Reduce your home insurance rate by five factors

Thursday, March 16th 2017. | Home Insurance

If you want to save money on your home insurance policy, it helps to understand the key factors insurers use to measure your risks and calculate your rates.

1. A history of past claims.

If you’ve filed previous home insurance claims, you could end up paying more for your policy. That’s because insurers have determined that statistically, people who have made a claim in the past are likely to do so again, says James Whittle, assistant general counsel and chief claims counsel for the American Insurance Association trade group.

2. Expensive homes are more costly to insure.

If you live in a very expensive home, you can expect your homeowners premiums to reflect that with higher rates, Whittle says. That’s because modestly priced homes typically are less costly to repair or replace than high-end dwellings.

3. Living more than five miles from a fire station

One of the things insurance underwriters want to know is how close your home is to a fire station and how prepared local firefighters are to deal with emergencies.

Whittle says homes that are close to fire stations are less likely to burn down, so there’s less risk that insurers will have to pay to repair or replace them. Even if you live near a fire station, your insurer will want to know if it has adequate staffing and equipment, says Ron Moore, a senior product manager at MetLife Auto & Home.

4. An older home may cost you more to insure.

The age of homes is carefully considered when premiums are set, Moore says.

“Newer homes generally have a lower premium,” he adds. “They’re easier to repair (and) less subject to damage.”

A home that is between one and five years old typically is considered to be newer, Foley says.

Older homes can be more costly to repair because the materials used to build them often are difficult to find. For example, homes built during the first half of the 20th century often have interior walls made from plaster. Modern homes use prefabricated drywall sheets to create interior walls.

The process of recreating plaster walls is more labor intensive than using drywall. Finding a contractor who do this work may be difficult and cost you more money.

5. A poor credit history can label you as a bad insurance risk

Most states allow insurance carriers to consider your credit history when setting homeowners insurance rates. According to the nonprofit Insurance Information Institute, only California, Massachusetts and Maryland ban the use of insurance credit scoring for rate-setting.

“A credit score is a reflection of how you pay your bills,” Foley says. That’s because insurance companies say they have found a strong statistical connection between how you pay your bills and how likely you are to make a claim, he adds.

United Policyholders, a consumer advocacy group, says in some cases homeowners with bad credit histories can pay as much as four times as much as policyholders with good credit records.


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