It seems like lately, everywhere I look is an insurance advertisement! Whether I’m lounging watching Hulu or glancing at a billboard around town, I’m noticing more and more insurance companies popping up, vying for my premium money.
When I first started paying for my own auto and renters insurance, I went with the insurance my family had always purchased. A few years later when I was buying a home, I shopped the market to see if I could find better pricing for my husband and I. After all, I thought this would be a great way to save some money month to month!
Although each insurance company did offer me a slightly differing rate, I noticed that there were several factors across the board that affected my insurance quote prices pretty equally.
It sounded easy to just “shop around” when it came to checking out insurance companies and different premium rates, but when I was purchasing a home it became a little more complicated.
First of all, I learned that I had to have some detailed information on hand when getting a quote online. I had to make sure I knew the ins and outs of the home I wanted to ensure such as when it was built, what updates had been made, and what material(s) the house was made of.
I also learned that there were several important aspects of the home I was looking to purchase, and myself as a homeowner, that were affecting the price of my quoted premium. The details that the insurance companies needed from me all contributed to how high or low my premium would be. And I needed to know them all if I wanted to save money on my home insurance premium.
The good news was that I could control these factors and look for a home that met certain conditions to lower my premium!
Here are 6 factors that affect your home insurance premium prices as a homeowner:
1. Your home’s value
In the insurance world, this is called the home’s “replacement cost.” It’s basically an indication of how much insurance would need to be paid out if you lost your entire home. Essentially, it’s the cost of “rebuilding” for the insurance company to consider.
And it’s different from your home’s market value, or what you paid for it, because it doesn’t take into consideration the cost of the land the home is built on. As the insured, you typically will come up with a figure to represent this cost, and it can be helpful to get an appraiser to estimate what this cost would be so you don’t end up under or over insured.
Since our home is built on land we own as well, our estimated replacement cost ended up being lower than the market value of our home. We wanted to be sure we had an accurate take on how much we should insure the home for, before we bought it and got our insurance so we also had an experienced contractor let us know what he estimated the replacement cost to be.
This gave us a peace of mind knowing our home was insured for the right value, and that we were paying the right premium for this value.
If you’re in the market for a new home, try to only insure what it would cost to fully rebuild your home and not the total market value of the home itself. This way you’re not paying extra on your monthly premium for an extra payout amount that you probably won’t even use anyway.
2. Your credit history
The way you pay off (or don’t pay off) your debt can certainly affect how high or low your premium will be. It can even determine if you can get a policy at all! Several years ago, I got into the habit of setting an alarm to pay off my credit card every week or so.
This eliminates the balance on the card, and helps my credit history look squeaky clean whenever a new insurance company checks out how I’m doing in this arena.
When my husband and I were applying for home insurance, we were pleasantly surprised that we were offered many policies that had reasonable premiums due to our excellent credit history. This is one aspect of insurance premiums that you can directly control by handling your money well!
So, before you secure your next home insurance policy, try to work on paying down some of your debt, and never miss a credit card payment. These things will help to increase your credit and may lower your monthly insurance premium in the process. It’s a win-win!
3. Your relationship status
No, insurance companies don’t care if you just got broken up with. They’re more interested in if you’ve tied the knot! Historically, married couples are less of a liability to insurance companies, and therefore if you file jointly you might be looking at a lower premium price.
When I got married a few years ago, I definitely noticed that the insurance quotes I was browsing seemed to lower based on my new relationship status. It was definitely a perk of making it official! Now obviously, this is one aspect of premiums that you shouldn’t force, but if you’re on the fence about getting married it can be an added perk.
4. Your home’s location
You’d be surprised how much where your home is located affects how much you’ll end up paying in a premium. I have family members who pay astronomical premiums because they chose to purchase a house near the beach, and the risk of flooding is much higher.
My husband and I chose to live in an urban setting, so we pay a higher premium than we would in a more rural area, due to the risk of crime and vandalism in our city. Be sure to check that the location of the home you plan on buying isn’t in a high risk area for any natural disasters, because this could possibly start you out at a higher premium.
5. The age of your home
As a general rule, the older your home is the higher your premium will be. Our house is almost 100 years old! So my husband and I definitely considered buying a newer home just to forgo a more expensive premium, but in the end we decided the benefits of our older home were worth the slightly higher insurance costs. To get a lower premium, check on when the home was built before you make the purchase.
6. Recent updates on the home
If your home’s roof, electrical, plumbing, HVAC, or any other major function was replaced or repaired recently, your premium will reflect this positive change. This limits the liability on the part of the insurer, because you’ll be less likely to have issues with your home when you keep up with repairs and replacements. Our home had recently had a roof replacement right before we looked into purchasing it, and this helped offset the higher premium due to its age.
The Bottom Line
If you’re already a homeowner, currently scouring the market, or just hopeful to purchase your own home in the future, knowledge about these factors can help you make the right purchase when the time comes.
You can also make repairs and healthy financial decisions, reassess your coverage, and get a lower premium now instead of waiting for your next house! These 6 factors helped me choose the home that was right for me, and secure a reasonable premium.
I plan to reassess my homeowner’s insurance annually, to be sure that I have the lowest rate I can possibly get while being comfortably covered. And when I’m searching for my next house, I’ll watch out for these 6 things to continue securing a lower premium.