How to Calculate Your Insurance
Knowing how to calculate the cost of your homeowner's insurance can help save you money. Before you purchase a home, you can calculate approximately what part of your monthly payment is needed for homeowners insurance. It is also a good idea to evaluate your costs on an annual basis as well, to make sure you have adequate coverage, but are also not paying too much. With knowledge of what homeowner's insurance is based on and what factors you control, you can make an approximate calculation and perhaps save some money. Using a few simple steps, you can have a good idea of the cost to expect for your homeowners insurance.
First: Know the costs you have little control over
Before you purchase a home, you have control over the area in which you live. You can also choose a home that is in good condition. Both of these factors, area the home is in, and condition of the home, have an effect on the cost of insurance. Once you are in your home, you have no control of where you live, unless you move. Only on annual basis would improvement to your home change the cost.
Second: Know the costs you can change
Calculate the cost to rebuild your home. Find out what the local building costs per square foot is currently; a local building inspector could give you this information. Multiply that amount by the square footage of your home. Compare that amount to the cost of your mortgage, or what you owe on it now. You need to have insurance coverage for whichever amount is higher, in the event of damage. Consider needed living expenses, if your home were destroyed. About 20 percent of your coverage amount should cover this part of your insurance, so add this amount to the total. Next, do an inventory of household items, and calculate replacement costs. Add to your total. The consideration for liability coverage, the amount to cover lawsuits if needed, is a variable cost. Therefore, you can determine what is best for you. Minimum requirement is generally at least $100,000, but $300,000 to $500,000 is recommended. Whatever you choose, add this to your coverage amount. You can also check to see what discounts you eligible for, perhaps multiple policies, such as auto/homeowner.
Third: Know eligible discounts and get quotes
Installing an alarm system and having a higher deductible lowers insurance, as well. Ask about any other available discounts and deduct all of these eligible amounts from coverage. When you have the amount of coverage you need determined, you are ready to get rate quotes for that amount. Shop around, get the best price and you could save some money.