Home insurance is no easy purchase, especially for new homeowners or first-time buyers who are looking to budget as much as possible. Understandably, home insurance can be daunting for those of us who do not understand what factors into the costs. We may not be paying the same price as our neighbours, even if we live in the same general area. Moreover, even though our houses were built at the same time, maybe you’re paying additional premiums compared to what your relative is paying. Why is that? Is there a specific home insurance company you should be buying through in order to secure the lowest possible price?
The true answer? Not really. Insurance companies do not gauge rates the same way. What may be the lowest possible rates for one homeowner through a specific company may not be the same for another homeowner. Moreover, it’s important that – as homeowners – we avoid thinking about home insurance as something to purchase at the lowest price available. “Cheap” seldom equates to quality, and you could be stuck in a situation where you don’t have enough protection to cover an unexpected loss – or you’ll find that the loss isn’t insurable at all.
In this blog post, Excalibur digs into rating factors, a bit about Max Insurance, and why “cheap” should never be included in the same sentence as insurance.
Max Insurance, an insurance company with roots dating back to 1866, does geo-location targeting for individual houses as opposed to calculating via postal codes. In the insurance world, most insurance companies have similar means for how they gauge premiums. Postal code is a big one, but Max does it all a little differently. Rather than having you pay the same insurance premiums as your neighbour (because you have the same postal code), Max gets a little closer to consider unique details that would otherwise be overlooked. That way, your risk is more unique to you – and you aren’t lumped in with everyone else. In the future, more insurance companies may be calculating rates in a similar way.
Home Insurance Rating Factors
Home insurance is priced differently depending on the insurance company (as you have already read regarding Max Insurance), and risks are weighed accordingly to the specific statistics that a company may utilize. These stats are different depending on the company, area, etc. The following rating factors may be impacting your home insurance premiums.
The overall replacement cost of your home.
Not all homes are built equal. A big factor in your overall insurance costs may be in how much it would take to fully rebuild your home, as it stands today, if something were to destroy it entirely. That includes the square footage of your home, the age of your home, its materials, modifications and additions, contents inside, appliances, systems – the list goes on. If you want to be sure that your home is insured for its actual replacement cost, you may wish to hire a professional appraisal to do the math for you. It can range into the hundreds of dollars to have an appraisal, but it can save you from having to guess about your coverage and potentially fall short of the real value.
Your geographical location.
Your risk is about the likelihood of a disaster occurring that would damage your property or otherwise result in a loss. These might be things like crime and theft, fire, flooding, extreme weather, etc. Where you are located in the world may be a factor as certain areas are more exposed to disaster than others. For instance, if your area suffers from a high crime rate, you may be paying higher rates than if you lived in a safer area. Statically, you would be at a higher risk of theft or vandalism. The same goes for if your home was located near a large body of water. Your odds of experiencing a flash flood are much higher.
Your deductible amount.
Your deductible plays a roll in how much you will pay for your premiums, as it’s the “portion” of risk that you take on. The higher the number, the lower your premiums. If you want to reduce your premiums without slashing coverage, choosing to raise your deductible is a valid option – so long as you are comfortable with paying that amount out-of-pocket in the event of a disaster.
Your insurance history.
Insurance companies may view you as higher risk the more claims you have made in the past, in addition to the severity of those claims. The more you’ve made in the past, the likelier you are to make additional claims in the future. If you want to keep your rates low, it is advised you fix small issues yourself and take care of your home to avoid further problems.
As you can see, insurance rates are largely about risk. While different insurance companies may all weigh risks differently, no one home insurance company can guarantee you the lowest possible rates. Moreover, different companies may offer different discounts – which you may or may not be eligible for, depending on your circumstances.
So, how do you get the lowest price on your home insurance? Your best option is to work through a broker, like Excalibur Insurance, to find yourself the most affordable prices – regardless of which insurance company that may be through. A broker may also advise you on the best ways to reduce your costs, inform you about eligible discounts, and so much more.