Searching for a home? Ask your insurance company for help! What???
Insurance companies calculate premium based on risk; risk is calculated by the reconstruction cost of the home and other factors that may cause a premium surcharge such as prior losses or proximity to a geographical hazard.
In most generic cases, a brand new small house fitted with a full fire sprinkler system and central station monitored alarm system would generate the lowest risk and lowest premium; however, the same house constructed by a mountain side full of brush may simply be ineligible for any preferred insurance program.
If you are interested in purchasing Earthquake Insurance, the earthquake insurance premium may give you an idea regarding the probability of risk in the area. As an example, Central California seems to show comparatively low premium where as South East California Desert communities seem to show very high premium rates.
Some homes will be in designated flood hazard areas where mortgage companies will require flood insurance; in this case, an Elevation Certificate will be required and must be obtained in advance in order for the insurance company to complete an accurate rate quote.
Once you have completed your cursory view of a few homes, it will be well worth your while to have a conversation with a friendly representative at your insurance company; a helpful person will take the time and explain the whole system in generic terms and then offer a quote for a specific home that you may have decided to place an offer on.
Insurance companies hire actuarial firms to go through data and calculate risk; this process is very tedious and expensive. It is a great idea to let the paid professionals share the information with you; especially knowing that you won’t have to pay for the information. As a basic rule of thumb, the greater the insurance premium, the higher the risk!
Homes that show a distressed maintenance condition, display a lack of pride of ownership, old homes that are clearly not well maintained and homes with obvious safety issues may become uninsurable by the preferred home insurance market. This will leave you shopping for either basic Fire Insurance only with the State Fair Plan or simply paying 3 -5 times the premium with a sub-standard insurance company specializing in higher risk homes.
Insurance companies all contract with home inspection companies who usually inspect each and every home within a couple of weeks of purchasing the insurance policy; any obvious risk factor will not be overlooked and will be reported to the insurance company who will take adverse action if the issue poses an imminent risk to the company. You should let the insurance company do their job thereby allowing you to benefit from the valuable information available to you minimizing risk and headaches to come……