If you're a first-time homebuyer you are also likely shopping around for a homeowner's insurance policy to protect what is quite possibly your single largest investment. Many factors go into determining your homeowners insurance premium. And while you can't control them all, just knowing what they are can help you understand how your premiums are calculated, as well as avoid some of the potential pitfalls.
Your credit
Some insurance companies may use your credit report as a factor when setting your homeowners insurance rates. The higher your credit score, the lower your rates may be. If you're planning on purchasing a home in the near future, check your credit report regularly to identify any red flags and dispute any discrepancies.
Your pets
Many insurers have underwriting guidelines that specifically exclude certain animal types as well as breeds. If your pet is on the “no go” list, you may be charged an additional premium, or even be denied coverage.
Your location
If you've already purchased your home, then there isn't much you can do at this point. However, if you're still house shopping, you should keep in mind that things such as how far your home is from a fire station, fire hydrant, or the nearest city can affect your premiums. Also, homes in areas that are prone to earthquakes or in flood zones can be subject to considerably higher rates.
Your home's age
The age of your home and whether or not there have been updates or home repairs in certain things such as plumbing, electrical, heating, roof, etc. can affect your homeowner's insurance premiums. Check with your insurer to find out what you should be looking for when shopping for your new home.
Your home's features
There are certain features of a home that can raise your rates, while others can actually lower them. For example, a swimming pool or Jacuzzi may increase your premiums, while adding a security system or fire alarm can offer you discounts. Check with your insurer about what discounts you may be eligible for, as well as certain features that you should avoid.
While you certainly want to get the best deal possible on homeowners insurance, you also want to ensure your coverage would provide you the money to rebuild in case of a serious tragedy to your home such as a fire. Unfortunately, many people are unaware that the limits you set on your homeowner's insurance policy should be based on the cost of rebuilding, not on the market value of your property or the price you paid for it.
Mistakes such as this could have you underinsuring your home and not having enough coverage, or over insuring your home and paying too much out of your family's budget. If you need some help, you may wish to consult a financial professional.
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