Things that can make home insurance rates increase
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Last week, I shared a rundown of factors that can cause your car insurance rates to rise, like your massively powerful engine or length of commute.
This week, I’m digging into the factors that affect your home insurance rate. Some are similar, some are different; some are things you can tweak, others just are what they are. But I’m always happy to arm my friends and clients with insurance knowledge, so here are some things you may or may not know feed into your homeowners insurance policy picture:
your credit score
If you read last week’s car insurance rates post, you saw this one there too. It’s not just car insurance rates that can get juiced by a low credit score — some providers take it into account with homeowners insurance rates too. My advice: Before you start househunting or exploring a new home insurance policy, check your credit score with Equifax, Experian and TransUnion, and see if there are inaccuracies in there that can be addressed — you might be surprised by incorrect information in your report that’s negatively impacting your score. (That happens to Juniors a lot — things like your Dad’s debts showing up on your report.)
your zip code
This one carries across different types of insurance too. Again, though, “zip code” is a simplification — what this really means is that when your rate is being calculated, companies are tallying up all kinds of details related to the area you’re looking to insure in. Those details range from distance to the nearest first responders (primarily firehouses) to proximity to bodies of water and claims trends in your neighborhood. For example: Neighborhoods in the suburbs are often more expensive than in the urban core, because first responders usually can’t get there as quickly (most carriers have price increases when your home is over 1,000 feet from fire a hydrant, too). Up-and-coming areas with a higher crime rate can bring higher insurance rates, and so can neighborhoods with a with a more transient population (like areas around colleges). Insurance companies have access to an amazing amount of data on exact locations. Even within Nashville I’ve seen drastic differences in rates just a couple of blocks from each other. These aren’t things you can change, ultimately, but it’s a little insight into why rates may differ considerably when you move.
the age/shape of your home itself
A thing that surprises a lot of clients: selling a small, older home and buying a large, brand-new home, and seeing homeowners insurance premiums go down considerably. Statistics show that older homes more frequently develop costly issues — foundation problems, roof problems, etc. — and insurers take that into account, so sure, it’s totally possible to pay a lower monthly home insurance rate on your new, more expensive home. If you have a historic home with the historic details that come along — like plaster walls, decorative trim, stained-glass windows — that could make your rate tick up some, too, since it’s costly to fix or replace those things. But on the flipside, updating big stuff (like the roof, electrical system, etc.) can bring your rates down.
upgrades and renovations
This is one of those instances when you really want to advocate for a potential rate increase. I know that sounds weird — but ultimately, if you’re upgrading or renovating your home by more than $5000, you’re changing the protection picture considerably. You want your homeowners policy to reflect what it would take to bring your home back to its previous condition and value if a catastrophe occurs. So once your renovations are complete, let’s talk about how your policy should change — it’s important, and generally not much of a price increase.
risk-increasing or risk-reducing extras
Your insurance company isn’t just looking at your four walls and roof when they calculate risk and rate. They also look at certain features, like pools or wood stoves, as a potential risk increase; meanwhile, alarm systems and security fences look like a risk decrease. So if you add a swimming pool or hot tub, you should expect your policy to change to reflect it. And if you remove your wood stove, let’s readdress your policy — the rate will probably go down.
your pets
Your insurance provider is going to calculate the likelihood of just about any and all claims, and if you have pets in your home, they’re figuring those in. You may strongly disagree, but they’ll look at statistics related to some large-breed dogs and exotic animals, calculate the likelihood of a claim related, and it may show up in a larger monthly payment. I know that can be frustrating, but one word of advice: Always, always be honest about your furry/scaled/etc. family members, because if you don’t, and an incident occurs, it could result in a cancelled policy, and any and all liability being firmly in your lap.
claims history at your address
A really annoying thing, I know: Using your insurance can mean you pay more for your insurance. Sometimes with homeowners insurance, that’s true even if multiple claims happened before you moved in (a history of, say, water-related claims can point to higher risk factor for more of them). That said, it’s not so cut and dry — if a hailstorm wrecks your roof five years into your policy, and it’s the one claim you make, you probably won’t see an increase. But if you made two claims in as many years, it might send up a red flag. Lots of other factors go into those decisions, but sometimes, for small things, it makes more financial sense not to make a claim. I’m always happy to give you some informed perspective on that, if you need it.
things that have absolutely nothing to do with you
If you’re looking at all of this and thinking, “None of that’s changed for me, but I still saw a rate increase,” well, unfortunately, sometimes it has absolutely nothing to do with you. It’s the market, and the city, or the state, or the world. A few years of increased claims in your area, statistics shift, and there you are with a higher insurance rate. Or there’s an inflation boost, or other changes in economic conditions, and there you are with a higher homeowners insurance premium. I can’t always point to exactly why rates change, but I can help you see if you have better options.
From my perspective, the most important thing is for you to have the right policy to protect your home and assets. But I also want my clients to have the right policy at the best rate, so that’s my goal when I’m searching and comparing. A lot of these details aren’t things you can (or want to) change, but I figure arming you with info gives you a clearer picture of what you’re working with, and why.
If you have more questions about home insurance policies, I’m always happy to talk more. Call or email me, and we can dig deeper together. Want a Nashville insurance quote? You can get started here.
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