December 18th, 2014
When determining your home insurance rate, providers look at a variety of factors that are mostly related to your level of risk. For instance, your credit score will be examined to see how reliable you are in paying your debts and monthly bills. If you have a low credit score, then insurers may charge you more on your policy because your past financial problems could hint at future issues as well. Further, insurance companies will also look into your income, location and the condition of your home.
If any of these components raises a red flag in the eyes of insurers, then you might be in for higher premiums. However, there is another scenario whereby you might be paying for the mistakes of others. If you notice your homeowners insurance rate increased, it could be due to the home's previous owner.
Why you're paying more
Despite your own financial security and low level of risk, you could be faced with higher rates because of the number of claims filed before you moved in. If the tenants prior to you filed multiple home insurance claims related to damage, theft or the condition of the home, then you could be stuck with footing a bigger bill after the fact.
While the previous owner's insurance paid for the damage at the time, your insurance company will realize that your new home may come with the likelihood of more claims, which would mean higher payouts. To minimize the amount of money they may have to spend to cover your home, insurers could be charging you more in the meantime.
Because the number of claims filed directly affects home insurance rates, you may have a financial burden on your hands.
Preventing rate hikes
The best way to insulate yourself from rate hikes of this kind is to do a thorough background check of the home you are considering. Contact the previous owners, your lawyer, your real estate agent and a certified home inspector to see just how well-preserved the home is. If it turns out that there are signs of degradation like leaks, holes or mold, then you should be wary of purchasing the home until all problems are fixed. This will make sure you're not falling into a trap that could ruin your home owning experience.
Approach your insurance company to find out if your home has a history of claims. Most insurers have access to the same information and can search through a database to find this data.
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