Everyone who owns their own home should definitely get home insurance to protect themselves in case something bad happens to their property. Most people who look into getting home insurance know that their policy value and the types of policies they can get depend on a number of things. But not many of those people realise that a person's credit history is one of those factors. In fact, it can have a big effect on how much your homeowner's insurance costs.
Homeowners with bad credit will have a harder time getting insurance and may not be able to get the policy they want. A credit check will be done on you by an underwriter at the home insurance company you choose to apply to. This has been done this way for years because it helps figure out the final rates for homeowner's insurance. Your credit score can put you in a high, medium, or low risk category, which has a lot to do with whether or not you get a policy. This might sound hard at first, but it's actually very easy to understand.
After putting in your information, an underwriter will run your credit information through a computer programme. The computer will then give you an insurance score based on a sliding scale. If your application is accepted, the computer will also figure out how much your homeowner's insurance will cost. The insurance score tells the underwriter how likely it is that you will file a claim on your home insurance. Those with a high insurance risk score will either have to pay more for homeowner's insurance or have their application turned down. On the other hand, those with a low insurance risk score will have a low rate and will be accepted for sure. In other words, if you are more likely to make a claim, you pay more. So, if you own a home, having bad credit can cost you a lot more in high premiums than if you had good credit.
Home insurance companies need to stay competitive, which is why they use credit scores to decide how much to charge for insurance. By charging more to people who do make claims, they can keep prices low for everyone else. Cost is based on risk, so some people will always have trouble getting home insurance at all. But there are home insurance companies that focus on helping people with bad credit get insurance for their homes, so there are still options. Find out more about Home Owner Flood Insurance at http://www.homeowners-insurance-help.com/Home Owner Flood Insurance.
Some countries don't use this method to figure out insurance rates for homeowners. One great example is the UK. They only look at the address, not who owns the house. This method works for them the same way that credit scores and insurance scores work in the U.S. It depends a lot on the country's financial oversight boards. But no matter what method is used, home insurance is available to everyone and can give peace of mind that not having home insurance can't.
