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In the United States, the average cost of homeowners insurance for $250,000 in dwelling coverage is $1,383 per year, or around $115 per month. The rate you pay could be higher or lower, and rates are typically calculated using a number of different factors. Home characteristics, like the age of the home, structural materials and square footage help determine your premium, but so do personal and household factors, like the owner’s claims history.

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Two Thirds
2 out of 3 homes
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1 out of every 20
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While many homeowners have come to understand at least some of the factors that determine their homeowners insurance rate, there are some that may surprise you. Factors like the size of the claims you file, your dog’s breed and items you buy to keep your children occupied outside could also affect how much you pay for home insurance. Understanding what insurers use to determine your rates is helpful as you are navigating through the numerous choices for homeowner insurance companies and coverage options.

Factors that impact your home insurance rate

Insurers note several factors that affect home insurance costs and determine your risk profile as a homeowner. A risk profile simply means how likely you are to file a claim or your home will need a claim. Keep in mind, an insurance carrier’s ultimate goal is to spend as little as possible. When an insurer weighs the multiple factors and determines there is a higher chance of a claim taking place, then it increases the home insurance rates. The following factors impact your home insurance rates:

  • Replacement cost
  • Credit history
  • Claims history
  • Marital status
  • Age of home
  • Deductible
  • Location

Replacement cost

The replacement cost is the amount it would cost to rebuild your entire home if something were to happen to make it a total loss. Though it may never happen, having the right amount of coverage in place will help ensure you can rebuild your home. Replacement cost can sometimes be confused with market value, but they are not the same thing. The market value includes your home and the land, while replacement cost is only based on the cost to rebuild your home’s structure.

You do not have to determine how much the replacement cost is for your home. Insurance companies have valuation tools built into their quoting system to help. The agent – or online quoting tool – will ask you questions about your home to determine the replacement cost. 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.

Credit history

Like bank lenders, many insurers check homeowners’ credit in assessing the level of risk they are taking on. A good credit score could lead to being perceived as lower risk and rates are often reduced accordingly. Insurers often use credit as an indicator of your likelihood to make timely premium payments. Furthermore, insurers feel homeowners with poor credit are more likely to file claims under their policy than are homeowners who have very good credit.

“Most insurance carriers use credit as a portion of the rate-setting process in states where it is permitted,” said P.J. Miller, partner and independent insurance agent with Wallace & Turner Insurance in Springfield, Ohio. “While it is supposed to be a ‘portion’ of the rate calculation, most believe it plays a significant role in determining the price for homeowners insurance.”

Claims history

Insurance companies often take prior claims behavior into consideration when calculating your rate. When a homeowner files a claim, the homeowners insurance company generally assumes he or she is more likely to file additional claims in the future. Having a history of filing a number of claims might indicate an even greater future claims risk for the insurance company, regardless of the size of the claim. Insurers assess claims history on both the home and on your personal claims history at 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 will follow you to the new policy and could affect your rates.

Marital status

Marriage can impact rates for a number of insurance policies, including home and auto. Insurers will typically charge lower rates to married couples because of the assumed lower risk. The chart below shows the general thought-process of insurers when factoring in marital status for rates.

Marital status Amount of claims typically filed Details Impact on premiums
Married Fewer than average Married couples statistically file fewer claims than non-married persons. These couples are viewed as being more stable and “settled” than singles. Likely to see lower rates
Single More than average Single people file more claims. This group is also perceived as being less responsible and more likely to take risks. Likely to see higher rates

Age of home

If you live in an older home or one that would likely need a lot of improvements if rebuilt, 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 ordinance or law coverage as part of your homeowners insurance package. 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 so your policy will reflect the changes.

Deductible

A homeowners insurance deductible sets the amount you will pay out of pocket. Agreeing to a higher deductible will decrease your premium, but it could also cost you more in the event of a claim. Some insurers offer diminishing deductibles on your home policy. For example, American Family may give $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.

Location

The location of your home influences the amount you pay in premiums. If your zip code is located near an area with a history of perils, such as vandalism, theft or weather-related events, then it could increase the cost of the policy. However, location could have a positive impact too, if you are located near a staffed fire station for example.

