Ever wonder what factors affect what you are charged for your homeowners insurance (and some methods to lower your premium)?

Understanding some basic information on how homeowners insurance rates are determined can help you have an impact on the size of the premium check you write every year.  Your home is one of the biggest investments you can make.  Properly insuring your home is critical to protect this investment.  Like most things in life, you get what you pay for.  So, when insuring your home, you need to be careful and not necessarily settle for the lowest price.  The list below will help you purchase the quality product you need at the lowest cost possible.

Replacement Cost
Insurers determine and file base rates for premiums for their homeowner's products.  These rates are considered "base rates."  There are several factors (see below) that influence these base rates.  The amount of replacement cost on the home is the key determinant for the amount of premium charged.

We are in a strange time in real estate valuations.  Replacement cost values are higher than market values for most homes.  Don't settle for only insuring your home for the market value.  Make sure your agent has completed a replacement cost analysis and that your home is insured to the full cost to replace.

Insurance Scoring
Insurance companies use credit insurance scoring (derived from credit scoring) to significantly modify the base rate.  The premium can fluctuate up to 35% either way depending on your credit score.  Checking, correcting, and/or keeping your good credit as high as possible is very important in keeping your insurance rates a low as possible.

Updates
If your home is older than 20 years, updating the furnace and the roof can save substantial premium dollars.  If you have remodeled your home, premium can be saved on updates to the electrical and plumbing systems.  Make sure your agent is aware of any improvements you have made to your home a they could decrease your premium.

Security
Up to 10% of the total premium per year can be saved just by installing a monitored alarm system in your hoe.  Other potential premium saving security items include dead bolt locks, fire extinguishers, internal sprinkling systems, back-up generators, etc.  Make sure to check with your agent to find out if you already have premium saving security, and that you are receiving the credit.

Location
The location of your home can alter your premium dramatically.  The further away you are from a fire department will have a significant impact on the amount you pay.  Check with your agent to make sure your home is rated properly in the appropriate protection class.  Protection classes can change, so it is a good idea to check this annually.

Deductibles
The amount of your deductible has a substantial effect on your premium.  the higher the home deductible, the lower the premium.  Most homeowners carry a minimum of $1,000 for a deductible.
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