“How much will homeowners insurance cost?”
As an independent insurance agent, this is one of my favorite questions I get asked, and typically the client is expecting a straightforward answer involving a dollar figure on the spot. The reason this is one of my favorites is that it opens the door for me to flex my nerdy insurance knowledge, but also it usually leads to a brief conversation that ends with my client knowing more about homeowners insurance than 90% of other homeowners. The first part of this multi-part answer is, “It all depends…”. Not exactly what they were looking for, but oh the possibilities hidden within. I thought I would flush out some knowledge here, in what is officially my first blog post, to spread the love to anyone who has ever asked this question.
There are two old wise sayings I feel everyone should keep in mind when thinking about homeowner’s insurance, or any insurance for that matter:
You get what you pay for.
You are bending over a dime to pick up a penny.
I am always entertained on social media when I see an all to familiar conversation unfold. It goes like this:
-“Hey guys, my homeowners insurance is too high, what should I do?”
-“I use this company, they are lowest.”
-“No you have to call this company, they got me the best rate.”
-“Those two are wrong, you have to call this company, they blew away my last company.”
Oh boy… here we go. I usually try to jump in as quick as possible and throw out some pearls of wisdom before we hear from every neighbor in the tri-county area. The truth is that you simply cannot compare your policy to theirs. Homeowners Insurance in North Carolina is based on so many factors that individual policies resemble snow flakes, no two are alike. So what are those factors and what can you do to ensure you have the “best” rate for your household? (Notice I didn’t say cheapest.)
Factors That Determine Your Homeowners Insurance Cost
- Credit Score: This is probably the biggest shocker to clients and in many cases one of the biggest factors in your homeowners insurance cost. Insurance companies use your credit as an indicator on how likely you are to take pride of ownership in your home and therefore how likely you are take action in preventing possible claims. Not only does having good credit help you in securing lower interest rates on loans but it actually can significantly reduce your homeowners insurance cost! The good news is there are companies available that don’t use credit as a rating factor, so if your credit needs some TLC, we can shop the right companies for you.
- Claims: Definitely the second and in some cases the main factor affecting your homeowners insurance cost is the number of claims or type of claims you may have filed. There is a certain time period, 3-5 years, where more than one claim can really negatively affect your cost. Homeowners insurance is there to protect you should the unthinkable happen, but sometimes claims for smaller accidents are filed and they can cause your annual premium to rise, in some cases by more than what the claim itself paid out! Usually this conversation is had with clients who may have been dropped by their prior insurance company after filing a claim or two and they are “stuck” paying higher insurance for a few years. Being judicious with the claims you file can go a long way to preserving your low homeowners insurance rates. We ALWAYS recommend taking the highest deductible your budget can afford and talking with an independent insurance agent prior to submitting any claims. Of course, the question pops up, “whats the point of having insurance if I am penalized for using it?” The answer is that it is in place for you when the unthinkable happens and you need to be made whole again.
- Age of Home: If you home was built in the last 15 years you are more likely to have a more favorable rate than a home built 50 years ago. A house may “have good bones” but most insurance companies have a rate adjustments depending on the age. Newer home can receive discounts and credits while older homes can come with a small surcharge. Different companies have different guidelines and only by letting an independent insurance agent quote you options will you find the best company for your home.
- Location Location Location: The county, city, neighborhood or street you live on can have a large impact on your homeowners insurance cost. Homes close to the coast are at greater risk for damage due to tropical weather systems. In the insurance companies eyes this is a higher probability for loss so the rate could be higher. Likewise if a certain area has experienced a higher level of claims activity it can cause an insurance company to adjust its rates for that area accordingly. You have less control over this aspect, but it can make a difference.
- ISO Protection Class: The Insurance Service Office along with local and state public safety organizations determine your homes “Protection Class”. This ranges from 1-10, 1 being the most favorable and 10 being the least favorable. This can have a huge impact in the cost of your homeowners insurance. If your home is a lower protection class there is likely a fire station nearby and ample water supply that they can pull from to put out a fire, like a fire hydrant.
(Random thought here… until I became an independent insurance agent, I never noticed fire hydrants. Now I see them EVERYWHERE and usually I point them out to my wife. Maybe now you too will start seeing them every day. You’re welcome!)
OK, back to it. One really great change that we have seen recently is that outlining fire departments have been putting in very hard work and making great investments in their equipment to not only serve its citizens better, but also keep the insurance costs lower in their districts! If you live in a rural area you may notice that your fire department has large water tanker trucks, which replace the need for a fire hydrant. They must then pass a rigorous test from the state and if they pass, their district is awarded a lower protection class!
- Deductibles, Endorsements and Discounts: A few factors that can increase or decrease your rates involve how you structure your policy and the coverage’s you purchase. Choosing the best deductible for your budget, can help lower your premium. The higher the deductible, the lower the insurance cost. The key is making sure you can afford that deductible. Homeowners Insurance policies come with many optional endorsements. Many of these are critically important, so this may be an area not to skimp. Talking to an independent insurance agent can really help you better understand what coverage’s you need! Finally, many discounts are available to you. Being a new homeowner, having a monitored alarm system, bundling with other products like auto insurance and having prior insurance can help take a significant amount off your homeowners insurance cost.
There are so many factors that go into your homeowners insurance. Your best bet is to have an independent insurance agent who will go line by line and make sure you are paired with the best company, best coverage’s and best options for your unique situation. Because the independent insurance agent is not beholden to any one insurance company, there is no motivation to insure you with one company. Our ability to impartially shop on your behalf is the #1 key to securing and keeping your homeowners insurance cost as low as possible, without skimping on the coverage!
If you have any questions regarding your homeowners insurance we would love to speak with you. Please call or contact us through our website. Remember, its a jungle out there, let us be your insurance guide!