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Why your home insurance rates or the premium may increase?

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The home insurance premium is increasing! One always hears about Insurance premium, particularly home insurance premium rates getting revised or instead going up. Let us see why it happens. Here are top 10 possible reasons why home insurance premium goes up.

1. An absence of area security:

Often, the area where the home is situated might be risky. There are many possible reasons why it can happen. Overall it puts the insurance company at risk, so indirectly they try to recover the possible future loss in the form of increased premium. 

2. Incorrect sum insured: 

Very often, the insurer does NOT get a correct valuation done, of his/her home or property. This may result in inappropriately arriving at your insurance premium. Generally, people tend to overestimate or overvalue their estate, and they end up paying higher premiums.

3. Misjudging individual needs:

People fail or ignore to identify/prioritise their needs, in case of loss/failures. Once again, excessive estimation might trigger additional premium. Again, the home insurance company might have some exclusion on what they can cover, people, try to find work-around for that exclusion, and so the premium rises, and the premium goes up.

4. Forgotten factors:

Apart from premium, one needs to check out what else may increase? Premium apart, it can be confusing to know which plan is the best suited for the buyer? Every insurance buyer’s needs can be different. It is advisable to check for the best home insurance coverage against the company’s claim settlement ratio. Then take the right decision else pay up higher premium.

5. Plan and lifestyle mismatch:

A common mistake an insurance buyer makes is selecting an incorrect insurance plan. This might mismatch the lifestyle and might be burdened with excessive premium. The insurance plan selection should match and fit the buyer’s requirements and lifestyle. Just check if 

· The home insurance plan covers the buyer’s needs?

· The insurance policy takes care of the valuables?

· The policy covers the costs of flood/cyclone/earthquake damage?

6. Inability to understand deductible/premium relation:

An amount that has to be deposited in advance, before submitting a home insurance claims is called a ‘Deductible’. This amount is to be paid by the policyholder, and the insurance company pays/settles the claim. If the amount of deductible is higher, the premium goes down and vice versa. So it might be an excellent trade-off to agree to pay it with a little higher deductible, from the beginning. 

7. Failure to study Home Insurance and its Coverage:

It is important to study what the home insurance policy covers. Many people might not know or may NOT bother to study/understand the policy coverage clauses. It might be wise to know in advance what is included and excluded and unknowingly pay the higher premium.

8. Failure to discuss/understand upgrade options:

It might be wise to consider choosing premium protection clause. This will ensure Insurance buyer pays the same premium year on year, irrespective of any claims. 

9. Ignorance of claim ratio of the Insurance Company:

Many insurance buyers are ignorant or do not care about claim ratio. It can backfire by way of a higher insurance premium. 

10. Absence of insurance office network nearby:

Often, non-availability of the desired insurance office in nearby vicinity also causes inconvenience and indirectly higher premiums. 

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.