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What Determines the Average Cost of Homeowners Insurance

What Determines the Average Cost of Homeowners Insurance

Every homeowner should know what determines the average cost of homeowners insurance and in turn the premiums. This way, one can reduce the amount paid. According to statistics, the average homeowners insurance cost lies between 300 and 1000 US dollars. To estimate this figure, you should divide your home’s value by 1000 and then multiply the result by 3.5 dollars. You should note that this is just an estimate because there are other factors that determine the cost. Some of them are:

The perils covered in the policy

The perils covered determine the cost of insurance. Some policies only cover the standard perils such as damage from fire, wind and vandalism. Other policies may include additional perils and that means higher premiums.

Location of the home and the neighborhood

The geographical location also determines the average cost of homeowners insurance, due to the coverage of disasters present in the area. For instance, if your home is in an area with earthquakes and flooding, you may have to take a separate policy to cover them and therefore increase the cost of your premium. Having a home in Gulf Coast in states such as Florida and Texas means dealing with hurricanes a fact that increase premiums by almost double. Residing in Oklahoma and Kansas means higher premiums due to tornadoes. If you live in high crime neighborhood, your premiums will be also high. The same case applies if homeowners in your neighborhood submit more claims even if you have not submitted any claim. In addition, the distance between a hydrant or a fire station to your home may affect the premiums that you pay because the longer the distance to your home the higher the rate. Any instance of high risk makes the insurers to charge more resulting to higher premiums.

Home condition

The condition of the home also determines the average homeowners insurance cost. To insure an older home costs more due to the problems that older constructions develop. The replacement cost of the home may also be more for an older home. The replacement cost, which is the projected cost of rebuilding or repairing a home to a new condition, also affects the premiums. The higher is the replacement cost, the higher the premiums. If you have not updated the plumbing in your home for 25 years, the premium is likely to be high. This is because an updated plumbing can lead to problems that are water related such as mold. The insurance company may also refuse to insure your home if it has defects such as an electrical wiring that is outdated and does not meet the building codes. You may be required to update it before being insured. Do not forget that you can reduce the premiums you pay by getting discounts. You can qualify for discounts if you install home security features such as an alarm system or constructing roofs with materials that will endure hailstorms and high winds.

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