Understanding How Your Home Insurance Rates Are Determined

Friday, August 22, 2014, AM | Leave Comment

If you’re planning to purchase a home, you probably already realize you should be planning to purchase a property insurance policy, as well. Your mortgage lender is going to require insurance before agreeing to extend a loan on any home.

While plenty of common knowledge elements will affect your insurance rates, there are also some factors of which you may not be aware.

  • Claims History

    If you’ve filed homeowner’s insurance claims in the past, you will be looking at higher rates on your next policy; furthermore, if you’re thinking of purchasing a previously owned home, claims filed on the home by past owners will adversely affect your rates, as well.

    Even inquiries regarding past damage that never made it to the claims process can send your rates skyrocketing.

  • Proximity to Emergency Services

    The further away from fire departments or hydrants the home is, the more your insurance rates will increase because some insurance providers view lack of nearby emergency assistance as a high risk factor.

    The rate increase in this situation typically begins at 20 percent, but it can grow to more than 10 times that amount.

  • “Dangerous” Pets

    Most common household pets won’t impact your insurance premiums, but insurance companies consider some more dangerous than others.

    If you own a Rottweiler, Pit Bull or German Shepard, your home insurance rates are bound to increase. These breeds have received a reputation for causing personal injury claims in the home insurance industry, so you will pay for this stereotype regardless of how well you trained your dog to behave.

  • Condition of the Home’s Internal Systems

    The home may look new from the outside, but insurance companies are also going to look at the plumbing, electrical and roofing systems before offering you an insurance quote.

    Water damage is among the most feared terms in the home insurance industry, so the plumbing needs to be up to date. The roof will also be taken into consideration since damaged roofing is the second leading cause of water damage claims.

    If the home’s electrical system is more than 25 years old, it is considered a high fire risk. Though these systems may be up to code, the insurance companies may still consider them sub-standard.

  • Condition of the Neighborhood

    You may be the most meticulous homeowner in the neighborhood when it comes to cleanliness and home maintenance, but this means nothing if your potential neighbors fail to hold the same values.

    Homes in disrepair elsewhere in the neighborhood will negatively affect your insurance rates as will water and fire damage, vandalism and burglary claims from other homeowners in the area.

Before applying for a mortgage on any prospective home, ask a number of insurance companies for homeowner’s insurance quotes.

The amount you will be forced to pay for your real estate coverage policy will affect your ability to pay your mortgage and other monthly expenses.

While there are a number of measures you can take to reduce your insurance rates, factors you have no control over may be working against you before you even move into a new home.

Information provided by Drayden Insurance Ltd, an Edmonton home insurance broker.

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