MUD Taxes: Understanding the Charges (and benefits!) When Buying in a MUD
When considering whether or not to buy a new home, buyers should consider all of the potential benefits. One benefit many people overlook, is the reduced risk of safety hazards that come along with buying new. People who buy newly built homes also are buying insurance-friendly homes.
Home insurance companies make a living evaluating risk. They want to insure low risk homes and they reward homeowners who demonstrate it with better rates than those who don’t. For many reasons, new construction usually translates into lower risks.
Start at the Top
One of the first things a home insurance agent will ask you is the age of your roof. Why? Because providers know what severe thunderstorms can do. In 2012, according to the Insurance Information Institute (III), they caused nearly $15 billion in insured losses – much of that to roofs. The average weather-related insurance claim costs $6,000.Since older roofs can be particularly vulnerable to storm damage, you can see why newly constructed houses – with newly constructed roofs – are desirable from an insurance standpoint.
The Saving Power
When you’re considering buying a house, you might not dwell too much on the electrical system. You should. Outdated electrical systems are a major cause of house fires.It can make $30,000 worth of difference. That’s the average loss from a residential fire. Structure fires are much more common than you think: The National Fire Protection Association says there about 500,000 every year.
Part of the “character” or “history” of those older homes could include fuse boxes (as opposed to circuit breakers) and ungrounded electrical outlets, which carry a major risk of fire. New homes feature up-to-date electrical systems, with circuit breakers and modern wiring, which greatly enhance safety.
Running Hot or Cold
You want your home to be comfortable, and you depend on your heating, ventilation and air conditioning system to keep you cool in summer and warm in winter. That older house could be comfortable when you tour it in spring or fall, but how will it feel during the other seasons?
The NFPA weighs in here, too. Air conditioning system failures contribute to about 2,500 house fires a year. New systems are much less likely to fail than old ones, cutting the chance of fire substantially.
As for the heating side of the equation, the III says frozen and burst pipes are the third-largest cause of property losses by homeowners. The resulting water damage accounts for about $5 billion annually in claims.
Homeowners reduce the likelihood of frozen pipes with newer heating systems. New plumbing also helps – modern pipes aren’t as likely to burst when they freeze.Another Hot Issue
Of course, fires can still break out even if your home has the most modern electrical and HVAC systems. But, again, newer homes can help you escape major damage.Newer construction methods include fire retardant carpet and other materials, and modern firewalls work to keep fire from spreading as rapidly.
That means you’re giving the local fire department a better opportunity to douse the blaze before there’s major damage. Newly built homes also are required to have hard-wired smoke detectors.
How It Affects Your Wallet
The bottom line? Many home insurance providers offer discounts of as much as 20% for newer homes. But you benefit in other ways, too.
The lower likelihood of filing claims means you’ll also avoid paying a deductible. Remember, that’s the amount you’re responsible for in a covered claim. This is where you can play the risk-assessment game, too. If you believe there’s a lower chance of having to come up with the amount, you can set your deductible higher – which translates into lower premiums. But take this step with great caution – you should never set the amount at a level that you’d have trouble coming up with should there be a claim.
Filing fewer claims also can help you to maintain better rates.
This article was contributed by Carrie Van Brunt-Wiley and Samantha Alexander, contributors to the The Homeowners Blog, and has served as a resource for home buying consumers since 2007.
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