Property Insurance Rates

Owning property involves a huge investment.  When a person buys a home or office space, he would have paid a big sum of money, given that real estate rates are always on the up move.  An earthquake, a storm, fire could cause a lot of damage to the building resulting in heavy losses to the owner.  He can protect himself against such losses by insuring his property after carefully studying property insurance rates of different insurers.

Factors which determine Property Insurance Rates

An insurance company determines rates of insured property on the basis of various factors.

  • Type of property

The age of the building would be considered by the insurer before quoting property insurance premium.  As a building gets older, its heating, plumbing and electric systems would have been affected increasing the risk to the building.  Property insurance rates would be lower for a new building.

The height of the insured property would also influence the rate of premium.  A multistory building beyond a particular height would attract greater premium.

  • Location of property

The location of the place where the property is situated would also determine property insurance rates.  For instance, a building located near the sea would face greater risk and hence its insurance costs would be higher.  Similarly, if the building is located in an area where crime rates are high, the insurance company may quote a higher rate.

  • Safety arrangements

Insurance rates would be lower for a property which is well equipped with alarm systems, fire extinguishers and other safety devices.

  • Claims record

The claims record for the property to be insured would directly affect the rate of property insurance.  A large number of claims would mean higher insurance premium.  Similarly, if the insured has a track record of a high number of claims, that too would result in a higher insurance quote.  In fact, some small insurers even refuse to sell insurance to such parties.

  • Deductibles

A deductible is the amount that the insured needs to pay to the insurer before the payment of the insurance amount.  If the insured opts for a higher deductible, property insurance rates will be lower.  However, the insured must ensure that he can indeed afford to pay the deductible amount in the event of property damage.

  • Credit rating

Often, insurers prefer to sell insurance to people with good credit rating.  Property insurance rates may be higher for people with bad credit.

  • Coverage

The type of coverage opted for also influences property insurance rates.  The choices available are –

  • Replacement cost coverage – where the insurer is required to indemnify the cost of replacing the damaged property.
  • Actual cash value –where the actual value of the damaged property is to be paid to the insured.  This would be the replacement cost adjusted for depreciation.
  • Coverage for alternative living arrangements – where the insurer is required to compensate for the expenditure incurred for alternative living arrangements when the residential property of the insured is damaged.

Each kind of coverage will have a predetermined rate.

Points to be noted when buying Property Insurance

  • A person wishing to insure his property should first compare rates of different insurers.  He can then use these to bargain for good rates.
  • It is advisable for the property owner to select an insurance company which is well known rather than select an unknown insurer just because he offers lower property insurance rates.
  • Often, insurance companies offer package deals at lower rates.  For instance, lower premiums for taking both automobile insurance and property insurance.  Such package offers would result in considerable saving.
  • Sometimes, the insurance company would be ready to lower the property insurance rates if the property owner takes steps like enhancing the safety and security system of the building.

A person who wants to insure his property should not only consider property insurance rates but also other features of policies offered by different insurers. He should then select the policy which is most advantageous to him.

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