factor is your choice of provider. Different insurance agencies will have their own set of rules that they’ll work with. Hopefully, Marty will be able to navigate his foray into home insurance smartly. Undoubtedly, you will, now that you know what goes into creating higher and lower premiums, and especially the role of local factors.