Home Insurance: Reasons Premium Rates Vary
When an individual has home insurance coverage, any damage or destruction to home or property that occurs without warning is compensated by the insurance company. Several individuals avoid home insurance because of varying premium rates. The rates of home insurance differ among insurance companies. Individuals get frustrated when they realize they are charged high premium and somebody else is charged low premium on similar insurance policies by the insurer. There are several reasons why premiums on home insurance vary.
Maintaining a good credit score: Maintaining a good credit score has its advantages. Insurance companies determine the creditworthiness by reviewing credit scores of an individual. An individual with a good credit score is considered prompt with payments. As the risk of premium defaults is minimized among individuals with a good credit score, premium charged on home insurance is low. When an individual avoids paying bills or is in debt it reflects on his/her credit score. Individuals with bad credit scores are charged high premiums by insurance companies.
Materials used in construction of homes: The materials used in construction of a home also determine premiums charged by insurance companies. Homes that are constructed using stone, sand, cement, or brick are at less risk of catching a fire than eco friendly homes constructed of wood or bamboo. Because of high risk, individuals living in homes made of wood have to pay a high premium. As the risk of concrete homes catching fire is less, premiums rates are low.
Presence of security and safety devices: The presence of security and safety devices in a home reduces costs on home insurance. Homes equipped with fire alarms, closed circuit television cameras, burglar alarms, sprinklers and dead bolt locks are at less risk of catching a fire or being burgled. Insurance companies take this into consideration and charge low rates on home insurance. Individuals that live in homes without safety and security devices have to pay high premiums because of high risk of burglaries.
Area of home location: The area in which a home is located determines the premium cost on home insurance. Individuals that live in homes that are located in areas or neighborhoods prone to thefts, violence, riots, or vandalism are charged high premium on home insurance because of high risk of damage and destruction. Individuals that live in areas where the crime rate is low are charged low rates on premium because of minimal risk of damage to homes.
Access to Fire Station: Insurance companies also consider the distance of fire station from your home. If your home is located in a remote location and does not have a fire station in its vicinity, you will have to pay high premium on home insurance. When a home located in a remote area catches fire, fire trucks are not able to reach the scene immediately. In such a situation, risk of a home being destroyed completely by fire is high. Insurance companies consider this scenario and fix high premiums on home insurance. Homes that are located close to a fire station are at less risk of being gutted as fire trucks can arrive quickly to douse fires. Insurance companies charge a low premium on home insurance if an individual's home is in close proximity to a fire station.