Factors that Affect Homeowners Insurance Premiums
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Factors that Affect Homeowners Insurance Premiums

Your home is most probably the most expensive investment and the important thing you own and hence it is important to protect your house against unexpected events like natural calamities or burglaries. There are several ways to protect your house such as installing security systems, adding CCTV cameras, securing the doors and windows, and lighting up the landscape. And even if you take all these measures, you should take extra precaution and invest in a comprehensive home insurance plan that comes to your aid in case of an unfortunate accident. That said, the premium you pay against your home insurance policy depends on several different factors. So what affects home insurance premiums? Let’s find out.

Factors that affect homeowners’ insurance premiums

There are various factors that can positively or negatively impact the cost of your home insurance premium. Let’s take a look at some of these factors:

  1. The neighbourhood you live in

    The first factor that affects homeowners’ insurance premiums is the neigbourhood in which you live. The location of your house plays a very important role in determining the cost of your home insurance premium. For instance, if you live in an area considered as a high–risk area, there is every chance that your insurance premium amount will shoot up. Risky areas are those where instances of burglary and thefts are common occurrences. A neighbourhood with a higher crime rate is likely to witness more instances of theft, burglaries and damage to property. Conversely, living in a gated society with 24–hours security measures can decrease instances of criminal activities and also reduce your premium payments.

  1. The characteristics of your home or building

    Certain characteristics of your home also play a critical role in determining your home insurance premium. The characteristics or factors that affect home insurance costs include the age of the building, the additional structures, and the value of the structure. All of these factors determine the cost of home insurance premium. Typically, older houses carry higher risks of damage, thus attracting higher home insurance premiums, whereas the premiums for newly constructed properties are usually low. Additional structures such as swimming pools, club houses, and garages are also likely to raise the overall cost of home insurance premiums.

  1. The weather conditions in your city

    An external factor that affects home insurance costs includes the weather conditions in the city or town you live in. If you live in an area that is prone to frequent natural calamities which can severely impact the foundation of your house, and reduce its longevity, your insurance premiums will be relatively high. For instance, people living in localities that are severely impacted by earthquakes, floods, torrential rains or cyclones, are likely to pay a higher home insurance premium than others.

  1. The personal safety measures you take

    There are some factors that affect homeowners insurance premiums in a positive way. If you take the necessary precautions to lower the risks associated with filing home insurance claims, you can reduce your home insurance premium amount significantly. Personal safety measures such as installing home security systems like CCTVs, motion detectors, and security alarms are not just your best defense against burglaries and thefts, but they also lower the cost of your home insurance premium to a great extent.

  1. The deductible amount you select

    The list of factors that affect home insurance costs includes deductibles. A deductible is an amount that you, as the insured, have to pay whenever you file a claim. This is a fair amount that is decided as per the Insurance Regulatory and Development Authority (IRDAI) guidelines. You can choose to go for higher deductibles at the time of buying or renewing the insurance plans. Higher deductibles mean lower home insurance premium. Do keep your long–term financial planning in mind, when choosing the amount of deductibles.

  1. The cost of construction

    The cost or rate of construction, also referred to as the ‘per square feet area’ cost of constructing your property, is also what affects home insurance premiums. The material used in the construction process determines the cost of construction, which in turn determines the insurance premium amount. Thus, if you use low standard material to build your house, your insurance premiums might end up on the lower side, but it can also affect your property’s longevity.

  1. The additional riders you opt for

    Additional riders are not part of your home insurance policy. You have to add them separately to your basic policy, by paying an extra price for each rider. You can buy these riders when you purchase or renew your home insurance policy. As such, additional riders are factors that affect homeowners insurance premiums to a great extent. You can choose from a wide range of add–on riders to get wholesome home insurance coverage. Some of the commonly available add–on riders include loss of rent cover, lock and key replacement cover, temporary resettlement cover, and so on.

  1. The type of insurance policy you choose

    The last of the factors that affect home insurance costs include the type of home insurance plan you choose. You can choose home insurance plans based on various tenures such as short and long–term insurance or a simple home insurance plan. The coverage you get can vary from 3 years to 30 years and protect you against a wide range of damages and perils. The general rule of thumb is to buy a home insurance policy with a lower coverage when your property is newer and increase your premiums as your property begins to age. Note that the insurance premiums for two similar properties can be vastly different.

Now that you know what affects home insurance premiums, consider investing in an all–encompassing Home Insurance Policy.

Disclaimer: The above information is indicative in nature. For more details on the risk factor, terms and conditions, please refer to the Sales Brochure and Policy Wordings carefully before concluding a sale.

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