Any realtor will tell you that the location of your home is one of the most important features to consider before buying. But what you may not have realized is that insurance agents also consider your location one of the biggest factors in the equation for determining your risk and premium.
Here are three reasons location could be considered the number one rule for home insurance:
Population and crime rates help predict the risk of claims
The more crowded your neighborhood is, the more likely a small accident could turn into a catastrophe. Consider how one cigarette butt thrown out by a neighbor could cause an entire block of tightly-packed houses to catch fire.
In a rural area, homes are likely more secluded and therefore considered lower risks to insure. Crime rates are likely lower in less-populated, rural areas, which is why even a large country home may cost less to insure than a smaller apartment in the city.
Severe weather risks may require additional coverage
Depending on your home’s location, you may be vulnerable to new geographic risks that require additional coverage and higher insurance rates.
If you’re planning to purchase a beach home, be aware that the additional risk of hurricanes and flooding may require you to buy a separate flood insurance policy in order to protect your investments. If you’re moving out West, your risk of earthquakes may also cause your rates to spike. Midwestern homes may require additional wind coverage because of the threat of tornadoes.
Work with a licensed agent to determine your risks of severe weather, and invest in the coverage that offers the best protection for you.
Local construction costs help determine dwelling coverage
A major section of every standard homeowners insurance policy is dwelling coverage – the total estimated cost of replacing your home. Nearly every other type of coverage is dependent on this figure, as they’ll likely be set as percentages of your coverage limit (your personal property coverage limits are typically 50-70% of your total dwelling coverage, for example).
In order to arrive at an estimate of the total cost of rebuilding your home from the ground up after a covered peril, insurance providers multiply the square footage of your home by your area’s estimated costs of construction per square foot. Depending on where you live, local construction costs may be higher or lower than other geographic locations.
Learn more about how the location of your home could affect the cost of your homeowners insurance by talking to an expert licensed for your area.