Many homeowners wonder why they are paying high premiums on their homeowners insurance. Homeowners’ insurance companies look at many different factors when they set the premiums for an applicant. They develop premiums based on the risk associated with a particular individual.
There are a number of factors homeowners should look at if they hope to get good rates on their policies. Although insurance companies set premiums partly by looking at the house itself (such as the location of the house and the security precautions the owners have taken), insurance companies also look closely at homeowners when deciding whether or not they are responsible.
Low Credit Score
One of the first things insurance companies look at is the credit score of the homeowner. Credit scores tell insurance companies a lot about a person. They don’t only tell them whether or not someone will pay their premium on time. Credit scores are also an indication of a person’s character. Statistically, people with low credit scores are most likely to file insurance claims.
If you have a credit score under 520, you should try to improve it. Work with a credit counselor if necessary. Improving your credit score won’t just help you save money when you are applying for a loan. Doing so will help you reduce your insurance premiums as well.
Another big thing insurance companies look at is how many insurance claims you have made in the past. Over time, filing claims for even small damages can lead to much higher premiums. Homeowners should take this into consideration before making claims every time a window breaks. You should seriously consider every claim you make. Small claims may not be worth the additional premiums. You may be better off just biting the bullet and paying for damages yourself.
Insurance companies also look at the incomes of homeowners. They make a somewhat unfair assumption that people with low credit scores are likely to have poorer character qualities. This sounds discriminatory, but statistically people with low paying jobs are more likely to file insurance claims. In this economy, you are often stuck with whatever job you can get. However, if you are offered a better paying job you may want to seriously consider taking it. Obviously, a higher income is always welcome for its own sake, but creditors and insurers may cut you a break on their fees as well.
Your character plays an important role in how insurers will set your premiums. You want to make sure that you understand how they came to set your premiums. Ask your insurer what they look at why they set a high premium. They would rather work with a homeowner who is reliable and unlikely to file claims with them. They can work with you to make your premiums more affordable.