Home insurance is a pretty essential purchase to make, considering that it protects (what is in all likelihood) your most valuable possession: your home. Go without it and you risk losing a life's worth of savings—all while holding on to a life's worth of debt.
Even though the decision of whether or not to get home insurance should be pretty clear cut (you get it—every time), the amount it will cost you to do so is not nearly as obvious. The price of a home insurance premium will depend on a multitude of factors, some of which are within the property holder's control, some of which are not. Here are 10 important ones to look out for.
1. A low deductible
As we've covered on Insurance Hunter before, a low deductible = a higher premium. This is a general principle of insurance—not just home insurance. Drivers face the same quandary when they take out an auto insurance policy; they can either keep the deductible low and pay a high premium or opt for a high deductible and save on the premium. The latter choice has both the highest ceiling of opportunity and the lowest floor—it's always better to be paying a lower premium unless something goes wrong. But the 'right' move will depend on what the homeowner(s) feel comfortable with.
2. Unmonitored property
This won't 'drive up' your premium per se, but not having a home security system may disqualify you from getting a discount that many insurers offer to their customers; one that is often as high as 10 or 15 per cent off. And if it isn't an official discount, you could always try using it as a negotiating tactic.
3. Making monthly payments
Monthly payments are another type of money trap that tends to hold true across the board in insurance. Whether it's for cars, boats, businesses, etc., monthly payments usually come with an extra administrative fee that wouldn't be there if you went for annual payments instead. Since there's more processing to do, it increases the amount of work for the insurer. The cost of this isn't all that high, but along with some of these other factors, it could really start to drive up your premium.
4. History of bad claims
An empty record of claims is one of the most valuable assets you can have in the insurance world. Especially if you were at fault for any of those claims, they can really set you back on your premiums. That's why, if something happens in your home that isn't too damaging, it might be a better idea to pass on a claim, rather than filing one. Before making a choice, do a cost-benefit analysis to decide if it is worth your while.
5. Risky pets
Not all pets will impact the price of home insurance. If you have a goldfish or gerbil sitting at home, you don't have to worry—your insurer isn't losing any sleep over it. Insurers do start to worry, however, when you start domesticating bigger and more dangerous animals (large snakes and aggressive dog breeds certainly fit the bill). So just be aware of that when you are anticipating the cost of home insurance.
6. Poor fire response location
In the event of a fire in your home, the amount of damage that arises from it could largely depend on how close the property is to a fire hall, or even just a fire hydrant. Urban homeowners don't have to worry about this as much as rural ones do, but it's something that all of them should be aware of. For those that don't have those things within a reasonable distance, it's important to have backup plans in mind that could get large amounts of water to the scene if required.
7. Old utilities
Houses with really old utilities are a major red flag for insurers. Things like oil-based heating (as opposed to electric heat or forced-air gas furnaces), wood stoves, lead pipes (as opposed to modern plastics or copper ones) and aluminum/knob and tube wiring are all things to consider replacing if you want to invest in the house and it's risk mitigation capabilities.
As you probably would have guessed, pools aren't exactly music to an insurer's ears. They will raise the risk profile of even the safest swimmers (accidents can always happen). There's not much you can do to lower the premium hit when you're insuring a pool with a house. Having it fenced off from other properties/spaces is about it.
9. Expensive possessions
Insuring a home requires more than just insuring the dwelling itself. Your possessions factor heavily into the equation as well, and for many possessions, basic policy coverage won't totally cut it. When you have lots of expensive items lying around the house—think jewellery, wine, ski equipment, silverware, etc.—you may need what is called a rider in order to be reimbursed for those items' full value if they are lost or stolen.
10. On-property business
Whether the house contains a home office that clients visit, or the home itself is the business (a la bed and breakfasts), businesses are not covered by standard home coverage. If you find yourself in that situation, you'll have the option to either beef up your home policy or take out a separate business policy. One way or another, your insurance costs will go up.