Ask Fitz: Homeowners Insurance – Why do premiums vary so much?

Have you ever wondered how your homeowners insurance rate is determined? Or why is it possible that your premium can vary so much among carriers when requesting quotes for your policy?
The reality is that many factors affect your premium rate. Below I have outlined various factors that influence homeowners insurance rates. Some of these you can control while others you cannot. By understanding these factors, you can have confidence the next time you shop your homeowners insurance policy. Let us begin with the factors within your control.

Location and Condition of Your Home
While you cannot control the age of your home, you can control the level of care you show for it. If your home is newer, then few updates may be needed other than normal care, such as making sure smoke alarms and home alarms are working properly. However, if your home is older, then it is necessary to care ensure critical home functions are updated as needed. This includes replacing an old roof, updating electrical systems and wiring when out of code, updating plumbing and updating HVAC systems. By completing these updates, your home will present less risk to an insurer and demonstrate you are willing to take action in order to minimize the risks associated with your home. It is also worth noting that some home additions can cause insurance rates to increase. Installing a swimming pool, trampoline or owning an aggressive dog increase the potential risk associated with your home and lead to increases in rates.

Deductible and Claim History
The deductible on your homeowners policy relates directly to your policy’s rate. If you have a low deductible, then your rates will be higher. If you choose a higher deductible, then your rates should go down. This is because the likelihood of a claim with a higher deductible is less than the likelihood of a claim with a low deductible. The frequency of claims, even if small, can have a significant impact on a homeowner’s insurance rate. If you have a low deductible and report many claims, then your insurer could potentially raise rates or even cancel your insurance policy. Several factors outside of your control also influence rates, but one good strategy to help minimize your premium is to increase your deductible to a comfortable place for you in consideration of your financial state.

Insurer Risk Appetite and Underwriting
Each insurance company varies in how they view risks, such as type of construction, location or demographics in that area. It is beneficial to work with a licensed insurance agent in your area, as he or she will know the risk appetites of the insurers in your area to know who can provide the best rates. Another factor you cannot change is the criteria an insurance company uses to determine the risk they associate with you as a homeowner. These factors include items such as occupation, education, location, credit score, claims history, etc. You can certainly take action to improve each of these factors, but also be aware that insurance companies are continually evolving these items based on new data.

It is important to become familiar with the many factors of homeowners insurance rates so that you can make knowledgeable decisions to minimize premium while maximizing coverage. As a Trusted Choice Independent Agency, the Oswego-based FitzGibbons Agency is here to guide you in those decisions. We work closely with multiple local insurers to compare coverages and ultimately ensure you have an insurance policy that is right for you.
Have further Questions? Just Ask Fitz!
John FitzGibbons
FitzGibbons Agency
44 East Bridge Street
Oswego, New York 13126

May 7th, 2019 by Huntington Agency