In the United States, the average cost of homeowners insurance for $250,000 in dwelling coverage is $1,383 per year. The rate you pay could be higher or lower, and rates are typically calculated using a number of different home insurance cost factors. Home characteristics, like the age of your home, structural materials and square footage may all help determine your premium, as well as personal and household factors, like the owner’s claims history.

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Some factors, like your location, are typically well-known for their impact on your home insurance rate, but others might surprise you. Factors like the type of claims you file, your home’s building characteristics and how close you are to a fire station may affect your insurance premiums or even your eligibility with some companies. Understanding what factors insurers use to determine your rates may be helpful as you navigate choosing a homeowners insurance company and coverage options.

Factors that impact your home insurance rate

There are several factors that insurers may use to determine your risk profile as a homeowner. A risk profile simply conveys how likely you are to experience a covered peril and file a claim. If an insurer determines you live in an area where the chance of a claim is higher, then it will likely increase your home insurance rates. The following homeowners insurance cost factors may impact your premium:

Location

Your state and even your ZIP code may influence the amount you pay in home insurance premiums. If your house is located in an area with a history of perils, such as vandalism, theft or weather-related events, you may see a higher premium. However, location could have a positive impact, too. If you are located near a staffed fire station, for example. Location may also be used to determine the replacement cost of your home since construction costs, including labor and materials, may vary depending on region.

  • If you’re looking to buy a property, researching your potential home’s location, as well as risk factors within specific cities or neighborhoods, may help you find a home with lower risk, ultimately lowering the cost of your home insurance premium. This research may also help you identify homes that may have a higher flood risk. For example, flood maps can show you where homes may be considered at greatest risk of flooding, which may require you to get a separate flood insurance policy.

Dwelling coverage

Dwelling coverage is the portion of your homeowners insurance policy designed to cover your home’s structure. You may be asked to choose whether you want this coverage at replacement cost value or actual cash value, which may impact your premium. Replacement cost value provides coverage to rebuild your home and replace your belongings at today’s costs, while actual cash value factors in depreciation and pays out to rebuild or replace items at their current value. Choosing replacement cost value will likely increase your premium, but will provide more financial protection in case of a covered event.

Insurance companies have valuation tools that help calculate dwelling costs. The insurance agent – or online quoting tool – will ask you questions about your home to determine how much it might cost to rebuild your house. Be prepared to answer questions about the age of the home and appliance systems (HVAC, plumbing, etc.), the roof age and materials, the type of building materials used, the square footage and even the unique features of your home, such as dormers or architectural characteristics.

  • Your dwelling coverage calculation is likely not something you have much control over as long as you are providing as many accurate details about your home as possible. However, if you are renovating or upgrading your home, it may be a good idea to keep in mind how these renovations may affect your insurance costs. For example, upgrading your electrical may offer you a cheaper premium or make you eligible to shop with more property insurance companies, whereas finishing your basement is likely to increase your insurance costs.

Credit history

In states where it is allowed, insurers can use a homeowner’s credit-based insurance score as a rating factor assessing the level of risk they are taking on. A higher credit-based insurance score could lead to being perceived as lower risk, and rates are often reduced accordingly. Insurers often use credit history as an indicator of your likelihood to make timely premium payments. Furthermore, insurers may feel that homeowners with poor credit are more likely to file claims under their policy than are homeowners who have very good credit.

  • If you have poor credit, working on raising your score could help reduce your premium in states where a credit-based insurance score is a rating factor. If you already have good credit, keeping your rating high may help you avoid increased insurance premiums due to your credit.

Claims history

Insurance companies often take previous claims filed within a certain time frame into consideration when calculating your rate. When a homeowner files a claim, their homeowners insurance company generally assumes they are more likely to file future claims. Having a history of filing insurance claims, even small ones, might indicate an even greater future claims risk for the insurance company.

Insurers may assess your personal claims history at current and prior properties. What that means is that even if you’re insuring a new home, your prior claims history from other homes you’ve insured may follow you to the new policy and could affect your rates.

  • Your homeowners policy offers financial protection in case of a covered peril, but some homeowners may choose to avoid filing a claim if the damage can be repaired with minor out-of-pocket costs or the damage is less than your homeowners insurance deductible. If you experience a covered loss, it may be helpful to estimate how much it would cost to fix the damage to help determine if a claim should be filed against your homeowners insurance policy.

Marital status

Whether you’re a first-time home buyer or have owned a home for many years, your marital status may impact your homeowners insurance rates. Insurers will typically charge lower rates to married couples because of the assumed lower risk. The chart below shows what the general thought-process of insurers may be when factoring in marital status for rates.

Age of home

If you live in an older home, you will 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 law coverage as part of your homeowners insurance policy. This coverage extends to getting the home up to date with current laws or ordinances that were created after the home was built or last updated. If you make upgrades to the heating, electrical or plumbing systems, or any other relevant updates, notify your insurance agent in case your policy should reflect the changes.

  • If your home is older, you might be able to take certain measures to modernize it and save money. For example, older houses may have knob and tube wiring, which may be more susceptible to electrical fires, and could increase the risk of a claim. Updating the wiring could reduce those risks and lower the chance of a fire, decreasing your premiums or increasing the chances of shopping with more property insurers for a more competitive rate. In addition, some insurance companies provide a potential discount if you make renovations that improve the safety of your home.

