This one home buying decision can make your insurance much more expensive

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One decision can lead to very high insurance premiums.


Key points

  • Buying homeowners insurance is important for asset protection.
  • Many factors affect the cost of insurance for homeowners.
  • One particular decision can have a particularly large impact on coverage costs.

When buying a house, you need to consider many different things to make sure the property is affordable. Home insurance premiums are one of the things worth thinking about. This is because home insurance premiums will have to be paid for the entire period during which the property is mortgaged – and ideally for the entire period of ownership of the property.

Home insurance prices can vary greatly depending on many factors, including the size of the home and the material with which it is built. But there is one specific solution that can make premiums significantly more expensive. Here’s what it represents.

The location of the property can make all the difference in home insurance premiums

One of the biggest decisions homeowners make when it comes to insurance premiums is the location of their home. In particular, if the home is located in a flood zone, this will lead to much more expensive insurance premiums.

You see, insurers decide whether to provide coverage and determine the price of home insurance coverage based on the risk of having to pay a claim and based on the amount that is likely to cost them a claim.

When the house is in a flood zone, the chances of water damage are very high. And FEMA reports that the average flood insurance claim was $ 52,000 in 2019, a rather large claim. The risks of providing flood cover are so great that standard insurance policies will not even cover flood damage. A special policy will have to be purchased either from one of the few insurers offering private flood coverage or through the National Flood Insurance Program managed by FEMA.

Paying for an entire individual policy obviously adds significant costs to home insurance – especially given the high risk that these policies will eventually pay off. FEMA reports that the average annual premium for flood insurance was $ 700 in 2019, which is a huge additional cost for homeowners who need this type of coverage.

Do you need to buy a property in a flood zone?

Every homeowner who buys a home in a flood zone will be required by their mortgage lender to have flood insurance coverage. And even homeowners who buy a house without a mortgage will want to choose to buy this coverage. Otherwise, their standard insurance will pay nothing when a flood occurs and they will have no financial recourse and will have to pay for losses out of pocket.

Now, sometimes, people will decide that these costs are worth paying. If a person wants to live on the beach, for example, and can afford a property on the coast, he may decide that the additional cost of flood insurance is a small price to pay for the beautiful views that the property provides.

But it is important to know in advance that flood insurance will be an additional expense and to incorporate this into the budget. Those who are considering buying a home in a flood zone should get an idea of ​​how much flood insurance will cost and make sure that their property will be affordable even with these high supplementary insurance premiums taken into account.

The best Ascent homeowners insurance companies for 2022

There are many homeowners insurance companies to choose from. We researched dozens of options and made a short list of our favorites here. Looking for a discount on green building or easy package policies? Want an easy-to-use interface? Read our free expert review and get an offer today.

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