Risk Assessments: A Central Consideration in Home Insurance Policies

Yara Zakharia, Esq.
Risk assessment is an investigative tool that a homeowner or a home owner insurance company utilizes to identify the property, resources, and individuals that are at risk of loss, damage, or injury from natural catastrophes or hazardous incidents.

A home owner insurance company typically provides risk assessment services. A detailed risk assessment of your home and neighborhood allows you to determine your risk level and can reduce home owner insurance costs. Homeowners should write down their risk assessment as well as a security plan setting forth what they have done to make their home more secure, and then schedule a meeting with an insurance agent.

There are many ways that individuals can avoid being labeled as 'high risk' and consequently lower their home owner insurance rates, including the following:

  1. Implementing changes that lower the risk of damage in windstorms and other natural disasters
  2. Updating old heating systems, plumbing systems, and electrical wiring in order to reduce the risk of fires and water damage, which are very common among homes.
  3. Ensuring that their home is as safe as possible by conducting a risk assessment, namely as follows:
    • Gathering facts and figures on crime, fires, and natural disasters from law enforcement, the fire department, insurers, and neighbors
    • Performing an analysis by ranking the areas of concern according to the likelihood that they might be subjected to those dangers
    • Identifying their weaknesses

For homes built prior to 1978, a lead risk assessment is a requirement. As concerning flood insurance coverage, the same business practice used for non-flood hazards, is employed. In addition, the risk assessment should include the cost of the building foundation and its supporting structure. An insurance agent will not only focus on flood zone data, but also conduct a risk assessment based on location, design and age of the property, the amount of coverage requested, and occupancy. Furthermore, for buildings situated in special flood hazard areas, an insurance company must take into account the building's elevation as compared to the base flood elevation.

In conducting a risk assessment, an insurance company also compiles all types of data on likely losses, such as statistics on the different breeds of dogs that cause bodily harm. Individuals usually pay more home insurance if they own a dog that's generally known to bite, act aggressively, or carry out an unprovoked attack, such as a pit bull for instance.

Another target for risk assessment is swimming pool or trampoline ownership, since they increase the cost of home owner insurance.

In conclusion, a home owner insurance company can assist individuals in risk assessment by ascertaining what types and levels of risks they face. This is done by relying on the method of grouping together similar risks. Through the mechanism of risk assessment, a home owner insurance company can quickly decide what kind of insurance to offer an insurance policy applicant and the amount needed to protect the insured from those risks. Therefore, the optimal way to lower home owner insurance premiums is to avoid being classified as 'high risk' and this is achieved by performing a risk assessment and taking corrective measures.

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