How your homeowner’s insurance premium is determined—plus 7 tips to help you save – Fortune

There are many hidden costs that come along with owning a home. One that is often overlooked is homeowners insurance. 
Many lenders will require a homeowners insurance policy before financing a home, but even if this is optional, experts suggest that this is the smartest way to protect your most valuable assets when the unexpected happens. 
Accidents happen—and a homeowners insurance policy is one way to keep your home safe. Homeowners insurance offers financial coverage when your home is damaged or destroyed.
But this type of insurance does a lot more than cover your home. “Homeowners insurance can help pay for additional living expenses if you’re forced to live elsewhere while your house is being rebuilt. It will also cover most legal fees related to defending lawsuits arising from injuries that occur on your property,” says Brian Greenberg, CEO and founder at Insurist, a life insurance agency based in Arizona.
Homeowners insurance provides the following coverage:
When you’re shopping around and requesting quotes from insurance companies, you’ll need to provide information to apply for a policy. This includes identifying information about yourself, as well as key information about the home you want to insure. You can typically fill out an application online, in-person at a physical location, or with the help of an agent on the phone who can help you choose a policy that meets your coverage needs and fits into your budget. 
Many insurers are flexible with policyholders and leave it up to them to decide how they want to spread out their payments. On average, yearly insurance premiums are about $1,272, according to the most recent data from the Insurance Information Institute (III). That translates to a monthly payment of about $106 per month, although this cost can range widely depending on where you live. 
When calculating your premium, insurers are trying to determine the risk you pose to them and the likelihood that you’ll file a claim. 
Some of the key factors they weigh: 
Insurance premiums are not set in stone, so there are plenty of ways you can reduce your premium to make your policy more affordable while still getting the coverage you need
Having a homeowners insurance policy could help you avoid a financial pitfall should your home or belongings be damaged or stolen. Still, that doesn’t mean that the cost of your premium should put a significant dent in your budget. Looking for opportunities to limit your risk exposure can help trim your bill. 
“One of the best options a homeowner has available to them to save money on their home insurance is to take steps to harden their home against the events that can cause damage,” says Conlin.  
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