There are five general factors that affect what your homeowners’ insurance rate will be for your Outer Banks home or vacation property. Generally, if your home is a rental property that you do not reside in full time, the rate will be higher than if you were to live in it as your primary residence.
The reasoning behind this is the property could be vacant and subject to break in. Also, if the home was to suffer a loss, because the increased likelihood that no one would be present at the time will increase the size of the amount of damages.
But whether or not your beach house is being used as a rental property or not, there are other items that will affect insurance rates. Here is a handy guide to what those items are:
The specific location of the property is a major factor on the risk the insurance company bears to insure it. In the Outer Banks and other coastal areas, the risk of flooding, high winds, damage from hurricanes and nor’easters are greater than other areas and will increase rates. However, the crime rate is rather low in the area compared to urban and even many suburban areas which will actually lower the rates. The distance to the nearest fire hydrant and fire station has a large impact on the rate you will pay. Finally, the cost to rebuild your home will factor into the rate you pay.
Age & Type of Construction
The age of your home impacts the rate because older homes may have malfunctioning systems that could contribute to damaging the home. Electrical, HVAC and plumbing systems in a newer home would be less likely to fail or contribute to a loss. Similarly, the construction material will impact how sturdy the home is and subject to damage from natural disasters. A brick or stone house is sturdier than a wood home and would command a lower rate, all things being equal.
The history of prior claims on your home will impact your rate, even if you were not the owner when the prior claims were made. There is a database, maintained by all the insurance companies called – Comprehensive Loss Underwriting Exchange (C.L.U.E) that tracks claims on an individual property.
Prior to purchasing a property, it is a good idea to obtain a CLUE report from the homeowner. The report would show any claims in the prior 7 years and could be indicative of hidden damage, due to mold from flood damage for example, or reveal a higher cost to insure the property. Home sellers should provide a copy of the report for disclosure to potential buyers to show no adverse claims on the property. There are 2 separate reports that cover automobile and homeowners’ claims. Each report is about $19.
The best advice many people receive is not to submit a homeowner’s insurance claim unless it is a major loss. The negative repercussions from a small claim, is just not worth it. The internet is full of many horror stories where properties became almost uninsurable or extremely expensive to insure due to a minor claim.
Risk Factors on the Property
The insurer will look at risk factors outside the home that could increase potential liability. For example, a swimming pool or trampoline could cause a potential accident. A pet pit bull or other dog breed with a negative reputation would surely raise your rate or could have you turned down for obtaining insurance.
Your Credit Score
Your credit score is a factor in just about everything else, so why not insurance. Insurance companies have found that homeowners with higher scores tend to submit fewer claims and thus can obtain lower rates. Unfortunately, the alternative is also true, so if your credit score is below average, statistically, you are more likely to submit a claim and therefore, pay a higher insurance premium.
In future blogs, we will examine the types of insurance needed for your Outer Banks home (flood, wind & hail and mult-peril HO policy).
So, let Eillu help you navigate local waters whether you are buying a home, selling a primary home, a vacation home; or just want to test the waters. We know the local Outer Banks real estate market and will keep you from running aground!