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Article 1 of 3 in Pricing Policies |
How insurance companies compute premium rates for homeowners |
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The cost of replacement material is skyrocketing, and homeowners’ premiums are following suit. This is because your homeowners’ premium depends largely upon your home and how much it would cost to replace it if it was seriously damaged or destroyed. As a result, premiums are higher for a luxury home with high-end fixtures and materials that would be costly to replace. If your personal property is expensive as well—if you have antiques, coin collections, precious jewelry—your premium will increase, or you will have to insure some of your possessions separately in a floater or endorsement.
But premiums also depend upon the age and condition of the house, so insurance for houses that have been badly maintained or are in poor condition will likely be steep. Old and decrepit heating and plumbing systems, for example, will result in higher premiums since their failure may result in serious damage to the home.
Where you live is also an important factor. Premiums are generally higher in areas with a high incidence of storms, fires or crime (such as home break-ins or theft). Homes with access to good fire protection services—like a local fire department and a fire hydrant close by, for example-- get better rates.
Your claims and credit history also affect your rates. If you’ve filed claims in the past, your premium is likely to be higher. Companies may also consider your credit score when deciding what to charge, although they’re not allowed to refuse to sell you a policy because of your poor credit.
For more help on homeowners insurance company pricing policies, go to the Free Advice Homeowners Insurance Center. For information about insurance law, check out the Free Advice Insurance Law FAQs. |
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