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How To Estimate Insurance Premium Costs

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The cost of owning a home has a number of variables, including the monthly mortgage payments and the insurance. While determining the mortgage is straightforward – the amount of the loan and its interest divided by the length of the loan - trying to estimate insurance costs takes a little more work. In households where working within a budget is a necessary consideration, selecting any old insurance policy is not an option. Finding the best deal on a homeowner’s policy takes a little initiative, but it bring substantial savings.

Gathering the data to estimate insurance premiums

Instead of accepting the first price that comes your way, put together a general picture of how much your monthly premium should be, based on your budget, and then find a policy that meets this estimate while providing most comprehensive coverage. The first step is to assemble your data. You will need to know the following:

The cost to rebuild in the current market – For this you need to know the square footage of your home, and the current residential building rates per square foot. Find the square footage on your deed, or at your local tax assessor’s office. Contact a builder or check with local realtors to find out current construction rates.

The market value of the dwelling - The mortgage lender will want to be sure that you have at least enough to cover the outstanding balance on your mortgage. Factors that affect market value are the square footage, the age of the home, and the number of bedrooms, its location, etc. A realtor can help, or compare selling prices of similar properties in your area.

The cost to replace the contents – You need an itemized list of the contents of your home, including clothing and other personal items, and then determine their market value. Most policies have a limit of $100,000 dollars.

Amount of the deductible – This amount is how much you will pay before the insurance reimburses you. The higher deductibles mean lower the premiums.

Additional issues that affect cost estimates

Besides the factors above, there are other variables. They are a little harder to put a dollar figure on, but an insurance agent can offer some advice. They include:

  • Additional policies – Is your area at risk for floods, earthquakes, or other damaging natural phenomena? Will you want an umbrella policy if you have property that exceeds the policies limits, or to protect against personal liability that is excluded from the standard homeowners policy.
  • Previous claims – Have you made previous claims on an older policy? Their nature and the amount reimbursed may play a role in the monthly premium.
  • Credit score and history – If your credit score and history is dicey, premiums could be higher.

Once you have as much information assembled as possible, you can use an on-line insurance calculator offered by insurance companies, or sit down with an agent to review your information and your needs and to prepare an offer. If you estimate insurance carefully, you should find a company that matches.

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