You might love your home but might be less than enthusiastic about how much it costs you month after month. Utilities are just one of many things you pay for, and are accompanied by maintenance costs, your mortgage principal and interest, and of course, your homeowner’s insurance. Fortunately, that’s one expense you have perhaps the most control over, but haven’t taken the time to do something about the cost of your premium.
Understanding Residential Property Insurance
When you buy a home, you are required by your lender to purchase certain things. For instance, if you’ve obtained a mortgage with less than a 20 percent down payment, your lender won’t allow the transaction to take place until you agree to take out private mortgage insurance. The PMI policy protects your lender, in the unlikely event you’ll default on the promissory note, it does nothing really to protect you. Homeowners insurance, on the other hand, does protect you, from a number of things.
“Homeowner’s insurance: if you’re buying a home, you have to have it to protect yourself—and your savings—from life’s big surprises. But the insurance premiums don’t always come cheap. Your premiums will affect how much you pay for the cost of homeownership each month, but by how much depends on several factors.” —Realtor.com
It protects physical property, not only your home but your possessions. It protects you in the event of a natural disaster and if someone is injured while on your property. It can protect things like jewelry or a fur coat, anything of value. Those are known as floaters, attached to your policy to insure certain personal items. All of which are accounted for and valued when you buy your home. What’s also included is not only those possessions, the value of your house, are many other things. Those are what can cost you big time in premium payments.
7 Factors that Increase Your Homeowner’s Insurance Premiums
You probably already know that the value of your home is a factor in how much your policy premium costs; but, there are several other reasons you’ll pay more than you have to and you might be surprised at one or more:
- Your deductible. Everyone know the higher an insurance policy deductible is, the less they pay in premiums. The problem for many homeowners is not having sufficient cash reserves to meet a high deductible. Save up the money, though, and you’ll be able to elect for a higher deductible with a lower premium.
- Your pets. Many dog owners already know this, and some only find-out about the pricey premium that comes with having certain pooches. It’s not just those big, aggressive breeds which make the list, either.
- Your possessions. Remember those floaters mentioned above? Well, though they are depreciating, they are costing you plenty of money. What was worth a lot when you got the policy might be less valuable now, and unless you inform your insurer of the depreciation, you’ll pay the same rate. That’s a real waste of money, because you’ll only be reimbursed at its current value, so there’s no point in paying more.
- Your location. Your location is also a factor in what you pay. Sure, you might be a in a very nice location, right on a beautiful lake, but that body of water poses a risk and that will cost you more to insure your property. Also, the distance to the nearest fire station is a factor. Though you can’t change these things, they still impact how much you pay.
- Your home’s age and condition. The older your home is, the more of a risk it has, to the insurance company. Make key improvements, not only in security, but in structure and function and you’ll save some cash.
- Your creature comforts. That whirlpool bath or hot tub might be a creature comfort to you, but to your insurance company, it too, is a risk.
- Your credit score. It might not be fair, but the better your credit file reads, the less you’ll pay in homeowner’s insurance.
Other factors include things like tree-houses, trampolines, and other “fun” items which pose a risk of injury to children. Look over your policy carefully, and then start making changes as needed.