Have you moved and bought a house? Here’s what you need to know

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BPT

Much of the country is still in the midst of a hot real estate market. Home values ​​are increasing due to high demand and first-time home buyers should be aware of the impact of their home’s value on how their premiums are calculated. Location and type of structure are two examples of considerations that can affect homeowners insurance premiums, but also home features, policy limits and, in some states, even the homeowner’s personal finances. Policyholders should be aware of the variables that are taken into account in their insurance coverage.

Location

Location is perhaps the single most important consideration when it comes to your insurance premium costs, as it deals with exposure and risk to the physical structure of the home. The type of home you own, where you live, and the state or city you reside in can significantly affect how much you’ll pay. In fact, location is such an important factor that coverage of certain areas may require special policies.

For example, many homeowners moved from the city to the countryside during the pandemic and found they now lived in areas prone to wildfires or flooding and needed additional coverage due to risk factors. environmental damage not covered by home insurance policies available in the region. . Homeowners who live in or near large urban areas may find that their premiums cost more due to the higher cost of construction or repairs.

Carefully consider the factors that affect the cost of your home insurance rate. The size of your home, regional vulnerability to natural disasters, and different building material options like brick or wood and their relationship to the environment can determine the cost of your premium.

Replacement cost

The more expensive your home is to replace, the more coverage you will need to insure it.

“Replacement cost is a measure of how much it would cost to replace or rebuild your home after a disaster with a similar home of the same kind and quality,” said Bonnie Lee, vice president of real estate claims at Mercury. Insurance. “This amount takes into account factors such as the square footage of your home, local construction costs per square foot, and construction details unique to your home.”

While replacement costs refer to the cost of rebuilding a home to the same standard as before, it does not include features such as neighborhood, amenities, and even proximity to schools that can affect home attractiveness. ‘a property.

“Replacement cost and market value are often used interchangeably, but they are two completely different concepts. Market value explains the impact of the neighborhood and its amenities on a property’s attractiveness to buyers, while replacement costs refer only to the expense of rebuilding a home after a disaster,” said said Lee.

Franchise

The insurance deductible is one of the most important elements of a home insurance policy and plays an important role in determining insurance premiums. The deductible is the amount of money a policyholder must pay before the policy pays for repairs or a loss.

For example, if the covered damages to your home cost $20,000 and your deductible is $5,000, you would be liable for the first $5,000 of damages and your insurance company would pay the remaining $15,000. Owners who pay a higher deductible can reduce the cost of their premiums, but may have to pay more out of pocket when filing a claim. Home insurance premiums are calculated based on a number of factors that homeowners should consider when looking for the best coverage for their needs at a reasonable cost.

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