In the United States, the average cost of homeowners insurance for $250,000 in homeowners coverage is $1,383 per year. The rate you pay may be higher or lower, and rates are typically calculated using a number of different home insurance cost factors. Home features, such as the age of the home, structural materials, and square footage, can help determine your premium, as well as personal and household factors, such as the owner’s claim history.
Some factors, like your location, are often well known for their impact on your home insurance rate, but others may surprise you. Factors like the type of claims you file, the construction features of your home, and how close it is to a fire station can affect your insurance premiums or even your eligibility with some companies. Understanding what factors insurers use to determine your rates can be helpful as you choose a homeowners insurance company and coverage options.
factors that affect your home insurance rate
There are several factors that insurers can use to determine your risk profile as a homeowner. A risk profile simply conveys the likelihood that you will experience a covered peril and file a claim. If an insurer determines that you live in an area where the possibility of a claim is higher, it will likely increase your home insurance rates. The following homeowners insurance cost factors can affect your premium:
Your state and even your ZIP code can affect how much you pay in home insurance premiums. If your home is located in an area with a history of hazards, such as vandalism, theft, or weather-related events, you may see a higher premium. however, the location could also have a positive impact. if you are near a staffed fire station, for example. Location can also be used to determine the replacement cost of your home, as construction costs, including labor and materials, can vary by region.
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Dwelling coverage is the portion of your homeowners insurance policy designed to cover the structure of your home. You may be asked to choose whether you want this coverage at replacement cost value or actual cash value, which may affect your premium. Replacement Cost Value provides coverage to rebuild your home and replace your belongings at current costs, while Actual Cash Value takes into account depreciation and pays to rebuild or replace items at their current value. Choosing replacement cost value will likely increase your premium, but provide more financial protection in the event of a covered event.
Insurance companies have valuation tools that help estimate housing costs. The insurance agent, or online quoting tool, will ask you questions about your home to determine how much it might cost to rebuild. be prepared to answer questions about the age of home systems and appliances (HVAC, plumbing, etc.), roof age and materials, type of building materials used, square footage, and even the unique features of your home , such as dormers or architectural features.
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In states where it is allowed, insurers can use a homeowner’s credit-based insurance score as a rating factor to assess the level of risk they are taking. a higher credit-based insurance score could lead to being perceived as lower risk, and rates are often lowered accordingly. Insurers often use credit history as an indicator of your likelihood of making premium payments on time. In addition, insurers may feel that homeowners with poor credit are more likely to file claims under their policy than homeowners with very good credit.
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Insurance companies often take into account previous claims filed within a certain time period when calculating your rate. When a homeowner files a claim, their homeowners insurance company generally assumes that they are more likely to file future claims. Having a history of filing insurance claims, even small ones, could indicate an even greater risk of future claims for the insurance company.
Insurers can evaluate your personal claims history on current and former properties. What that means is that even if you’re insuring a new home, your past claim history from other homes you’ve insured can follow you into the new policy and could affect your rates.
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Whether you’re a first-time homebuyer or have owned a home for many years, your marital status can affect your homeowners insurance rates. Insurers will generally charge lower rates to married couples due to the lower risk assumed. The chart below shows what the general thought process of insurers may be when considering marital status for rates.
If you live in an older home, you’ll likely pay a higher home insurance premium. Older homes may need to be brought up to code as part of the rebuilding process, so you may want to consider adding ordinance or statutory coverage as part of your homeowners insurance policy. This coverage extends to updating the home with the current laws or ordinances that were created after the construction or last update of the home. if you make updates to heating, electrical, or plumbing systems, or any other relevant updates, please notify your insurance agent in case your policy reflects the changes.
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A homeowner’s insurance deductible sets the amount you’ll pay out of pocket on a covered claim. Accepting a higher deductible may lower your premium, but it could also cost you more out of pocket. Some insurers offer decreasing deductibles on your homeowners policy. For example, American Family may give you a credit of up to $100 toward your deductible for each year that you go without filing a homeowner’s claim. this can lower your out-of-pocket cost if you have to file a claim in the future.
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surprising factors that affect your home insurance rate
While the above factors related to home construction, claims history, and the insured’s credit-based insurance score may be significant, there are other factors taken into account when setting rates that may surprise you.
- Type of Home Insurance Policy: There are several different types of home insurance available, differing in terms of benefits, risks covered, cost, and types of homes that qualify for coverage. coverage. Talking with a licensed insurance agent can be helpful in helping you understand the different types of home insurance policies and which one may be right for you.
- Distance from water: “The closer a home is to the shoreline, the more likely it is to experience flooding or hurricane damage, and tends to increase the cost of insurance,” said sean harper of kinship insurance. According to Harper, “Flood zones play a key role in whether or not you need flood insurance. If you have a federally backed mortgage, such as an FHA loan, and your home is in a high-risk flood zone, you must have flood insurance.”
- Distance from a fire station: Wherever you live, the premiums you pay for home insurance are likely to be affected by how close your home is to a fire department and hydrant of fires. The closer you are to a fire station and fire hydrant, the greater the chance that a fire can be quickly extinguished and serious damage or total destruction of your home prevented. The insurance industry typically uses the Bureau of Insurance Services (ISO) fire suppression rating (FSRS) program to determine your home’s fire risk.
- Breed of Dog: Having pets, especially certain breeds of dogs and exotic animals, can also affect your rates or even your eligibility with some companies. Harper explained, “Some companies will simply increase your rates to account for the increased ‘bite risk.’ said harpist.
- Attractive Nuisances: If you have attractive nuisances or items on your property that could be potentially dangerous and attractive, especially to children, you may also see higher homeowners insurance rates or eligibility restrictions.
- Flood Insurance: Flood insurance is excluded from standard homeowners insurance policies. Flooding is covered by policies placed with the National Flood Insurance Program (NFIP) and some private companies. Even if you don’t live in a high-risk flood area, you can still consider flood insurance. According to the Insurance Information Institute, customers in areas with low to moderate flood risk account for 20 percent of flood claims.
- Comprehensive Policy: These policies are intended to supplement your personal liability coverage. Liability coverage helps pay for legal fees and medical costs if someone is injured on your property or if you are responsible for damage to someone else’s property. If you decide your liability coverage doesn’t provide enough financial protection, an umbrella policy may help you increase your coverage. An umbrella policy may make sense if you have a high net worth, have an attractive nuisance on your property, or regularly host parties at your home.
This is just a snapshot. There are many factors that can affect homeowners insurance premiums, including some that may not be mentioned.
additional home insurance coverage options
Standard homeowners insurance policies offer protection for the structure of your home, your personal belongings, and your liability. however, home insurance policies do not cover everything. If you want to fill in the gaps in your coverage or tailor your policy to fit your specific needs, you might consider adding endorsements or additional policies.
for example, if you keep valuable items at home, like art or jewelry, you might consider purchasing a scheduled personal property policy or adding the endorsement to your homeowners insurance policy for higher coverage limits . these add-ons may increase your insurance costs, but can save you significant out-of-pocket costs down the road if you experience a covered risk.
Here are some other common endorsements that can be beneficial to homeowners:
there may be other options you want to add. You may want to talk to your insurance company and licensed insurance agent about optional coverages and additional policies to help create a solid insurance package.
frequently asked questions