Deductible

A homeowners insurance deductible sets the amount you will pay out of pocket in a covered claim. Agreeing to a higher deductible may decrease your premium, but it could also cost you more out of pocket. Some insurers offer diminishing deductibles on your home policy. For example, American Family may give you up to an $100 credit toward your deductible for every year you go without filing a homeowners claim. This may lower your out-of-pocket cost if you do have to file a claim down the road.

  • Increasing your deductible could reduce your monthly premium, but this strategy should be approached with caution. It is important that your deductible remains low enough to avoid financial distress if you must pay it out of pocket because of a claim. Additionally, not all coverage types within a home insurance policy have a deductible. Dwelling coverage and personal property coverage have deductibles, but liability coverage, medical payments coverage and additional living expenses coverage don’t. However, if a deductible applies, you could be subject to paying out of pocket if damages exceed your coverage amounts.

Surprising factors that impact your home insurance rate

Though the factors above relating to a home’s construction, claims history and the insured’s credit-based insurance score may be significant, there are other factors considered in setting rates that may surprise you.

  • Type of home insurance policy: There are several different types of home insurance available, which differ in terms of benefits, perils covered, cost and kinds of homes that qualify for coverage. Talking with a licensed insurance agent may be useful to help you understand the different types of home insurance policy types and which may be right for you.
  • Distance from water: “The closer a home is to the coast, the more likely it is to experience flooding or hurricane damage, and tends to increase the cost of insurance,” said Sean Harper of Kin 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, like an FHA loan and your home is in a high-risk flood zone, you’re required to have flood insurance.”
  • Distance from a fire station: Wherever you live, the premiums you pay for home insurance are likely to be impacted by the proximity of your home to a fire department and fire hydrant. The closer you are to a fire station and hydrant, the greater the likelihood a fire can be quickly extinguished and severe damage, or complete destruction of your home, averted. The insurance industry generally uses the Fire Suppression Rating Schedule (FSRS) from the Insurance Services Office (ISO) to determine your home’s fire risk.
  • Dog breed: Having pets, especially certain dog breeds and exotic animals, may also impact your rates or even your eligibility with some companies. Harper explained, “Some companies will simply raise your rates to account for the increased ‘bite risk.’ Even if your dog isn’t a ‘restricted breed’, a bite history could also impact your rate or ability to get coverage,” said Harper.
  • Attractive nuisances: If you have attractive nuisances, or items on your property that could be potentially dangerous and appealing, especially to children, you may also see higher homeowners insurance rates or eligibility restrictions.

This is just a snapshot. There are many factors that may affect homeowners insurance premiums, including ones that might not be mentioned.

Additional home insurance coverage options

Standard homeowners insurance policies offer protection for the structure of your home, your personal belongings and liability. However, home insurance policies don’t cover everything. If you want to fill gaps in your coverage or tailor your policy to fit your specific needs, you might consider adding endorsements or additional policies.

For instance, if you keep valuable items at home, like fine art or jewelry, you might think about purchasing a scheduled personal property policy or adding the endorsement to your homeowners insurance policy to get higher coverage limits. These add-ons may raise your insurance costs, but can save you from significant out-of-pocket costs in the future if you experience a covered peril.

Here are some other common endorsements that may be beneficial to homeowners:

  • Flood insurance: Flood insurance is excluded from standard home insurance policies.  Flood 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 area for floods, you may still consider flood insurance. According to the Insurance Information Institute, customers in areas with low to moderate flood risk make up 20 percent of flood claims.
  • Umbrella policy: These policies are intended to supplement your personal liability coverage. Liability coverage helps pay for legal expenses and medical costs if someone is injured on your property or you are liable for damage to someone else’s property. If you decide that your liability coverage does not provide enough financial protection, an umbrella policy could help increase your coverage. An umbrella policy may make sense if you have a high net worth, have an attractive nuisance on your property, or if you regularly host parties at your home.

There may be other options you want to add. You could speak with your insurance company and licensed insurance agent about optional coverages and additional policies to help create a robust insurance package.

Frequently asked questions

    • The average cost of home insurance in the U.S. is $1,383 per year for a policy with $250,000 in dwelling coverage. However, home insurance premiums are unique to each individual. Homeowners insurance factors like your location, credit-based insurance score and claim history, may all impact your rate. To find the most affordable policy for your situation, most insurance professionals recommend comparing quotes from several different home insurance providers.Learn more: How to calculate the cost of your homeowners insurance
    • The best homeowners insurance company will likely not be the same for everyone. Most insurance professionals recommend starting by reviewing which carriers offer the coverage options you need, positive customer service ratings, strong financial strength ratings and discounts. From there, you can get quotes from top companies and compare to find which company might be best for your circumstances.
    • While you may be able to lower your coverage amount in order to lower your premium, your insurance company and your lender will typically have minimum recommendations, so this is not a decision you will likely have much control over. Additionally, you may want to consider that while having higher coverage limits may cost more, it may also offer more financial protection in the case of a covered event. If you’re trying to decide whether lowering your coverage is the best option, it may benefit you to speak with your insurance company or agent to discuss your concerns and review your policy.
    • Making updates to your home may lower your homeowners insurance premiums, but it typically depends on the updates, the insurance company you insure your home with and your policy specifics. For example, putting a new roof on your home could lower your premium, but remodeling your home could also increase your premiums. If your heating, electrical or plumbing systems are older, you may get access to a lower premium by upgrading them to new systems. To find out what updates can potentially lower your home insurance premiums, it may be helpful to contact your insurance company or speak with an independent insurance agent.