Over the past two weeks we’ve examined how you and your home impacts what you pay for home insurance. Your home policy also impacts what you’ll pay, so let’s delve into four common areas that lower or raise your rate.
Policy Type: There are two broad policy types, one which pays claims on an actual cash value or depreciation basis and one which pays them on a replacement cost basis. In most cases, the actual cash value policies will cost less than a replacement cost policy but their savings may result in a higher out of pocket expense when filing a claim.
Within the replacement cost policies, different carriers offer different policy types including named perils and broad form policies. The named perils policies only pay claims on the perils the policy specifically states it covers such as fire, smoke damage, water leaks, etc. Broad form home insurance policies cover all perils unless they are specifically excluded such as acts of war, terrorism, nuclear accident, etc. Broad form policies usually cost a little more than a named peril policy, but this depends on the carrier.
Coverage: All home insurance policies come with a range of standard coverage based on their type and the perils they address, yet there are several options that may provide more complete coverage. These options may include coverage for water damage, slow leaks, foundation, water and sewage backup, home office equipment, electronics, musical instruments, and scheduled items. The more options you add, the more the policy costs.
Discounts: Everybody loves a discount which reduces what you pay for your home insurance policy. The most common discount offered is the multi-policy or auto / home discount. All carriers who write both home and car insurance offer this discount on both policies. In many cases, bundling the policies together provides an attractive savings on both. Many carriers which write only home insurance may provide a “companion” policy discount for having both policies with the agency.
Other discounts include early quoting for having a new policy quoted 14 to 30 days prior to needing coverage, monitored alarm discounts (fire and burglary), payment discounts, and even discounts for what school you went to, education level, marital status, age of roof, home buyer and more. Always ask what discounts are available and which ones fall off after the first year.
Prior Claims: Claims usually have a negative impact on your home insurance rate. Some carriers count the prior owner’s claims against a new home buyer although, many don’t. Claims follow the home buyer or owner and will impact your rate for up to five years. This impact may be the loss of a claim free discount or the rate being surcharged as in the case of a water, fire, or theft claim. Ask what is impacting the rate if it seems high to you.
The key to knowing what raises or lowers your rate is to have a detailed discussion with your agent as you review a quote or your renewal packet. What do you think? Share your comments, questions, and experiences on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!