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Which factors decide your home insurance costs?


If you're paying more for your home insurance than that of your neighbor, there must be reasons behind it. An application for home insurance policy has to undergo the insurance underwriting process before coverage is allowed for the property. Apart from the value of the home, the underwriters check for other factors and fix the rates for the policy accordingly. Find out which factors affect the rates on a home insurance policy and how.

The factors which determine your home insurance rates are:

  1. Type of construction for the building - The insurers check for the building material before insuring the property. Materials like brick, concrete or stone are fire-resistant, and are considered less risky by the insurers. Frame houses are more prone to damage. For homes constructed out of flammable materials like wood etc., the owners will have to pay more on insurance. Fire insurance coverage might be denied for homes which have Exterior Insulation Finishing System (EIFS) in them, since EIFS is not considered as fire resistant and is also prone to damage and acts of vandalism. The more unsafe your house seems to be, the more will be the rates charged for insuring it.
  2. Size of the house - The bigger the house, the more will be the risks associated with it. Damages to such houses will be more during a fire or a natural disaster. Similarly, the costs for restoring a large insured house after a mishap will also be more. Consequently, owners of large houses have to pay more for their home insurance. Insurance companies may charge premiums based on per square feet of the house.
  3. Age and condition of the building - Insurance costs are more for older homes as compared to the new ones. That is because newer homes usually have the latest security installations as well as new wiring or heating systems etc. and are considered safer. Besides older homes are more prone to damages, than the newer ones. However, even old homes might fetch low rates if they are well-maintained.
  4. Date and details of the renovations - Apart from the original construction of the building, if there are additional structures, the owner will have to pay more for insurance. The insurance companies will need to know about all renovations in the building, before they allow you coverage. Since renovations usually increase the worth of the home, they must be taken into account. Besides, certain developments may also mean that you should get additional coverage, and that will affect your cost as well. For e.g. - If you set up a swimming pool inside your home, you'll have to buy additional liability coverage.
  5. Location of the property - A house located in a high risk area might be subject to acts of vandalism, and thus the owners will be charged more for their insurance protection. Again, the houses located in less populated areas will cost more to insure.
  6. Proximity to the nearest fire station - Distance of the property from the fire station will affect the premiums charged on it. The farther your home is, the more will be its insurance rates. The same thing happens if the house is too far away from a police station.
  7. Safety devices installed in the house - Security set-ups reduce the likelihood of theft in your property. Thus, installation of security arrangements like alarm systems, smoke detectors, sprinklers, etc. will be helpful if you want to cut down your home insurance premiums.
  8. Probabilities of natural perils in the zone - If your house is in a flood-prone zone, your insurance rates will be high. Similarly, likelihood of natural disasters in your area, like hurricane, windstorms, earthquake etc. leave its impact on your home insurance rates.
  9. Purpose for which the house is used - The insurers ask whether or not you'll be using the house as your full-time residence. If a house is used only for seasonal holidays or during vacations, that would mean that it's left vacant most of the time in a year. Empty houses are more inviting for thefts and burglars, and cost more to insure.
  10. The applicant's preference of deductible and coverage - It's obvious that your insurance rates will reflect the amount of coverage you have opted for. If you seek more insurance protection, be prepared to pay more as premiums. However, you may enjoy lower rates on your home insurance policy, if you agree to raise your deductible.
  11. Credit history of the homeowner - Like in every other form of insurance, the home insurers also check the credit records of a person. A clean credit history would indicate that you're in control of your finances. Insurers would mark you as 'low risk' since they'll think that you'll have less chances of missing out on your home insurance premiums. As a result, you may enjoy low rates for the necessary insurance coverage.
  12. Insurance score - Insurance scores reflect your risk profile and are assessed by the homeowners to determine your home insurance rates. A low score would mean that you'll have to pay high premiums for insurance protection and vice-versa.
  13. Be it a homeowner or a renter, everybody needs to secure the roof above their head against the uncertain future mishaps. Knowing the above factors will help you to be all set, when you go out to buy insurance protection for your home.


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