The BIG 8: Factors That Determine the Cost of Insurance
As a real estate agent your main priority is to find your client that perfect home. But is the perfect home really that perfect….it may not be if the new homeowners are stuck with the not so insurable house. The BIG 8 will help you ensure you are selling your clients the most insurable home.
- Credit/Insurance Score: Insurance scores, based partially or wholly on a person’s credit information. It helps insurers assess risk and charge the appropriate rate. As statistically, people with poor insurance scores are more likely to file a claim. Thus, your clients with a higher insurance score will be rewarded with lower premiums.
- Age of the Home/Characteristics: Insurance companies charge higher premiums for an older home. Thus, the historic home that your clients fell in love with, well it is going to come with a big insurance price tag. Additionally, the siding is a major factor. A wooden home, is a bonfire waiting to happen. That is why brick homes carry lower insurance premiums then a house made from mostly wood or other flammable materials.
- Coverage A: This one is simple, as coverage A is replacement cost. Thus, the higher the replacement cost the higher the yearly premium, ceteris paribus
- Age of Roof: This is a BIG one. Wind and Hail are the most common claim(s) here in Georgia. Insurance companies love new roofs because new shingles can tolerate much more abuse from elements, like hail. Thus, reducing the probability of pay out and therefore the homeowners cost of insurance. Accordingly, when showing homes, I recommend sticking to those that have had a roof revamp.
- Protection Class: LOCATION.LOCATION.LOCATION. Yes, we all know it is a BIG deal for the market value of a home. Surprise… it is also a BIG deal for the insurability of a home. The Public Protection Classification program is a rating system that ranges from 1 (best) to 10 (worst). Class 1 represents an excellent fire protection system whereas class 10 indicates virtually no protection (rural areas mainly). Thus, a protection class 1 has a spectacular fire department, water supply and fire alarm/communications. All three factors are none existent in protection class 10. Consequently, premiums in protection class 10 can be nearly triple of those in protection class 2 or 3.
- Updates: The key factors to update in older homes on the side of Real Estate are kitchens and bathrooms. I mean come on…who does not love a new kitchen. However, the insurance company is not to concerned with how great the new kitchen in that 1970’s ranch house may be of it still has the aluminum wiring. As this home (along with any home with aluminum wiring) is 55x more likely to reach fire hazard conditions than a home that has been updated. The plumbing is also a big deal. Most new construction homes post 2011 (off the top of my head and to my knowledge) use PEX piping. This pipe can expand up to 3x, thus decreasing the likelihood of a water loss. Thus, homes with PVC and cooper pipes have higher rates, due to the fact that frozen water in the pipes is more likely to result in a busted pipe and therefore a water loss.
- Liability Risk Factors: This one is simple. Attractive Nuisances (i.e. Pools and Trampolines).
- THE COMPANY YOU CHOOSE: Save the best for last right. This one is my favorite. Work with an independent insurance agency that can objectively compare different insurance carriers. This will allow your clients to find that insurance coverage of equal value may vary greatly in monthly premium cost.
– Abby Kelly-Poe
Read my bio at www.rhoads-group.com/abby