The purpose of buying home insurance is to make sure you are covered if you suffer a loss. In today’s environment, we see natural disasters such as hurricanes, floods, and wildfires affecting the US every year. It has never been more important than now to make sure you are protected if the worse were to happen. At First Step, we ask our clients what matters most to them and shop with dozens of insurance companies to help secure the level of protection they desire at an affordable price. People often wonder why they are paying so much for home insurance, so we included a list of the most important rating factors that affect home insurance premiums.
Dwelling Replacement Cost
Estimated Replacement Cost is the amount of money it would cost to reconstruct your home from the ground up if you were to suffer a total loss. Many homeowners are confused by this concept because they assume their home should be valued at its purchase price or the appraised amount. The Market valuation of a home is the estimated value it would sell within a reasonable amount of time. Market valuation also includes the land the home sits on. So, when an insurance company estimates replacement cost, they factor in the age, square footage, construction, labor cost, and materials. Generally, these two valuations will not be the same so it’s important to know the difference and all the factors that go into creating the replacement cost estimate. The higher a home’s replacement value the higher the insurance premium will be.
Age of Dwelling/Roof
The age of your home will impact your rate due to the fact older homes most likely have materials and features that cost more to repair and replace such as plaster walls, stained glass windows, antique doors, and other hard to find materials. A general insurance rule is the older the home the higher the rate. The age of your roof is also equally as important due to the weather we have in Texas. We are surrounded by 400 miles of Gulf Coast and the threat of hurricanes or severe wind and hail storms is real. Most insurance companies would like to see roofs at least 15 years of age, and some will provide a discount if the roof has been replaced within the last 5 years. If you are purchasing or own an older home, it’s important to retain all documentation of major updates so you can point them out to your agent to help lower your premium.
Underwriting Risk Factors
Every insurance company has different guidelines on which types of underwriting risk factors they will accept. Check the table to the right to see a list of the most common underwriting concerns insurance companies consider when evaluating homes.
Most insurance companies rely on third party property inspectors to accurately appraise the replacement cost and to identify any risks that need to be addressed. The age, size, and location of the home will determine the type of inspection necessary. Homes that are older will normally require an interior and exterior inspection. Exterior inspections will check the roof, siding, yard, and outside appliances. Interior inspections they will check plumbing, electrical units, heating, and safety features (alarms, smoke detectors, deadbolts). If anything is deemed too risky after the inspection the insurance carrier will send a notice naming the issue, explaining how to fix it and provide a timeline for having it fixed. These inspections are normally completed within the first 90 days after the effective date. It’s important to meet with the inspector and discuss their findings to help find ways to better the home. The most common issues that arise from home inspections are small roof repairs (missing shingles) and removing tree limbs or branches that overhanging the roof.
Underwriting Risk Factors
Home insurance rates vary by region. It’s important to note that homes in a coastal region may pay a higher premium. These are commonly referred to as “Tier 1” properties, meaning the home is in a county that touches the Texas coastline. Also, homes in rural areas outside of city limits may pay a higher premium because they are serviced by a volunteer fire department as opposed to a 24/7 professional fire department. This is referred to as a home’s protection class. Protection class is rated on a 10-point scale and the higher the home’s protection class the higher the premium.
Dog bite-related claims are one of the most reported home insurance liability claims in America. Your dog’s breed might determine whether an insurance company is willing to provide coverage for your home. Most insurance companies have a list of breeds they determine to be dangerous or a history of aggressive behavior. Some companies charge an additional premium to purchase animal liability coverage and some may exclude all animal liability coverage. It’s important for dog owners to disclose all information related to their pets to ensure they are properly covered.
A lot of homeowners in Texas have swimming pools to beat the summer heat. Most insurance companies require pools to be fenced with a lockable gate and some insurers do not accept pools with diving boards or slides. It’s important to weigh these factors before buying a new home or wanting to add some additional “fun” elements to the property.
Parents are often unaware of the serious injuries that can occur on trampolines. Most insurance companies will deny coverage if there is a trampoline on the property. Others may provide coverage for the home but exclude liability for trampoline-related accidents and injuries. It’s important to know what is covered on your policy and to consider protective measures if you plan on keeping your trampoline. Trampolines that are “netted” with pads covering the springs will help prevent injuries and some insurance companies require the measures to accept coverage.