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Top Factors That Decide the Premium of Property Insurance

To get your valuable assets insured is always recommended and with insurance for health, life, and car, it is also suggested to insure your property with a suitable property insurance policy. However, if you are thinking about the premium of your property insurance, then understanding the factors that affect it is very important. Knowing these factors in advance can give you a clear idea of how much you have to pay for insuring your property.

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Factors that Affect the Premium

The following factors affect the premium of your property insurance policy:

  • Type of Property Insurance You Have Selected: The extent of coverage of your property insurance or the type of insurance that you have taken for your property or home affects its premium. There are three major types of property insurance plans provided by most of the property insurance providers, they are:
    • Property All Risk Insurance: Under this plan, wider and comprehensive protection is provided. This is because it gives the guarantee to cover almost all property-related risks.
    • Fire Insurance: Provides coverage against all the risks that are caused because of fire only. A fire such as lightning, aircraft impact, smoke, and explosion is most of the time covered. This risk is also known as FLEXAS.
    • Earthquake Insurance: An insurance that provides coverage against risks associated with earthquakes, volcanic eruptions, tsunamis, and other effects.

The premium amount is proportional to the type of insurance that you have taken. Doing simple research will help you to find out the most suitable property insurance policy. The amount of the premium increases with the benefits you add in your insurance plan for the property, like additional guarantees for life cover for your family and you.

  • Value of Your Property Assets: The two most important factors that affect the premium of your property insurance plan are – the total value of your assets that are to be insured and your insurance premium level. Residential property value is dependent on its assets and its contents and as per these two factors, you require coverage for your home. However, the coverage value that you want must be reasonable and true.
  • Property Usage: The usage of your property or building as well decides its premium. This is because the use of building directly deals with the level and type of risk that it may face. Residential property like apartments or houses has a low premium as compared to commercial buildings like boarding houses, hotels, shop houses, or buildings used for an office. The highest premium is of course of those buildings that are used commercially like for some office, factory, or warehouse.
  • Building’s Construction Type: The following is the construction type used for property or home insurance:
    • Class One Building Construction: Using non-flammable material for construction.
    • Class Two Building Construction: Using construction materials that are made of wood.
    • Class Three Building Construction: The construction materials that are other than class one and class two construction materials.

The premium of class 1 building material will for sure have the lowest premium than class 2 and class 3 building construction materials.

  • Environment Surrounding Your Building or Property: The environment that is around your property or house if has high potential risk will for sure increase the amount of premium. For example, if your home is in a locality that is prone to security disturbances or disasters, then you will have to pay more premiums. Easy access and distance from the nearest source of water also defines the amount that you have to pay for your home or property insurance policy.
  • Some Other Deciding Factors: Some other factors that influence the premium of your property insurance are – insurance claims or records of losses that have incurred. In addition to this, the availability of some additional security systems and equipment like a sprinkler, alarm for smoke detection, fire extinguisher small, security alarm, surveillance cameras, etc. as well decide the premium of your property. If you have such devices, then you may get a good discount on your insurance policy for the property.
  • Age of Your Property: As the old buildings are most susceptible to damages and losses, the property insurance providers charge a high premium. For example, damage due to fire eruption in your office premises because of short-circuiting in the electric wiring that are old could cost expensive repairs and the building being old may need to be rebuild again. Therefore, for such properties, the insurance provider may charge high premiums.
  • Claim Deduction vs Replacement Value: As per the replacement value cover, the insurance provider makes payout which will be sufficient for replacing the damaged items with new equipment. However, in other options, the insurance provider makes the payout after the deduction of the depreciation. In this way, these types of property insurance policies cost comparatively lesser. So, you can select one as per your requirement.

Summing It Up!

The irony is that we keep ourselves busy in making our dream home by using various security systems and tools but we forget that insuring your home is also as important as these things are. Even though we desire to get property insurance at a cheaper rate, but if the protection that you need for your property is insufficient and is not optimal, then paying a premium for it would be a wastage of money. It will be the same as putting your home or other property at risk. We suggest you not let your home or other property face danger instead protect it with a reliable and sufficient property insurance policy. You can do that by paying attention to these aforementioned factors before purchasing a property insurance policy and get the reasonable and appropriate value of your property insurance premium.

Written By: PolicyBazaar - Updated: 30 September 2021
Disclaimer: Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by an insurer.
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Reviews & Ratings

4.4 / 5 (Based on 120 Reviews)
(Showing Newest 10 reviews)
Bokaro, July 26, 2022
Coverage for natural calamity
I was looking for an insurance policy that provides me coverage for natural calamity. Since my house is located near a river and it floods my area in the rainy season. So i went on the Policybazaar website and particularly look for this coverage found the exact plan that provides this coverage.
Bilaspur, July 26, 2022
Premium Calculation
I was looking for a home insurance policy online. I stumblled upon the Policybazaar website and it is one of the best online platforms to purchase home insurance policy. I learned about the insurance plan i wanted to purchase and after choosing the plan and add ons i could calculate the premium using their online premium calculator. Thanks Policybazaar.
Bikaner, July 26, 2022
Natural Calamity cover
I have recently purchased a flat and wanted to cover it with a home insurance policy. I was aware of the Policybazaar website so i thought i should give it a try. I went on their website and as i wanted to cover my flat with a natural calamity cover specifically i searched for it and without wasting a minute it showed me the natural calamity coverage.
Amritsar, July 26, 2022
Enough coverage
I was looking for a home insurance plan online. I was fed up as i have to visit different websites to look for a single suitable insurance plan. However, i stumbbled upon Policybazaar website where i was able to find the right insurance plan that could provide me enough coverage.
Bareilly, July 26, 2022
Nice customer service
I wanted to purchase a home insurance policy and a friend of mine suggested to purchase it from Policybazaar. I bought the policy and after that i had a confusion regarding exclusions so i called up Policybazaar customer care and they cleared out the confusion and i loved their customer service.
Ajmer, July 26, 2022
Qiuck claim
I purchased a home insurance policy recently. However, due to a natural calamity, my house was damaged as the pressure of the water because of flood broke the enterance door of my house. But the insurance plan that i bought got me covered and i as able to get the quickest claim possible.
Delhi, July 26, 2022
Natural calamities covered
I bought a home insurance policy recently. As i live near a river and in the rainy season, my area gets flooded so in order to protect my house and its contents, i purchased the insurance to get coverage for such natual calamities and i am tension free now.
Kolkata, July 26, 2022
Wide coverage
The home insurance plan that i purchased from policybazaar's website is a great plan that provides me coverage for not only the structure but also cover several expensive content of the home such as paintings, mobile phones, laptops, television, etc.
Ahmedabad, July 26, 2022
Suitable insurance plan
I purchased the group health insurance policy from Policybazaar website. First of all, i did not have to wander much online while lookig for a home insurance plan that fits my requirement and i found the suitbale home insurance plan by comparing different plans on the website.
Amritsar, June 09, 2022
Natural calamities covered
I bought a home insurance policy recently. As i live near a river and in the rainy season, my area gets flooded so in order to protect my house and its contents, i purchased the insurance to get coverage for such natual calamities and i am tension-free now.
  • Disclaimers+

    #Savings of 28% are based on the comparison between the highest and lowest premiums for a pucca building with sum insured of >₹ 1 crore at Delhi, for property age less than 5 years and policy term of 11 years.