When buying a home, there are more costs to worry about then the down payment and the mortgage. There are other closing costs, taxes and other considerations to make. And although you are not able to have much control of some costs like taxes, others like homeowner insurance is where you can find your savings. Wherever you decide to live in the state, whether it’s in the middle of the Chattanooga countryside or a duplex in Nashville, finding the right homeowner’s insurance should be a priority.
How Does Tennessee Compare With the Rest of the Country?
Tennessee is the 17th largest state in the Union by population, and like most states, most of its population is centered around a couple of large cities, with the rest spread out through the countryside. The largest city is Nashville, followed by Memphis, Chattanooga, and Knoxville.
Buying a house in Tennessee means you will be getting fairly average prices on homeowner’s insurance compared to the other states, coming in at 20 on the highest price rankings.
Across the state, the average annual homeowner’s insurance cost on a 2,000 square foot property valued at $200,000 was $1715 annually.
Where Are the Cheapest Rates in Tennessee?
One of the ways to lower your insurance costs is to buy a home in a location with generally low rates. The cheapest rate in the state can be found in Johnson City. This city is located in Eastern Tennessee along the Appalachian Mountains. It has a population of about 65,000 people and is home of East Tennessee State University. The average insurance policy on a $200,000 home is only $1,344 per year. This is 21.6% lower than the state average and is almost $1000 less than Memphis, which is the most expensive city in the state. Memphis has average annual premium of $2,302, which is 34.2% higher than the state average.
What Are the Major Factors in Determining Insurance Rates?
The biggest factor of all is the estimated replacement cost of the home. This is how much money it would cost to rebuild a home from the ground up on the same place in the exact same way if something were to happen to the original home. This number does not include the cost of the plot of the land, which is factored into the market value, so these numbers are completely different. To determine this price for your home, you would be wise to have an appraiser to come out and give you an estimate. Having an independent appraisal will give you the ability to negotiate with the insurance company when they send out their own appraiser.
Another major factor is location. Homes located in high crime areas will simply cost more to insure than in lower crime neighborhoods. The main reason why Memphis has the highest premiums in the state is because of its notoriously high crime. The good news is that several suburbs in the Memphis Metropolitan area have taken big steps in curbing criminal issues, which has not only caused the value of the homes to go up, but the insurance premiums to go down. Suburbs like Germantown are significantly lower than Memphis, with annual premiums averaging only $1857, which is closer to the state average and several hundred dollars cheaper than Memphis.
Crime is not the only location factor. The area’s weather history can also affect prices. Once again, Memphis suffers from higher premiums due to a history of tornadoes and the danger of water damage from the Mississippi River. The good news is that the majority of the cities in the central and eastern parts of the state have much lower premiums due to the temperate climate and low chances of damaging weather, save for the occasional snow storm.
Outside of where you choose to buy your home, you can also affect your insurance price through having good credit. You will most likely already have your credit information since you have just purchased a home, so use that information as leverage when choosing a company.
Can You Save Money Through Your Deductible?Â
Another way to lower your cost is through choosing your deductible. A higher deductible can lower your premium significantly. The problem is finding the balance. You do not want to choose a deductible you cannot reasonably afford, or you will end up with an insurance policy you cannot pay for. At the same time, a higher premium might end up being a waste of money over the long term if you do not have any major issues during your time in your home.
This does not have to be a gamble. Like your premium’s initial cost, you should factor in your location when deciding on a deductible. If you live in a safe neighborhood with little to no weather issues like in the Chattanooga or Maryville area, you would be alright with going with a higher deductible, as long as you can afford it. You should also factor in the age of your home when deciding this because unforeseen issues like broken water pipes and leaky roofs can happen to anyone in an older home.
In 2014, for example, the city of Nashville was hit with a very harsh cold snap that damaged a lot of homes. Pipes were not insulated properly on a lot of the older homes in the area, causing them to crack and burst after they froze. In cases like these, having a slightly lower deductible with a higher premium saved homeowners a lot of money.
No matter what you decide to do, research your new neighborhood and find out as much about it as you can. Don’t be afraid to look up old weather history, crime data, and other location-specific information to figure out where you want to be with your deductible.
2 Point Highlight
One of the ways to lower your insurance costs is to buy a home in a location with generally low rates.
Homes located in high crime areas will simply cost more to insure than in lower crime neighborhoods.
