How Expensive is an HO6 Insurance Policy?
An HO6 insurance policy has many factors that determine the premium charged by the insurance company. Although premiums will differ between insurance companies, there are similarities in determining the premium charged that you need to be aware of. Knowing how this premium is calculated can help you in choosing a condominium that won't cost you a fortune to insure.
The first factor that the insurance company looks at is
location; specifically what state the condo is in. Premiums are different from state to state
depending on many factors such as amount of business the company has there,
what claims experience they have, and how close to a fire department it is
located. The fire protection class of
the fire department is used in the pricing as well as whether the condo is
located in a city or not.
Also important in location is whether the condo is exposed
to unusual risks, such as flooding and hurricanes. Many millions of dollars have been spent
repairing hurricane damage, as we have recently seen in New York, and premiums
have to reflect this risk.
Another factor that affects how expensive an HO6 insurance policy can
be is how much coverage you need and how high a deductible you are comfortable
with. The deductible is the amount of
money you pay first in the event of a claim before the insurance kicks in. The higher the deductible, the lower the
premium. Keep in mind that HO6
insurance, as well as any other type of insurance policy should not be thought
of as a way to pay for any smaller claims, so look to getting a higher
deductible on the your policy, at least $1000 to save money.
The type of replacement coverage you have also has an effect
on the premium charged. Policies can be
purchased by most companies two ways; replacement coverage or actual cash value,
also known as ACV. In a HO6 insurance
policy the replacement cost option will pay to replace your home just like it
is now without any deduction for depreciation.
The ACV coverage deducts money for claims based on the age of the
insured part. For example, in the event
of a total loss of a roof, the ACV policy will deduct so much from the payment
of the claim based each year of age of the roof, resulting in a lower payout
and more for you to pay. The replacement
cost coverage replaces the roof completely regardless of the age. Obviously the replacement cost coverage is
more expensive than the ACV policy due to paying better when a claim is filed.
Yet another factor the insurance company looks at is your
personal claim history; in other words how likely you are to file claims. As stated before, HO6 insurance is meant to
cover large losses. If you have several
small claims of $200 - $500, the insurance company will look unfavorably on
your application and price the policy accordingly.
How expensive an HO6 insurance policy is can depend on many factors,
so the best idea is to get several quotes before you decide on a particular
company. It can save you money in the
long run.
