Homeowners insurance is very important for home owners, but when it comes to payment, there are a few different options to consider. Depending on the insurance company, you can usually choose to pay upfront if you wish, or at closing. Let’s have a look at the advantages and disadvantages of choosing to pay your homeowners insurance upfront.
Advantage: Protection against rate increases
It is quite common for a homeowner’s insurance company to ask for 1-year up-front payment. This acts as an insurance binder for the insurer, and the main benefit for home owners is that it protects them from rate increases which may occur though out the year.
Disadvantage: Your credit rating
Although paying upfront may save you some money, what about your credit rating? Your credit ratings, meaning how good you are with paying off your credit cards, etc., often have an impact on how much your insurance company charges. Homeowners who have excellent credit are usually charged a lower rate than those who have a poor credit record. If you have a good credit record, you may be missing out on getting a good rate if you pay upfront.
Disadvantage: The costs
It may seem great to get your initial homeowners insurance payment done with at once, but these up-front costs can actually take a toll on the pocket, as it is a payment which not all homeowners have considered.
Paying your homeowners insurance upfront can out you in a time crunch, as some companies offer discounts which others don’t. Time is an important factor when it comes to buying a home or attaining homeowners insurance, so you don’t want to be rushed!
In conclusion, there are pros and cons to paying your initial homeowners insurance payment upfront, but most importantly, you need to maintain a fully paid insurance policy on your home and keep a good record.