Last week we looked at how you, the buyer and homeowner, impact your home insurance rate. The second broad category impacting your home insurance premium is your home itself. There are several factors and none of them include your home’s purchase price, what you could sell it for, nor what the local appraisal district sets the value at. Let’s look at what does count.
Replacement Cost: The replacement cost value is the amount of insurance needed to replace your home in the event of a total loss such as a fire. This is calculated by each carrier’s replacement cost estimator, and includes your home’s square footage, number of stories, number and grade of bathrooms, kitchen grade, floor coverings, siding, roof shape and shingle type, foundation type, number and size of rooms, built-ins, and much more. The amount of coverage needed to replace your home impacts what you pay.
Siding Type: The type of siding your home has impacts both the replacement cost and the insurance rate. For instance, brick siding cost more than wood siding, so a brick home will usually have a higher replacement cost than a home with wood siding. However, since wood is more flammable than brick, a home with wood siding will cost more to insure than a comparable brick home. Fire resistant materials such as stone, concrete fiber boards, and concrete stucco will also have a lower home insurance rate than a wood home.
Roof: There are three ways roofs impact your home insurance rate, its shape, shingle type, and age. A gable roof will have a different rate than a hip, gambrel, Saltbox, tented or other roof style. A home with composition shingles will have a different rate than a home with a tile, slate, or concrete roof, and a hail resistant shingle will cost less than a home with a composition shingle roof.
A roof’s age also impacts the rate. Older roofs have a higher rate than new roofs, and they may also carry a higher wind / hail deductible such as 1.5% or 2% depending on the carrier. Some carriers won’t write a home insurance policy if the roof’s over 15 years old, or they may shift the coverage from replacement cost to actual cash value which pays a claim on a depreciated basis.
Home Age: New and newer homes have a lower home insurance rate than older homes. There are a few carriers who won’t write a home insurance policy on a home over 40 years old.
Location: Where your home is located impacts the rate too. For example, a home in McKinney will have a different rate than a home in Dallas, Fort Worth, Duncanville, or Arlington. This may be due to several factors such as crime rate, recent claim events, or desirability.
Claim Events: Over the last two years, home insurance companies have paid millions in hail related claims across from Justin, TX to McKinney and points east. These claims are having a profound impact on both renewal rates on existing policies, as well as, new policies for home buyers and new construction. Houstonians should prepare for their rates to increase due to Hurricane Harvey next year!
Architectural Style: Do you live in a traditional ranch style home, or is it a French traditional? Or is it a contemporary, loft, Victorian, or Craftsman? What type of architectural style it is impacts the rate as it indicates type of construction materials, window shapes, roof shape, and much more.
These are just a sampling of items which impact your home insurance rate. Other factors include the presence of a swimming pool, foundation type, and historic district to name a few. The key to paying less for your home insurance is to confirm its replacement cost estimate accurately represents these factors and then compare rates between carriers. That’s why I chose to be an independent insurance advisor, to help my clients find the best rates.
What do you think? Share your comments, questions, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!