What You Should Know About:
What Drives the Cost of Homeowners Insurance
Insurance companies consider many factors to determine the price of your policy.
Hundreds of insurance companies write and sell homeowners insurance, and offer different coverage levels, services and rates. To choose the right company and policy, do your homework first. Work with a reputable insurance agent or shop around with multiple insurers for rate quotes. Check out your state’s insurance department websites to see if consumers have made a high number of complaints against some companies you’re considering.
So, what factors determine what you’ll pay for homeowners insurance? Every company has unique rating criteria – that’s how they compete with each other. But, here are some common elements insurers consider when calculating your home insurance premium:
- The square footage of the house and any additional structures.
- The estimated cost to rebuild your home (not its market value at the time of sale).
- The age of your home, the condition of the roof and the construction type of your home (brick/masonry or wood, for example) and any unique materials or features.
- The condition of your home’s plumbing, heating and electrical system.
- The deductibles you choose for your policy (how much you’ll pay first before your policy pays if you suffer a loss).
- The likelihood of damage from natural disasters occurring in your area such as wildfires, windstorms and severe winter weather.
- Your loss history (previous insurance claims you have filed).
- The proximity of your home to a fire hydrant and/or a fire department.
- The presence of a swimming pool or hot tub, which could affect your liability insurance.
- Your credit history.
- Owning a dog. Oftentimes, the breed of your dog may affect your insurance rate.