When you are buying a house, location is important. Many would even argue that it’s the single most important factor to consider when purchasing real estate. You know the saying – location, location, location. So why does it matter so much? Well, location is often an indicator of how much your home’s value will appreciate over time. Buy in a good location and you can end up getting a handsome return on your investment.
But location doesn’t just matter when it comes to buying your home; it also matters when it’s time to insure it. In fact, your home address can be a determining factor in how much you pay for home insurance.
Just like when you made an investment in purchasing your home, your home insurance provider is investing in protecting it. From potential severe weather threats to building costs, carriers will consider a variety of local factors to determine how risky it is to insure your home. In the end, the more risk your home’s location poses, the higher your insurance quote will likely be.
Let’s take a look at some of the location variables that may possibly go into setting your premium.
Severe weather
Each year, millions of homes are damaged or destroyed by severe weather. In 2014, hail alone caused more than $1 billion in property damage, according to the Insurance Information Institute. With each city and state offering its own unique set of weather threats, home insurance premiums can vary widely depending on where you live and how frequently you are confronted with severe weather.
In general, the more severe weather your area faces, the higher your home insurance premium will be. Homes on the East Coast, for example, can see higher premiums due to the frequent threat of hurricanes and tropical storms. The same goes for homes located in Tornado Alley.
Luckily, even if you are stuck paying a pretty penny for home insurance, your home is being protected from a wide variety of perils. Standard home insurance policies typically protect against lightning, hail and wind so you can feel confident that your investment is safe. Flood and earthquake coverages are not included in standard policies, however, and should be purchased separately.
Claims history
Most home insurance providers will consider your personal claims history when setting your premium, and many also will pull a report on how many claims have been filed in conjunction with the house – before you owned it. Both go into building a risk profile for the policy.
Some even go as far as considering your ZIP code’s claims history. That’s right, your provider will be able to enter your ZIP code and see how many policyholders in your area have filed claims. If you live in an area that’s seen a high number of claims, you may end up paying more for home insurance.
Fire safety
When you call you get a home insurance quote, most providers will ask, “Are you within five miles of a fire department?” or “Is your home within 1,000 feet of a fire hydrant?” Carriers ask these questions because they care about fire safety. The closer you are to a fire department and a fire hydrant, the quicker a fire can be put out in your home. If you live outside of these parameters, your insurer will likely make you pay more for insurance. Why? Because fires are costly for providers. In 2013, fires caused over $19 billion in property losses in the United States, according to III.org.
Home insurers take fire safety seriously. In fact, they take it so seriously that you can earn discounts for being fire safe around your home. If your home has smoke alarms and/or a sprinkler system, you can receive a discount on your premium from many home insurance providers.
Local building costs
The largest component in setting your premium is your dwelling coverage. This is the part of the policy that protects the actual structure of your home. In the event it is damaged or destroyed by a covered peril, your policy will kick in to repair or replace it, up to your coverage limits. That's why you should work with your agent to make sure you set your dwelling coverage at an amount that will allow you home to be rebuilt from the ground up.
If you live in an area with high building costs, you might end up paying more for your premium. Why? Because it will cost your insurer a lot more to potentially rebuild your home. Not sure how much dwelling coverage you need? Check out this dwelling coverage calculator.
In the end, whether you are buying a home or insuring it, location is key. Keep that in mind when deciding where to settle down.
Samantha Alexander writes for HomeownersInsurance.com, an online insurance resource for homeowners and drivers across the country. Offering comparative automobile and homeowners insurance quotes, consumers rely on HomeownersInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeownersInsurance.com blog, Square One, provides tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.
Comments (0)Subscribe to CommentsComment