A homeowners insurance policy is vital to protect your home structure and personal properties when the unexpected happens. However, its cost won’t be constant, as it can increase or decrease yearly depending on the additions or exclusions you have made. Are you wondering why your rates did go up? Here are the reasons.
Of course, you buy home insurance to cover the cost of major expenses resulting from the damage to your home caused by the covered perils (theft, vandalism, natural disasters, etc.). However, filing a costly or more than one claim in a year may increase your home insurance premium.
Evaluate the total cost of a claim before filing it. For example, if it is a small claim costing around $200 to $300 excluding deductible, pay it out-of-pocket to avoid you’re a rise in premium. If a claim costs thousands of dollars, you can file it because, in such cases, the increase in your premium will be offset by the payout.
If other local policyholders file more claims, your rates will go up along with theirs even if you did not file more claims. You can expect this during a major storm or catastrophic event. For example, if an insurance provider receives more claims from a particular area for the same peril, they will likely increase the coverage rates of the policyholders in that community.
When calculating your premium, your insurance provider will usually consider your home’s replacement cost. Now, construction costs are becoming expensive with the increase in building materials and labor costs. This will increase the cost of rebuilding your home if it is severely damaged by a covered peril. Therefore, your premiums might increase.
If you upgrade your home with security systems, like CCTV cameras and fire alarms, you can expect a decrease in your premium. However, some features, like adding a swimming pool, trampoline, or hot tub, can increase your premium. This is because these additions increase the probability of others being injured on your property, raising your chances of filing more liability claims. Therefore, your provider might consider you as a high-risk customer and hence increase your premium.
Not all insurance providers calculate the premiums the same way. Therefore, look for different insurance companies and compare their costs in terms of benefits and coverages of the policy. Then, choose the provider that offers comprehensive coverage at an affordable rate.
If you are looking for a cost-effective home insurance policy that will adequately cover your home and belongings, contact us today at Reata Insurance Group. We will help you find the right policy according to your budget and needs.
