7 Factors That Affect the Cost of Home Insurance

 

Homeowners insurance underwriters have a long list of factors to consider when writing a home insurance policy, all of which go into a formula for determining policy premium costs.  Two of the major factors determining the cost of your home insurance includes the geographic location of your home and how much it would cost to rebuild your home in the event that it's totally destroyed by a covered peril such as an all consuming house fire.

Here is a list of factors that affect the cost of your home insurance:

1.  Location, location, location.  Where your home is located is one of the primary determinants affecting your home insurance premium costs.  In states like Florida or Louisiana, where natural disasters are prevalent, premium costs may be as much as three times as expensive as costs in areas statistically safer from natural disasters such as Oregon or Utah.  Home insurance in North Carolina is the 30th least expensive of the 50 U.S. states.  Other location factors show policies are typically more expensive in urban rather than rural areas and in locations with statistically higher crime rates.
2. Home value and rebuilding costs.  Coverage for repairing or rebuilding your home is a major factor in the price of your home insurance.  Higher priced homes cost more to insure because they generally cost more to repair or rebuild.  These repair/rebuild costs will depend on the size of your home and local construction prices.
3. You'll pay more for more coverage.  Higher levels of coverage bring higher policy premiums.  The value of your personal possessions may be higher than standard policy limits and you may want to raise your limits, making your coverage more expensive.  Liability protection on your policy may be limited to $100K, but experts agree you may want to increase this limit to cover the total amount of your assets.  Consider an umbrella policy for extra protection.  This will add to the cost of your coverage.
4. Age and Condition.  An older home may be more expensive to insure.  Outdated electrical, plumbing and heating/cooling systems may be seen as higher risks by insurers.
5. Your credit history.  Many insurers use your credit history data when underwriting your policy.  Poor credit may mean higher insurance costs.
6. Deductible Amount.  Choosing a higher deductible amount should translate to a lower premium amount.
7. Ask about any discounts available from your insurer such as a bundling discount.  Other discounts may also be available.

What is a Businessowner's Policy?

 

Generally designed to appeal to small and mid-sized businesses, a business owner's policy (BOP) is insurance coverage consisting of several policies combined into one.  The advantage of buying a BOP is that it's a collection of policies protecting a business owner from the various property and liability risks most businesses face and it's sold at a discount from what you'd pay to assemble all the included protections separately.  These may include:

• Property damage or destruction from various named perils
• Liability protection
• Business interruption protection

Although coverage offered may vary from one insurer to the next, you may usually opt to add additional coverage to the basic BOP being offered with:

• Crime protection
• Protection against merchandise spoilage
• Protection against forgery and more

Qualifications 

Individual insurance providers decide if a business qualifies for a BOP, determined by such factors as: 

• Business location
• Size of business location
• Class of business
• Revenue

BOP Requirements

Not every business qualifies for a BOP and each insurance provider has its own requirements.  Many providers, for example, will only consider writing BOPs for companies that handle all their business operations on-premises.  There may also be limitations on business size, with primary business locations required to fall within certain size parameters.  Business classes that typically qualify for a BOP include:

• Apartment buildings
• Retail operations
• Office-based businesses
• Small restaurants

Certain businesses may qualify for what are known as "special considerations," to be determined between the insurer and the insured.  These may include additional coverage for mechanical breakdowns and computers.  BOPs typically do not cover worker's compensation, health insurance or disability insurance.  Coverage for these require separate policies.

Understanding Basic BOP Protections

A breakdown of the three basic protections found in a BOP include:

1. Property Insurance - Similar to homeowners insurance, the property insurance portion of a BOP covers the structure of the business property against losses from a list of named perils such as fire, lightning, explosions, storms, smoke, vehicle or aircraft damage and more.  Coverage also extends to any business-related property found within the covered business.  
2. Business Interruption Insurance - coverage against loss of income caused by a peril covered in the policy that disrupts business operation.  May also include expenses incurred from operating business from a temporary location.
3. Liability Protection - protection against losses from bodily injury or property damage caused by your business during normal business operations.  Could be damage from faulty installations or defective products.