6 Factors That May Impact Your Home Insurance Rates

Contrary to what a lot of people believe, home insurance does not follow a flat rate system. Every premium is personalized for every homeowner.

Home insurance rates are primarily based on the location and size of your home, and how much property you own. However, there are other hidden factors that may have a significant impact on the price of your premiums, such as:

1. Your home’s replacement cost

Many homeowners have this misconception that their premiums are quoted according to their home’s current market value. The fact is, your home insurance rates are actually based on your home’s replacement cost or the amount of money it would take to rebuild your home in case of a total loss.

If you want to save money on home insurance, make sure that your insurance rates are quoted based on replacement cost and not on market value. The market value of your home includes the land where your house sits on, which means it’s usually higher than the estimated replacement cost.

To avoid over or under insuring your home, consider hiring a professional appraiser to get an accurate replacement figure.

2. Amount of your insurance deductibles

 Insurance policies come with a deductible, which is the amount you need to pay toward a loss before your insurer pays a claim. Insurance companies often provide their clients with a range of deductible rates to choose from, but opting for a higher deductible can drastically decrease the amount of your monthly premiums.

Most insurers would recommend a home insurance deductible of no less than $500, but if you raise that deductible to $1000, you may be able to save as much as 25% on the overall cost of your home insurance policy.

3. Home remodeling

If you have recently remodeled a room or an area in your house, make sure your policy reflects these new improvements that have added value to your property. It cost you a lot of money to remodel your home, which means that it’s also going to be more expensive for the insurance company to rebuild it.

Updating your homeowner’s insurance to include the changes you’ve made will likely raise your home’s value and – consequently – the cost of your premiums, but at least you know that everything will be covered in the event of a loss. 

4. Age of your house and roofing system

Your home becomes more susceptible to damage from weather, external elements, and internal deterioration as it ages. That said, the newness of the home and materials used for the construction of the house and its roofing system can play a part in setting home insurance rates.

Older homes often cost more to insure because of features that are costly to repair and replace. On the other hand, newer homes with impact-resistant roofing are likely to qualify for substantial discounts.

5. Special amenities in your home

It’s great to have a swimming pool, an outdoor spa, or a trampoline in your own backyard, but these features can increase your insurance premiums because of the additional liability risks that they pose. If someone gets injured while using them, you will be liable for the resulting medical or legal consequences, whether you gave them permission to use the said amenity or not.

For added protection in case of injuries, insurers usually suggest an umbrella policy to homeowners with swimming pools and other special features in their property.

6. Your credit and claims history

In most states, insurance companies weigh in your credit-based insurance score when setting your home insurance rates. The credit formula differs from company to company, but insurers typically review factors such as: payment history, outstanding debt, and credit history length, among others. Those who have better credit standing have a higher chance of getting a more favorable insurance rate.

Additionally, the type and number of claims you’ve filed in the past also influences your home insurance premiums. Frequent claims, even minor ones, can significantly jack up your insurance rates or may even disqualify your from availing a standard homeowner’s policy.

These are just some of the many factors that companies use when determining your home insurance rates. But just because you’ve had one too many claims in the past or live in an old home does not mean you have to settle with paying very high premiums.

Some insurers charge more than others for the same level of coverage. Shopping around and getting quotes from multiple insurance companies can help you find a policy that offers more bang for your buck.


Guest Post by Rachael Harper