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7 Things That Affect Your Home Insurance Premiums

Home Insurance

By Smart Bug | December 15, 2015

Have you ever wondered why you pay more—sometimes much more—in home insurance than your next-door neighbour? Are you curious as to why your aunt who lives in a small town pays significantly less each year for her home insurance coverage? Insurance companies use a variety of factors to determine insurance rates—some are geographic, some are historical and some are personal. In this article, we discuss seven things that affect your home insurance premiums.

#1. Geographic: Distance to a Fire Hall

Nobody wants to be jolted from their sleep because of the piercing shrill of a fire engine siren—and often buyers will try and select homes further away from a fire hall. But from an insurance perspective, the further you are from a fire station the higher your home insurance premium will be. This is because every extra minute of fire truck response time can affect the extent of fire damage. The nearest fire hydrant is also a factor here.

To lower your home insurance premiums, choose a home near to a fire hydrant and fire station!

#2. Historical: Neighbourhood

Do you live in a valley and is your neighbourhood prone to floods? Is your street the only one without garages—a cause for concern considering the annual hail storms in the area? Is there a lot of break-ins and theft in your neighbourhood? All of these factors impact how a neighbourhood and street are categorized—in terms of risk—by an insurance company. Insurers look at the crime rate and claim rate to help determine your home insurance premiums. Neighbourhoods with higher rates of claims and crime are likely to stay on that trend, making it more expensive for you to insure your home.

#3: Historical: House Structure and Age

The age and style of your home will really impact your rates. Construction materials impact the rebuild value of your home as well as provide more or less protection for certain types of damage. The age and type of systems in your home can also indicate the likelihood of a claim.

For example, older electrical systems—such as knob and tube and fuse boxes—will cost much more to insure as will older roofs. Quite often upgrading or replacing older home components can actually result in insurance savings – and a safer, more resilient home.

#4. Personal: Dangerous toys

If you want to cut down your home insurance rates, you’ll need to consider eliminating family play areas that are statistically a source of frequent accidents. Both trampolines and pools are a common source of injuries – and lawsuits. You will pay higher insurance rates if you have these dangerous toys in your home (or outside of it).

#5. Personal: Credit score

Most people think that this means you have to be rich for this to benefit you. This is not the case. It is about how responsible you are at paying your bills. That’s because insurance companies will use your credit score as a way to measure how responsible and reliable you are—not just in paying bills but also on whether or not you will do the work to keep your home well maintained.

While allowing a soft credit check is optional, it will often result in a discount which is why we recommend clients allow it.

#6. Personal: Your claims history

The number and frequency of claims you personally make will significantly impact your home insurance rates. The more claims you make, the higher your annual insurance premiums will climb. This is why home insurance should be used only when you cannot afford to repair your home or replace property out of pocket or for major losses.

#7. Personal: Deductible

Choosing a higher deductible—the amount you pay before the insurance company steps in to cover the costs of a claim—and you’ll keep your home insurance premiums down. It is important that you still choose a deductible that you can afford to pay in the event of a claim.

Most home insurance companies default at a $500 deductible, although some offer as low as $250. If you can, we recommend going with a higher deductible of $1000 or $2000 or even higher to keep rates down.

These are just a few of the factors that affect your home insurance premium.Talk to a broker today to learn more about home insurance premiums and how you can reduce yours.

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