Buying homeowner's insurance can be a bit complicated if you don't understand how certain risk factors affect policy rates.
Just ask Joel Laucher, a deputy commissioner with the California Department of Insurance, who says policy rates can rise or fall depending on all sorts of surprising variables.
"Anything that adds risk has the possibility of increasing the rate or having [the home] not be eligible for coverage," Laucher says. "There may be exclusions, surcharges, or a denial of the policy."
Do you wonder what unusual risk factors could affect your home insurance? We provide examples - and solutions - on how you could reduce your rates.
Reason #1: Your Home's Location is Vulnerable to Natural Disasters
Wildfires, mudslides, and - let's not forget - earthquakes can be a threat to many homeowners.
But that's not all: Homeowners who are at risk of these natural disasters often have to pay higher monthly mortgage insurance fees known as premiums.
Earthquakes, for example, can "send a tremor of fear through most Californians," writes the California Department of Insurance on its website. "Impossible to predict, earthquakes can cause major damage to your home and personal property, not to mention the loss of human life that can occur in severe earthquakes."
As a result, the California Department of Insurance says insurance companies are required to offer earthquake coverage. But the insurer, according to the department's website, can charge an additional premium, an increased earthquake deductible, or both if your property does not meet current building code and health and safety code requirements.
Solution: Make Your Home Disaster Resistant
"Find out from your insurance agent or company representative what you can do to make your home more resistant to windstorms and other natural disasters," according to the Insurance Information Institute's (III) website.
"You may be able to save on your premiums by adding storm shutters and shatter-proof glass, reinforcing your roof or buying stronger roofing materials," it adds.
Reason #2: Your Home is Far From a Fire Hydrant
Guess what can happen to your home insurance when you move into that quaint cabin in the deep woods? Your rate is likely to shoot up because the nearest fire department could be located several marathons in the distance.
In fact, the III says that location to a fire hydrant is one of the many factors an insurance company uses to determine the price of your policy.
Specifically, insurance companies are looking at "The proximity of your home to a fire hydrant (or other source of water) and to a fire station, whether your community has a professional or volunteer fire service, and other factors that can affect the time it takes to put out fires."
So, while living next door to Big Foot might sound like nirvana, it could cost you extra bucks when it comes to your insurance rates.
Solution: Shop Around and Compare Rates
When it comes to insurance rates, some factors such as where you live can be out of your control. But what you can control is how well you shop around and compare whether companies might hike up your rates based on the location of your fire department.
Reason #3: Your Home is Prone to Burglary
Nobody in their right mind would invite a burglar over to dinner, but a lack of security is definitely an inviting sign to thieves.
What's more, if your home is ill-prepared to deter thieves and other forms of danger, this can be a disadvantage to your safety - and your home insurance.
In fact, one factor that insurers look at when determining your rate is the amount of crime in your neighborhood, notes the III.
So, "The more safety-oriented you are can have an impact on your rates," Laucher says. And if you're not taking precautions to protect your home from burglars….well, that could be a reason your rates are high.
Solution: Install a Burglar Alarm
Scott Holeman, a spokesman for the National Association of Insurance Commissioners, says the installation of protective devices can have a positive effect on insurance premiums.
How positive of an effect? Well, according to the III, "Most insurance companies provide 2 percent to 15 percent discounts for devices that make a home safer - dead-bolt locks, window grates, bars and smoke/fire/burglar alarms."
Reason #4: Your Home has a Backyard Pool
Backyard fun, especially during the summer months, can be priceless. But the cost of having a backyard pool or trampoline might be reflected in surprisingly higher insurance rates.
"There is an extra charge for a pool because it presents an additional liability or risk," Laucher says, pointing to potential risks like drowning or injuries suffered by diving into a pool.
The National Association of Insurance Commissioners offers a similar view on its website, noting that "Backyard items, such as a trampoline or pool, may require you to increase your liability coverage with an umbrella policy. In some cases, these items may even lead a company to cancel your policy."
As for the risk factors associated with trampolines, the American Academy of Orthopedic Surgeon's (AAOS) website says that "domestic and international research indicates that trampolines should not be used in the home environment." Injuries from falls, collisions, and stunts gone wrong are common, AAOS reports.
Solution: Add a Protective Cover around the Pool or Trampoline
To help keep rates down, make sure pools are equipped with a protective cover, fence, locking gate, or some combination of all three, Laucher says.
"There are certainly insurers who won't write a policy without a fence or if it's not protected," Laucher says. "Most require a pool cover that renders the pool inaccessible."
On the subject of trampolines, it's advisable for homeowners to check with their insurers about whether this backyard accessory might be excluded from a policy or could cause the non-renewal of a policy.
Reason #5: You Have a Canine Companion in the Family
For dog lovers, did you know the presence of a certain Fido or Spot in the home could raise your premiums?
The reason: There is risk associated with the possibility of a dog biting, maiming - or worse yet, killing someone on the property.
In fact, "Dog bites accounted for more than one-third of all homeowners insurance liability claims paid out in 2011,costing nearly $479 million," according to the III.
Because of this, some insurers maintain lists of certain breeds they will not insure or will exclude, Laucher says.
"Generally speaking, the lists tend to be larger animals, pit bulls, Dobermans, and there are some insurers that indicate they will not insure a pet that has shown signs of aggressive behavior," Laucher says. "You might have coverage after the first bite, but after that, they may exclude the animal or not renew you."
Solution: Present Proof that Your Dog is Trained
Insurers are aware that your furry friends can also act as protection for your home, so providing proof that your dog is trained could help alleviate some of their worries.
In fact, "I think [insurers] like barking dogs, but not biting dogs," says Laucher. "It's a balancing act between the likelihood of harm being greater than the likelihood of value."
As you're thinking about how to save on your home insurance, don't forget about reviewing and updating your other insurance policies as well, including auto, life, and health insurance. There are a number of great insurance resources available, like HealthPlans.com, which can help you make an informed decision about your insurance needs.
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