How an insurate rate is determined?

When it comes to the rates you get for your home insurance there are numerous factors affecting them in complex. Starting with the location of your house to square footage and actual house type, as well as insurance claims history - these all contribute to the price you will have to pay every year. And if you want to change your actual rates you will certainly have to learn more about these factors and see how changing them can affect the amount of money to be paid for insurance.

These factors include but are not limited to:
Type of the house - The materials and techniques used in the construction of your house will strongly influence its ability to withstand various types of damage such as flood, fire, storm and other hazards, and will respectively affect the final insurance rates. And while brick and stone houses are very costly to construct they will be usually less expensive to insure than cheap stick frame homes.

Home maturity - Older constructions are usually more costly to insure than newer ones, because mature buildings are more prone to damage due to wear and tear they have taken over the years. Besides, brand new homes usually provide homeowners with new home discounts as their overall condition is evaluated as perfect by insurance companies.

Location - The place your house is located in will strongly affect your insurance rates. Homes located in urban areas will cost more to insure than suburban or rural homes because of the higher burglary risk. Constructions located in areas that have a high risk of certain hazards (hurricanes, storms, flood) will have higher insurance rates too. On the other hand, having a fire hydrant or a fire department close to your home will pull down the premiums to an extent.

Coverage amounts and deductibles - Each homeowners insurance policy has its individual deductible set by the insurance provider. This is the amount of money you will have to pay out of pocket before the insurance claim will be processed. This means that if you have a deductible of $500 you will have to pay for the damage to your property not exceeding this amount and will have to file a claim only for the damage exceeding this value. And the higher is your deductible the lower are your premiums.

Dollar amount of coverage - The types and amount of coverage carried by your homeowners insurance policy will also affect the rates. Having large coverage amounts usually leads to higher premiums, although some providers tend to offer special discounts for getting certain large amounts of coverage with their policies.

Endorsements - These are additional types of coverage that you wish to include to your policy for an additional price. Of course, the endorsements will make your policy pricier but they will also make your house covered to a larger extent and protected against specific risks. Endorsements give you more flexibility and protection in case of insurance situations, such as pay for your temporary residence in case your home is damaged badly.



© 2010 Ranjan Kumar