Insurance is perhaps the most important factor you need to consider when purchasing a home. When the property’s price is too high, low insurance packages can ease off the burden of purchasing a house to a certain degree.
First-time buyers often have a hard time finding affordable homeowners insurance, mainly because they’re unaware of the market prices. In this article, you’ll learn how to scout for affordable insurance packages.
What Does Homeowners Insurance Cover?
Homeowners insurance is a type of property insurance. These are designed to cover damages to one’s real estate property and its assets. The assets, depending on the package, include electrical, furnishing, and other expensive items.
Once the property is insured, you receive four types of coverage. Those are interior damage, exterior damage, bodily injuries that occur on the property, and damage to the assets. In case a claim is made, the policyholder will have to pay a deductible.
Some policies also provide liability coverage in case of damages arising out of accidents. So if you damaged someone else’s property, the insurance would pay for the cost.
But you shouldn’t confuse homeowners insurance with home warranty coverage or mortgage insurance. Those are separate policies.
What Affects Homeowners Insurance Pricing?
Many people carry the notion that home insurance operates on a flat rate basis. But the reality is that a different price is quoted to different homeowners based on several factors. So you might be wondering what factors determine the insurance pricing. The primary ones are:
- State – Different states in the US have different insurance laws and pricing. This is because of the climatic conditions and the risks they pose to the property. So, people living in flooding or hurricane-prone areas often have to pay a higher premium. That’s why Maryland has an average home insurance cost of $1,212, while someone in Ohio pays only 895 per year.
- Claims History – Insurance companies will look into your claims history and see how many claims you’ve filed in the last 2-3 years. The higher the number of claims, the costlier the homeowner insurance is going to be.
- Credit Score – Your current credit score is a major deciding factor in insurance pricing. For those with lower credit scores, companies will charge a higher premium for protection.
- Home and Assets to be covered – Insurers will inspect the home’s quality and the assets to be insured. Insuring a new home is expensive than an older home. This is because an insurance company has to pay more to fix newer homes than older homes.
- Company and Agent – Finally, the insurance company and the agent you’re working with decide how much premium you should be paying. Some companies have a higher rate than others. This is something you need to research on your own.
If you’re looking for an affordable homeowners’ policy, here are few things to take care of:
Look for a Policy with Higher Deductibles
Deductibles are an important component of any insurance policy. A deductible refers to the amount you’re required to pay when you file for a claim. So let’s say if the cost of the damage as estimated by a claims adjuster is $5,000. So, if your deductibles are $2,000, the insurance company will be paying $3,000 to cover the cost. The higher the deductible, the lower is the amount your insurer has to pay. This will directly lower down the insurance cost, and you’ll be able to get an affordable homeowner insurance package.
Maintain a High Credit Score
As mentioned earlier, insurance companies do look closely at your credit history. They will grab a report of your credit history from a credit union when creating an insurance package for your home. As a rule of thumb, the higher your credit history, the lower premium you’re going to receive. This is because the company will be confident that you’ll pay the premiums on time, thus limiting its losses in insuring your home.
A poor credit score, on the other hand, will come with a pricier premium. This is so because the company is taking a bigger risk in insuring your property. So, maintain a high credit score for buying an affordable homeowner insurance policy.
Work with an Agency
Finally, if the cost is your primary concern, it’s best to work with an insurance agency. Since agencies are independent, they work with multiple insurance carriers. Thus, they’ll be able to offer you more options and create packages that are best for your needs.
Before working with either an agency or an agent, you can request a quote. With an affordable homeowner insurance policy, you can easily plan for other expenses.