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Homeowners Premium – Insurance companies are in the business of assessing risk by relating it to the probability of numbers. Risk is studied by actuaries who prepare actuarial tables on behalf of insurance carriers; based on the probability of the occurrence claims, insurance companies are able to place a price on the homeowners insurance contract known as the Premium for a Homeowners Insurance Policy.
In most States, underwriting guidelines and premium rates are filed and approved by the State Department of Insurance prior to publishing rates for homeowners to see. It is most common for homeowners simply to review premium and the insurance policy based on a one year commodity; this is not the way that insurance carriers see the risk.
Insurance is studied over a much longer period of time since the probability of claims is more accurate over a longer period. For example, it is not likely for a home to be faced by a covered claim in one year of coverage but it is much more likely for a homeowner to have a claim once every 10 or 15 years. Yet, customers may traditionally be sticking to a low deductible although historically, coverage limits may have doubled or tripled.
If home owners use the same premise and review the risk over perhaps 10 years, it would be more accurate and responsible to multiply the annual premium by 10 and review the deductible savings over the 10 year period with the probability that one claim may occur in that period. Customers have found that insurance companies are making huge sums of profit on deductible differences.
Deductibles are the sum of money deducted from a claims payout by your insurance company. In many areas of the country, deductibles are expressed on a percentage of coverage basis. For example a 1% deductible of $250,000 (Dwelling Limit) would be $2,500 or a 2% deductible would related to a $5,000 deductible. In some States, the deductible is still referred to as a fixed dollar amount; perhaps $1,000, $2,500, $5,000 etc… Most homeowners insurance forms do not have an applicable deductible for the Section II coverage; namely, Personal Liability and Guest Medical Payments.
When searching for new homeowners, landlords or condo insurance options, it would be beneficial to review the coverage with a ten year prospective rather than simply looking at the one year probability, this will always be in the interest of the consumer.
