How Home Insurance Rates Are Determined?

How Home Insurance Rates Are Determined

The premium of your home insurance not only depends on how much coverage you are taking but also there are some other factors present here. In the following article, we are going to discuss the other factors that affect how the home insurance rates are determined.


How Home Insurance Rates Are Determined?

The factors that affect how home insurance rates are determined are:


#1: Which insurer you are choosing

There are many types of insurance companies available in the market. You should check all the insurance companies’ annual premiums before choosing one. When you compare the premiums of the insurance companies’ we can see that some companies’ charge twice as much as others for the same coverage. So don’t hurry before choosing the insurance company. It may save you thousands of dollars.


#2: Your credit rating

Your credit rating plays an important part in determining the rate of premiums of your home insurance.  Apart from California, Hawaii, Maryland, and Massachusetts, every other state checks the credit rating of the customer before offering the insurance. If you have a good credit score then you have to pay less premium. But if you have poor credit rating the premium will be much higher. The reason behind it is the amount of risk the company is taking on you.


#3: Claims History

The third factor that can affect how home insurance rates are determined is your claim history. If you have claim history it can affect the premium. Sometimes if you have too many claims the insurer may refuse to renew your policy.  They will term you as a high-risk customer. In this scenario, the premium rates can also go up by many folds.  So try to limit your claims. Don’t claim minor problems. Unless it is necessary, try to avoid the claim. In some cases, the insurers offer a discount to the customers who have no claim history in a two-to-five-year period.


#4: The place where you live

The place of your living also determines the rate of premium. Insurance companies generally divide areas based on losses. The factors that affect the premium are the roll of the police and fire department, the rate of crime in that area, etc.


#5: The proximity of Fire Station

The rate of premium of your homeowners’ insurance will be much less if your home in within 1000 feet of a fire hydrant or within 5 miles of the fire station. If your home is on these types of locations then your home is safe. It will reduce the rate of premium as well. If it is not then the rate of premium will be much higher.


#6: Type of building materials used in house

Insurance companies consider houses made of concrete, metal as superior quality. The reason is that they are not combustible. In this type of house, both the interior and the exterior construction are build using non-combustible materials. In masonry construction, the exterior is made by bricks, stones but the floor and roof use combustible materials like wood, vinyl. Insurance companies generally offer fewer premiums for superior construction than for masonry. As it carries less chance of damage.


#7: Deductible

The next factor that determines home insurance rates is the deductible. The deductible is the amount of money you will pay before the insurer pays for your losses. Usually, it is one percent of your coverage. Most of the insurance companies charge around $1000 to $2000. They also allow you to increase the amount of deductible above the basic level. With the increase in the amount in a deductible the rate of premium also goes down. As you have higher deductible there is less chance that you will ask for frequent or small claims. You should choose the deductible that you can afford.


#8: Age of Your Home

The age of your home is also a factor in determining the rate of premium of the insurance. The companies offer you a discount if your house is less than 10 years old.

Also read: A Thorough Guide To Home Warranty vs Home Insurance!

You will get a higher discount if your house is brand new. The rate of discounts goes down as the age of the house increases. If it is more than 25 years old then they won’t offer you any discount. The rate of premium is also higher for old houses. So it is very important when you are insuring your house.


#9: Dual-Policy Discounts

Buying multiple insurances from the same insurer attracts a discount. Suppose you have car insurance from an insurance company. So if you are thinking of buying homeowners’ insurance from the same insurance company there is a chance they will offer you a discount. It can be either in auto insurance or it can be in house insurance. Some insurance companies can also offer a discount on both insurances. But don’t always go for a discount. First, check if the company is overpricing or not.


#10: What you have in your home

The insurance company is going to charge more if you have the following items in your home. Like if you have:

  1. A fireplace
  2. A pool, trampoline
  3. An electrical system without a circuit breaker
  4. A roof made of wood shingles or it is more than 20 years
  5. A furnace which is more than 20 years

If you have these items in your home it is going to attract more premiums.


#11: If you own a dog

Another factor that affects how your home insurance rates are determined can be if you have a dog! If you are an owner of dogs then some insurance companies will charge you more. The reason behind it is the company thinks that the dog can attack strangers. Which leads to claims. Some insurance companies can also remove the damages due to dog bites in their portfolio.


#12: Protective Devices

You are eligible for a discount if you have devices that protect your home. Like fire alarm, burglar alarm, fire extinguisher, deadbolt lock, etc. It will save you up to a two percent premium.

Also read: Mobile Home Insurance: Do You Really Need It?

If you want more discount then you should have a house with a full sprinkler facility.


#13: If you are a smoker

If you are a smoker or you have some at your home who smokes then there is a chance that the insurance company will ask for a higher premium. As smoking can cause a fire there is always a risk. Due to this the premium rate slightly goes up.



These above-mentioned factors play a role in deciding how the home insurance rates are determined. Keep these points in mind. Consult with your agent or insurance advisor. Clear all your queries and doubts before taking the insurance. Take quotations from different insurance companies or ask your agent to do it on behalf of you. Choose the policy that suits you. It is always wise to check before jumping onto any conclusion. If you like this article please share it with your family and friends. For any clarification please comment in our comment box below.