Calculator and paper
Calculating a policy premium for your home boils down to 5 major factors.
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Because of natural disasters and other unfortunate incidents that happen in succession these days, it’s no wonder that a lot of people would like to avail of home insurance in order to protect the cost of their home and their valuable possessions within it or to get adequate funding should their home be in the path of a disaster waiting to happen.

Yet, not a lot of people have an idea of what are the factors that are used to calculate the cost and coverage of a home insurance. To give people the necessary information that they need, here are some of the factors that are considered by insurance companies when computing for the final cost of the home insurance coverage that your home and your valuables will have.

The Location of Your House

Just like in real estate, a better house would fetch a better cost. The same can be said of home insurance because it is looking at the location of a house to see if the value of the insurance can be raised or lowered in relation to other factors.

There are two ways by which home insurance can be approximated based on location. If the house is in a city area or a rural area, there is an effect to the cost of the entire insurance. Usually, city owned properties are more expensive based on value per square footage, so the coverage of the insurance is likely to go up.

Also, the type of neighborhood can also determine the type of insurance that you can get. If you live in a neighborhood where the crime rate is high and the income is relatively low compared to other neighborhoods, you can actually see a decline in coverage because of these reasons. Neighborhoods that are assigned as districts to minorities may not fare as well as compared to neighborhoods that have mixed nationalities and ethnicities living within the same common area.

Another factor when it comes to location is its proneness to natural disasters and other situations which might damage property. A house in a floodplain may have a lower insurance coverage, but a home which is far enough from these types of disasters may drive the insurance cost lower.

The Type of Dwelling

Both homeowners and renters can avail of insurance in order to protect the property that they live in. Homeowners may enjoy a little more flexibility in their insurance, as the cost of their house has already been shouldered, but renters may go through another direction, as they are not the sole owners of the property.

One must also note that there are distinct differences when having an insurance for a property like a condominium and a home on firm ground. Condos have a lot of risk factors which is why the declaration of personal property value must be raised, but homes are separate from each other, which makes them ideal for a lower cost of insurance compared to its building brick and mortar counterparts.

The Age of the House

The home insurance is also dependent on the age of the dwelling. For instance, an old house may not fetch a good coverage because of its age, but a new house that follows standard building code guidelines can have a better coverage because of the prudence of the owner of the house.

Similarly, if the house has been well maintained, and has some historical value, it is possible that the coverage will be raised for the reasons being as such.

Aside from the age of the house itself as a factor, the age of the house is also a telltale sign of other possible conditions that the house may be through, including molds, mildew damage, termites and other pests that might live in between the interior and the exterior of the home. It is important then for the homeowner to have their house inspected for pests every now and then to make sure that the value of the home is not compromised.

The Age of the Owner/ The Paying Ability of the Owner

Some home insurance calculators would ask the age of the owner because the age of the owner says a lot about the value of the property. Generally, younger people belong to  a lower wage bracket, so their ability to pay for the insurance is lower. Older people on the other hand tend to earn more, so their paying ability is higher than that of younger people.

Depending on the type of insurance, type of home, and type of person who will pay for the insurance, the age of the owner may affect the cost of the insurance to make it go higher or lower. Therfore, it is important to get a quote from different insurance agents to get a fair chance of choosing the best home insurance for you.

The Security Features of the Home

Since security systems are widely available today, it is important to note that having one in your house can actually affect the price of the insurance that you will get. Installing a security system in your house does not only make your house safer for you, but it also drives down the cost of paying for the insurance that you have. Security systems have fees and features that are different from insurance itself, but it helps tremendously in preventing burglars from entering the house. This is a key feature of the security system that drives the cost of the home insurance down for the homeowner.