First time homebuyers are often surprised by the line item on their settlement statements labeled “homeowners insurance.” Sometimes referred to as “hazard insurance” in the industry, lenders require that all homeowners carry this insurance to protect the financial interests of the both mortgage company as well as the mortgagee. Like any type of insurance, there are a number of risk factors that are analyzed in order to calculate the premium.
Common Risk Factors
Perhaps the largest factor that influences NJ homeowners insurance premiums is where the property is located. Insurance companies typically look at crime statistics for different townships and neighborhoods when calculating premiums. Areas with higher incidents of break-ins and burglaries will have higher premiums. The property’s proximity to water is also taken into consideration. Properties located in a flood plain—near the ocean, a river or another body of water—will cost more to insure or may even require additional flood insurance. Other factors that influence the price of insurance include:
- Age of plumbing and type of pipes
- Heating source
- Replacement cost
- Age and condition of roof
- Other uses of home (i.e. home office or mother-in-law apartment)
Ways to Reduce Premium
Owning a home can be expensive. Once you are familiar with how NJ homeowners insurance premiums are calculated, however, you can take steps to reduce your annual or monthly payments. Upgrading from galvanized or lead pipes to copper or plastic plumbing reduces the likelihood of damage to your home from cracked pipes, and will typically reduce your premium as well. Improvements to the security of your home can also reduce your payment. For instance, many insurers offer discounts for security fencing and/or alarm systems. Contact an insurance agent for more money-saving advice.