Location is also used to determine the replacement costs, since construction costs, including labor and materials, can vary depending on the community.

Surprising factors that impact your home insurance rate

Though the factors above relating to a home’s construction, history and the insured’s financial background are significant, there are many other factors considered in setting rates, which are often overlooked.

  • 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,” Harper of Kin Insurance said. 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.”
  • Filing small claims: In the view of many insurance companies filing even a small claim is an indicator you are likely to file more claims in the future, possibly larger ones.
  • Living near 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. The closer you are to a fire station, 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 judge fire prevention. On the 10-point scale, the lower the score, the safer the home is from fire risk. If your home is further than five miles away from the nearest fire department, the rating will automatically default to a 10.
  • Dog breed: Pets and dog breeds may also impact your rates. Harper explained, “Some companies will simply raise your rates to account for the increased ‘bite risk.’” Certain dogs may even be excluded from homeowners coverage entirely. “Even if your dog isn’t a ‘restricted breed’, a bite history could also impact your rate or ability to get coverage,” Harper said.
  • Attractive nuisances: If you have attractive nuisances, or things on your property could be potentially dangerous and appealing, especially to children, you may also have higher homeowners insurance rates. As Harper highlights, attractive nuisances “include swimming pools, trampolines, treehouses, wells, fountains, swing sets, construction projects – anything enticing that could attract trespassers or increase the risk of an invited guest getting injured.”

This is just a snapshot. Countless additional factors may be considered in your homeowners insurance so pinpointing what factor affects insurance premiums the most could be difficult.

Home insurance policy types

Insurers further breakdown insurance policies into specific types. Each one of these forms of homeowners insurance has different levels of coverage, including which perils are included, the amount of liability and even the types of homes covered.

Both the type of dwelling and the amount of protection you want are driving factors for which home insurance policy to choose. While it may be tempting to purchase the bare minimum policy because of a limited budget, it will not offer the level of protection you would find in another type of policy.

Type of policy What’s covered
HO-1 policy This type of policy is the bare minimum of coverage for home perils such as fire, theft and vandalism. HO-1 policies only cover specifically named perils and excludes liability coverage.
HO-2 policy An HO-2 policy provides a little more coverage than an HO-1 policy and also includes a small amount of liability protection. It only covers named perils but the coverage extends to detached structures, personal belongings and additional living expenses.
HO-3 policy This is the most common type of homeowners insurance policy and it includes the basic coverages you’ll find in an HO-2 policy, but it will cover the physical structure of your home from anything that is not explicitly excluded.
HO-4 policy Designed for renters rather than homeowners, an HO-4 policy includes coverages like theft, explosions and additional living expenses, but coverage does not cover the structure you live in – it only covers your personal property and belongings.
HO-5 policy This type of policy covers open perils for both your dwelling and personal property. That means that it provides coverage for any peril that is not specifically excluded (such as damage from neglect).
HO-6 policy An HO-6 policy provides coverage for condominiums and has specific distinctions to account for what is covered. These policies, also known as condo insurance, typically cover the interior of your unit, personal property, personal liability, guest medical payments and loss of use.

Additional home insurance coverages

Standard homeowners insurance policies offer protection for the structure of your home, its covered contents and liability. However, you may either find yourself with insufficient limits or with damage that is excluded entirely from your existing policy. Additional policies can vary in price, but may make a huge difference in filling potential gaps in your coverage. Two key types stand out:

  • Flood insurance: Flood insurance is not included in most home insurance policies. It is separately covered by policies placed with the National Flood Insurance Program (NFIP) and some private companies. While flood insurance is generally available to anyone, it is most prevalent in high-risk flood zones. The states with the highest number of flood policies in 2019 were Texas, Louisiana, Florida and California.
  • Umbrella policy: “[Umbrella policies] supplement your personal liability coverage and are a more cost-effective way to increase liability limits,” Harper said. He points out it might make sense to consider an umbrella policy if you have a high net worth, are a landlord, do a lot of community volunteering, regularly host parties or gatherings or have an attractive nuisance.

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

Frequently asked questions

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