Home insurance is a contract whose purpose is to pay compensation to the policyholder who is the victim of an accident that occurs while occupying a home, in exchange for a premium known as the home insurance premium. This monetary compensation is based on the damage suffered by the victim, but also on several other parameters. If you were planning to take out such insurance, you should now understand how to assess the premium.
What is the home insurance premium?
A home insurance contract allows the insured to be compensated personally for possible bodily injury or material damage, but also allows third parties to be compensated. The premium is the amount of money paid by the subscriber of a home insurance contract to an insurance company, in return for guaranteed coverage and protection. The home insurance premium is paid on an annual basis.
To put it in concrete terms, it is the annual sum that you pay to an insurer in order to benefit from protection against the risks inherent in possible deterioration or accidents that could affect your dwelling and third parties.
There are several components to this premium:
- the cost of the risk: this is assessed by the insurer and represents the probability that the insured will suffer damage related to his or her place of residence and the probability that this place will be a source of harm to third parties;
- management costs: the home insurance premium also includes the costs of handling the case so that the insurance company can draw on it to cover its operating costs;
- the sales margin: this is the profit that each insurer expects to make on each policy subscription;
These are the three main components of the insurance premium, each of which is carefully calculated and evaluated by home insurance companies.
How is the home insurance premium calculated?
Several criteria are taken into account when calculating the insurance premium. These are :
- the type of housing: the home insurance premium includes the dimensions of your home, the nature, the surface area, the number of rooms, etc. in its calculation. The insurance premium changes according to these elements. The bigger they are, the higher the premium;
- the policyholder's profile: this involves checking whether the policyholder is an owner or a tenant, whether he or she has already had to deal with risks in the past, and asking him or her a number of questions about his or her personal profile;
- the geographical area: this is the area in which the home is located. The home insurance premium would not be the same in Paris as in the suburbs or in less populated cities;
- the value of the dwelling: this includes the market value of the building as well as the value of the valuables you keep in your home. You will have to declare all the goods honestly in order not to vitiate your insurance contract.
Can the insurance premium increase?
The insurance premium may increase. It is already clear that the amount of the premium you pay depends on the type of insurance you have purchased. The amount of your home insurance premium can then change depending on certain factors:
- In case of additional guarantees: if, over the course of time, you feel that you are moving from one guarantee package to another that is more comprehensive, your insurance premium will increase. This will also be the case if you wish to include another beneficiary among your family members in your insurance contract;
- recurring claims and accidents: if too many claims and accidents occur in a short period of time, your insurer may ask you to review the clauses of your contract;
- the levying of taxes: the home insurance premium will also increase depending on whether the compulsory tax regime to which your insurer is subject also increases;
- revision of the insurer's commercial policy: due to their expenses, insurers can revise the rates of their contracts.
- Reassessment of risks: insurers review their rates on a regular basis. It can happen that they increase.
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