Deciphering A Home Owner Insurance Rating

Deciphering your home owner insurance rating can be difficult, because the insurance company takes many different considerations into account when determining your rates.

Your Home Is an Investment

Because your home is one of the largest purchases you will ever make, it is important to adequately insure the structure, the property, and the contents of your home against damage and vandalism. It is also important to protect yourself in case someone is injured on your property.

Understanding how insurance companies arrive at their rates can be difficult. From your point of view, the rating may seem arbitrary, but the rating is actually a very complex mathematical formula.

Factors Including in the Rating

There are several key components insurance companies use to determine your insurance rating. The two most significant variables are your level of coverage and your level of risk. However, within those two categories are a myriad of subcategories that affect your rating.

When considering your coverage levels, insurance companies have developed rate structures based on the amount of coverage you request. Things like the maximum payout per incident, the amount of your deductible, and whether or not there is special coverage for expensive collectibles or jewelry can significantly impact your insurance rating.

When determining the risk factors that are considered in determining your home owner insurance rating, there are many factors the insurance companies consider. Some of these factors you can't control, like the location of your home. The location of your home is significant for several reasons that can affect your insurance. Is your home in a high crime area? Are you in a flood plain? Are you far away from emergency personnel like the fire department or ambulance? All of these questions are used by the insurance company to determine the risk they take in insuring you.

Understanding Your Rating

When you receive your “binder”, an explanation of your premium, the binder will break down all of the different coverage you have and how much each of those coverage contribute toward your premium. Reading this detailed information can help you identify the variables you can control. The structure of your policy will be similar no matter what company you obtain coverage through.

There will be a declarations page, which summarizes all of the information. There will be a definitions page, which identifies and defines key terms as they are used in your policy. The coverage section explains what coverage you have; the exclusions page specifies what coverage is not included. The endorsements page covers any special additions you've made to the policy.

Be sure to read your policy carefully. It is important to obtain the insurance you need to protect your home and property. Shop around before making a decision and compare coverage and service as well as price. Insurance is an important purchase; it is worth taking the time to make sure you are getting what you need.

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