Tuesday, April 14, 2009

Homeowners Q&A - What are the drivers of insurance premium?

Question: I referred a client to you and was surprised to see that their insurance premium was $400 higher than mine. What gives?

Answer: There’s so many variables into where a premium figure is derived including: coverage, additional coverage options, loss settlement (i.e. replacement cost versus actual cash value), and the type of perils protected against. Also, and equally as significant: age and construction of the home, the hazards or safety features of the home (i.e. brick versus wood construction, older versus newer construction, year of updates to the home, location of the oil tank versus no oil tank, etc). That aside, credit also plays a role. Some agencies are quicker to offer less comprehensive policies because some people like hearing the lower premium amount – but when you look at the big picture, and consider the possibility of a loss, there are certain places you don’t want to cut corners.

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