How are home insurance premiums calculated?
Several factors related to both your home, and you influence your home insurance rate. Your homes characteristics such as the age of your home, structure, build quality, location of your home, and the age of your roof can all affect your home insurance premium. Additionally, your credit score and claims history also factor into the home insurance premium cost.
How does my roof type and age affect my home insurance rate?
When it comes to determining eligibility and insurance rates, one of the top factors is the type and condition of your roof. More frequently now, insurance companies will not accept you as a new customer if your roof is older than a certain age, usually 15-20 years. With the increased occurrence and severity of hail and windstorms, replacing roofs is one of the biggest claim liabilities for an insurance company. The roof is also the first line of defense against other hazards, and an older or a roof in bad condition can also increase the likelihood of additional or more severe claims. The type of roof can also impact your rates, as some types carry different risks. For example, metal roofs are more fire resistant but dent in hailstorms or a gable shaped roof is more wind prone. A roof may be uninsurable if it is old, in poor condition, or made of materials considered high risk like wood shake.
Why are older homes more expensive to insure?
Older homes often have outdated wiring, plumbing, and heating systems which increase the chance of fire and water claims. Additionally, older homes most likely aren’t up to current building codes which make them more expensive to repair or rebuild.
What does “other structures” cover and why can’t I remove it if I don’t have any detached structures?
“Other structures” or Part B of a home insurance policy is always included on a standard home insurance policy. The amount of this coverage can be increased if needed but usually cannot be decreased. It is most often 10% of your Part A coverage or “dwelling coverage”. Other structures cover more than detached garages, sheds, guest houses, or barns. Other structures also cover fencing, outdoor kitchens, retaining walls, and sometimes part of your pool equipment. Other structures do not cover landscaping, normal wear and tear, or structures used for business. Usually, you do not list each structure separately rather make sure that the total limit covers all the structures.
What does home insurance not cover?
You should always review your exact policy language for specific exclusions but there are some common exclusions for home insurance policies. Some natural disasters are not covered by an unendorsed home insurance policy including earthquakes, sink holes, and flood. Repairs or replacements that are needed from normal use and wear are not covered. Mold and mildew are often excluded or extremely limited in coverage. Also, damage caused by acts of war, terrorism, or civil unrest are not covered. Damage you intentionally cause to your own property is not covered. Repairs or updates to comply with updated building codes are not covered or include a limited amount in the policy. An unendorsed home insurance policy will not cover the plumbing or other lines in your yard leading to the home and city or county maintenance ends at your property line. Some types of water losses are not covered by an unendorsed home insurance policy such as water back up, water seepage and leakage, and water foundation coverage. Rodent and pest infections are often excluded from home insurance policies. Most standard home insurance policies have limited coverage for high value items so while they are covered, they are not covered to the potential full value of the item. Some examples of these types of items include art, jewelry, guns, electronics, cash, antiques, and other collectibles.
How is my Replacement Cost calculated?
Each insurance company uses their own Replacement Cost Calculator. These insurance tools use information about your home such as square footage, age of your home, number of stories, house shape and style, type of finishes, garage square footage, type of foundation, porch and deck square footage, and type of building materials to calculate what it would cost to rebuild your home. The tools also factor in local building costs and the cost to remove the existing home and debris if your home is a total loss. The replacement cost of your home is not the same as the current market selling price, tax appraisal, or market value. Most insurance companies will not lower this amount and require you to insure your home for at least 80% to 100% of the replacement cost . Homeowners should use the most accurate information to get the best estimate possible, however, you should realize that there is no guarantee it will be 100% accurate at the time of loss.
