Unique Exposures that Could Impact your Home Insurance

Do you ever ask yourself “Why the heck am I paying so much for home insurance?”

We understand how it feels. Paying a lot for insurance (when fingers crossed -- you might not even ever have to use it) can be frustrating. People are always looking for ways to save on their personal insurance, and our clients at Berry Insurance often ask why they are paying X-amount on their home insurance when their neighbor’s insurance premium is much cheaper.

Our answer? A lot goes into home insurance, so you can’t really compare apples to apples with a neighbor. In addition to coverages, limits, deductibles, and the competitiveness of your insurance company, the items you own or the features of your house could actually be causing an increase in your home insurance cost, or making it harder for you to find coverage.

What are some of these features? Well we’re here to fill you in.

If you have a home or are considering buying a home with one or more of the features outlined in this article, don’t worry. It doesn’t necessarily mean you need to run for the hills and find another home -- it just means there are some things you need to be aware of, like how they could increase your premium or shrink the pool of insurance carriers willing to work with you. Plus, at the end of this article, we also offer advice on how to save some money on your home insurance if any of these items are increasing your cost.

Unique home insurance exposures:

There are several unique factors that could drive up your home insurance costs, or prevent you from finding coverage.

Most have to do with risk. If insurance companies determine that you are at a higher risk of having an insurance claim, they will probably not want to insure you. Other factors may have to do with replacement cost. If you have valuable items or rare materials in your home, your insurance company knows they would have to pay you out a higher amount if you had a claim, so they charge you more.

Below are some (but certainly not all) of these unique factors that could impact your insurance.

Special features:

The more expensive your home is, the more expensive your policy will be. 

Home features such as crown molding, recessed lighting, ceiling fans, built in book cases, fireplaces, jacuzzi tubs, upgraded kitchens, finished basements, and cathedral ceilings would increase repair cost if a home was damaged. So the costs of those items need to be factored into your home’s replacement cost on your home insurance policy (which will increase your premium).

Other structures:

While detached structures on your property are typically included in your home insurance policy at no additional cost, if they exceed a certain value, they will cost you more to cover.

Homeowners insurance includes a section called “other structures coverage” which covers structures on the policyholder’s property that are detached from your home. Under this coverage, items in your yard such as sheds, detached garages, pools, fences and driveways are covered from a variety of causes of damage.

Limits for other structures coverage is usually automatically set at 10 or 20% of your dwelling coverage limits on your home. This means, if your other structures coverage is $30,000 (10% of $300,000) your insurance will cover up to that limit for damage to any detached structures. 

But what happens if your other structures cost more than your limit? 

If you have higher value other structures, such as a pool or a detached shed, you will need to purchase extra other structures coverage specifically assigned to the pool to ensure it would be completely covered in a disaster.

If you need to purchase extra other structures coverage, you can usually expect it to cost around 40 cents for every additional $100 of coverage.

Solar panels:

Since solar panels are attached to your home and would cost additional money to repair or replace, their value is considered part of your home value.

So depending on your contract with the solar panel company, you may have to factor the value of the solar panels into your home’s dwelling coverage, which will increase your premium.

If you rent or lease your solar panels, there is a chance that the leasing company might be responsible for pair and maintenance, meaning you wouldn’t need to insure them, so you would have to review your contract to figure out if that is the case.

Knob and tube wiring:

Many houses built before the 1950s still have knob and tube electrical wiring. Because knob and tube wiring is no longer used when building homes, if it were damaged, the entire electrical system would need to be replaced, creating a large insurance expense.

Because of this, most insurance carriers won’t even write policies for homes with knob and tube, so you would need to pay to have it replaced before you get an insurance policy and mortgage.

Aluminum wiring:

Having aluminum wiring is a similar scenario to having knob and tube. Because aluminum wiring is no longer used in homes, replacing it during a claim situation would be an expensive cost for a home insurance company. So if you are trying to get an insurance policy for a home with aluminum wiring, you will very likely be denied a policy until you replace it.

Bodies of water:

If you have any bodies of water near your property or live near the coast, you are at an increased risk for water damage. Because of this, many insurance companies may not write a policy for you, or may institute a higher deductible for storm-related claims (1-5% of your dwelling coverage).

Homeowners insurance doesn’t actually cover flood damage, so if you do have any bodies of water on your property (or if you live in a high risk flood zone) you might also need to buy a separate flood insurance policy to protect you. 

How much flood insurance you need to buy depends on your risk and lender requirements, but the cost can vary greatly (from $500 to $12,000 annually).

Home-based businesses:

Home-based businesses are generally a big red flag for insurance companies. If you have certain types of home-based businesses, many insurance companies won’t write insurance for you, even if you have business insurance policies (which you should), so you will have less options of insurance carriers to choose from.

In other cases, insurance companies may write your home insurance, but only if you show proof of business coverage.

Wood stoves:

While on the surface, a wood stove may seem like a cozy and practical home feature, they could cause you a couple delays when first applying to home insurance.

Because wood stoves add additional fire risk to your home insurance companies may not cover you (especially if it is your main source of heat), and in most cases will at least require you to have it inspected and serviced to prove it is installed properly and not causing any hazards.

Oil tanks:

If you have an underground oil tank, you’re out of luck -- most insurance carriers will not write a home policy for you until you replace it with a safer option.

Trampolines:

Trampolines will also cause some issues on your home insurance.

Because of the associated risks, many insurance companies will not write policies for homes with trampolines, and if they do, they require safety netting around it.

We also always recommend anyone with a trampoline get an umbrella insurance policy, which would be an additional cost.

Prior claims:

If you’ve had home insurance a claim before, (especially in the past five years) insurance companies might see you as a risk to have a claim again, so your insurance premium will be higher, or carriers may not be willing to write you a home insurance policy.

Carriers will often give you a  loss-free credit each year on renewal, which can vary based on how long you have been claim-free.  

Renting out:

If you rent out your home to anyone, you won’t qualify for a standard homeowners insurance policy, and your premium may be higher.

Having additional people using your home (especially ones that may not be as careful in the home since they don’t own it) creates additional claims risks.

So if you are renting your home out to tenants, your policy must be written as a dwelling fire policy. These are not quite as comprehensive as a regular homeowners policy, and can cost a bit more as well.

Don’t worry there are other ways to save:

As you’ve clearly figured out in this article, there are a lot of components to homeownership that can really hike up your home insurance costs, or create some hiccups in the buying process.

Have one or more of these features in your home? Not to worry … you also have options to lower your costs.

Some of these options include bundling insurance policies, increasing your deductible, paying ahead or through EFT/ACH, switching to paperless billing, re-evaluating scheduled items on your policy, asking for discounts, or donating to charity.

Be sure to check in with your insurance agent to see if any of these situations apply to you. At Berry Insurance, we are always happy to review clients’ personal insurance policies to see where they can save a few bucks.

If you would like some more details on how this could be possible, check out this article about ways to save on your personal insurance.