I’m often tempted to call this a disaster area, but the truth is that sometimes real disaster is right around the corner. Any of us could return from work or a family vacation to find a flooded basement or a house that’s been broken into.
For these reasons and others, we purchase homeowners insurance. It enables us to rebuild our homes and our lives.
Ordinarily, we’d say this is something you can’t put a price on. And yet, there is a price in the form of your premium and deductible. How is this premium set and what causes it to vary so much?
I don’t know about you, but when I go to the gas station I couldn’t tell you the first difference between the premium gas and the regular stuff. They tell us it’s better for our cars, but at the end of the day, all we can do is just take their word for it. (If there’s a car expert out there who wants to let me know the difference, please leave a comment!)
When it comes to homeowners insurance, there are certain scenarios where you’ll pay a premium price for your premium.
Michael Thrasher reports on homeowners insurance issues for Value Penguin. He said that high premiums are often related to exactly what you might expect.
“I would say that the number one determinant is exposure to what the insurance industry calls perils, or anything basically that could threaten to damage your home,” he said.
There are certain states where insuring your home is riskier than others. The top five states in terms of homeowners insurance cost are Florida, Louisiana, Texas, Mississippi and Oklahoma.
You’ll notice these states tend to have something in common: Their location places them along the Gulf Coast. It’s prime hurricane territory.
There are certain mitigations you can take in order to reduce your risk.
“A lot of homes are built on stilts to mitigate the risk of flooding,” Thrasher said. “There’s all kinds of reinforcements and types of roofs and things that are just more resistant to those types of perils.”
Just because you live in a coastal state doesn’t necessarily mean your premium will be higher.
“The people that are very near the coast, that are right there on the Gulf, are going to be paying more than the people that are in the northern part of the state, very much inland,” he said.
It’s important to note that a standard homeowners insurance policy doesn’t cover homeowners insurance policy earthquakes and floods. There are special policies written to cover those events.
In the event of a hurricane, your deductible may be different and there may be a special clause in your policy that explains when it kicks in. For example, hurricane provisions may only kick in when the storm has reached a certain strength level.
It’s also against the law in states such as Florida to buy coverage during an active hurricane watch or warning. It’s necessary to plan ahead.
State Deductible Differences
As with any insurance, you can save money by increasing your deductible, which will lower the amount you pay toward your premium. How much you save and whether doing this makes sense depends on your coverage and the state you live in.
According to a study by InsuranceQuotes.com, you can save an average of 16% on your insurance premium by raising your deductible from $500 to $2,000. In North Carolina though, the savings goes up to 25%.
However, in states like Oklahoma, you would have to raise the deductible a lot more to see significant savings. Also, you have to take into consideration whether you would have enough money to pay off the deductible in the event of a loss.
For more tips on saving money on your premiums, check this out.
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