The most valuable and important asset that most people will ever own is their home. Since your home is such a big asset and important towards your overall quality of life, you need to make sure that it is properly protected. The best way to do this today is through the use of homeowners insurance. While you may initially get a home insurance rate that you are comfortable with, there are situations in which they can increase. If you noticed that your homeowners insurance rates are going up each year, it could be due to a variety of different factors.
Replacement Costs Go Up
The most significant factor that has an impact on your overall home insurance rates is your replacement cost. The more money that it would cost to rebuild your home, the more your insurance rates will be. Over the long haul, the amount of money that it will cost to rebuild your property will continue to increase due to changes in construction costs as well as inflation. Typically on an annual basis, the insurance company will run an analysis to determine what it would cost to rebuild your home. If they determine that the cost to rebuild your property has gone up, they will have to charge a higher rate to compensate for the increased risk.
Risk Profile in Location Increases
When you are getting a new homeowners insurance policy, a big factor that will influence your total rate is the location of the property. The home insurance provider will review a significant amount of data including risk of theft and vandalism, fire damage rates, crime statistics, and risk of bad weather to figure out what your home insurance rate will be. This type of data is then updated on a very frequent basis, and at the end of a policy year, it will be analyzed again. If it has been determined that your location risk has increased, the insurance company will increase the homeowners insurance rates to compensate for the increased risk.
You Made a Prior Claim
Overall, the number one factor that will influence your home insurance rates is the risk that you will have to file a claim and the amount of the claim. Much of this risk is based on factors that are outside of your control, such as rebuilding costs and location risks. However, if you have filed claims in the past for your home insurance policies, it will also have an impact on the rates that you receive in the future. Home insurance providers have determined that someone that has filed one claim is more likely to file additional claims in the future. While it often makes a lot of sense to file these claims, each claim that you do file will have a negative impact on your rates in the future. Because of this, it is important to carefully weigh the benefits and risks that come with filing a home insurance claim.
Policies are No Longer Combined
If you are looking to save money on your total personal insurance expenses, one of the best things that you can do is to get all of your personal insurance policies with the same insurance company. When you are able to get your home, auto, and other personal insurance policies with the same insurance company, the insurance provider will be able to combine your policies. In many situations, this can result in a big savings off of your total insurance expenses. If you decide to change your auto insurance to a new company, you could end up losing your multi-policy discount. This will then result in your home insurance rates increasing once a new policy starts. It is important to consider this additional expense whenever you are shopping for new insurance rates.
Changes to Insurance Policy
Another factor that could have a major impact on your total insurance expense is whether you change your insurance policy. All people should spend time each year evaluating their insurance needs. When you do choose to change your insurance policy, whether it is to increase your coverage levels or decrease your deductible, it will have a change to your risk profile. This could then impact the total money that you have to spend out of pocket.
Personal Credit Score
Depending on where you live, you could see an increase in your home insurance rates if your credit score has gone down. Some insurance companies have found a link between home insurance claims and customer credit scores. In certain states, it is not illegal to use credit scores as a metric for determining home insurance rates. In these areas, insurance providers may charge higher rates to people that have lower credit scores. If during the prior policy year something happened that negatively impacted your credit score, it could lead to an increase in your home insurance rates.
Use of the Property
Whenever you are shopping for a new home insurance policy, you will have to disclose what the use of the property is. There are a number of factors that could influence whether the use of the property impacts your rates. For example, if you operate a small business out of your property, it could lead to increased liability risk. This increased risk will then lead to higher home insurance rates. Because of this, any change to the use of a property will have some type of impact on the rates that you are charged.
Changes in Underwriting Methods
In some situations, your home insurance rates could go up even if nothing has changed about your policy or risk profile. All insurance companies have their own methods for assessing risk when it comes to home insurance. If they end up altering their underwriting methods, it could change the way the insurance company perceives your insurance application. In these situations, your rates could increase even if nothing else about your profile actually changed. Because of this, it is important that you continue to evaluate your home and other insurance options and shop around to see if you can find a provider that will give you good coverage at a better rate.
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