It is one of the most critical elements of a home insurance policy, as it covers the physical dwellings of your property. Contents insurance and liability are the two other common components in a homeowners insurance plan.
Homeowners Insurance Basics
Homeowners insurance is one of the most common insurance products purchased by people. It is not only a necessary insurance solution, but one that is typically regarded by mortgage lenders when you finance a home purchase.
Lenders want to have their investment in your property protected. The three usual components of a complete home insurance policy are building, contents and liability protection.
Building coverage is the most critical element of a home insurance policy, typically. It includes protection for replacement costs on your property as well as damage repairs. The replacement cost is the cost for materials and labor to rebuild your home following a total loss.
Homeowners are often surprised to learn that replacement cost is often more than your home’s value. This is especially true when it has been a long time since your home was built. Building coverage also pays benefits for damage repairs.
Contents insurance covers the costs of the valuables and personal items you maintain in your home. Unless you have especially valuable items, your insurer usually works with you to develop an estimate of value based on the number of rooms and floor space in the home.
If you have valuable jewelry, antiques, or other items, you may want to take out an extra rider for those items. Liability coverage protects you when a third party is injured or experiences property damage on your property. It provides for medical payments and legal protection if you are sued by someone injured on your premises. Continue reading
The rates you pay for homeowner’s insurance coverage are based on many factors, including the value of your home and your claim history. Your credit history also plays a role in how much you pay for homeowner’s insurance premiums.
Credit Score Correlation
Homeowner’s insurance is designed to provide you with some protection against accidents that damage your home.
Since accidents are unpredictable, it may seem like a credit score could not help insurers project how many claims you will file.
However, insurance companies have found that there is a direct correlation between your credit score and how many claims you file. Those with lower credit scores tend to file more claims over the long term. This means that insurance companies will charge you a higher premium if you have a low credit score.
Insurance Credit Score
When the insurance company looks at your credit information, it uses a credit score that is created especially for the insurance industry. Your insurance score looks different than what you would see with a traditional credit score from a mortgage lender.
While this score is still based on the same factors, each factor is weighted differently as insurance companies value different items. Insurance companies put more emphasis on stability such as a consistent payment history.
When the insurance company calculates your credit score, the score is based on many factors in your credit report. For example, up to 35 percent of your insurance credit score is based on your payment history. Continue reading