Factors Impacting Homeowners Insurance Rates

Factors Impacting Homeowners Insurance Rates

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Consumers can still walk into the office of an insurance company or speak to an agent on the phone to get a quote, you can now get accurate quotes online in about five minutes. This is the best place to start when shopping for home insurance.

You will know most of the information required for the companies to create a custom quote for you. Some things you might not know off the top of your head but can easily figure out. We’ve broken down the information the calculators ask for below and explained how they use it to calculate your quote.

The cost of your homeowners insurance is determined by:

Estimated Replacement Cost: the most important number to get right

Here we detail a few things that affect how home insurance companies calculate your rates, including replacement cost of your dwelling to the area's claim history

The estimated replacement cost is the amount of money it would cost to build the exact same home where it stands now.

The most important number and piece of information when determining the cost of homeowners insurance is the estimated replacement cost of the home. This is different from the market value of the home, which includes other things such as the value of the plot of land. Every online quote calculator will ask you for this number.

If you don't know the replacement value of your home, many companies, like State Farm, use tools on their online quote forms to estimate the replacement value of your home once you enter your address. Companies typically send their own appraisers to estimate the replacement cost in person. It could be a good idea to consider hiring an appraiser, too.  

Most appraisals cost between $200 and $400 but they can be as high as $500 or more, depending on how far the appraiser must travel to your property. Getting your own assessment gives you a basis of comparison when your home insurance company comes back with their cost.

The deductible you choose

One of the ways you can significantly impact the cost of your premium while using a quote calculator online is by increasing your deductible — the amount you pay before making an insurance claim. We found that increasing your deductible from $500 to $1,000 could reduce the cost you pay for homeowners insurance by 13%.

Choosing the right homeowners insurance deductible can be tricky. The higher the deductible you choose, the lower the cost of the premium quoted. However, selecting a deductible that's too high will restrict the property losses you can make claims on.

Some home insurance companies require you to select a deductible that's represented as a percent of your coverage. If your policy is worth $300,000, then a 1% deductible would equal $3,000. These deductibles still affect your price the same despite looking differently: higher deductibles mean lower premiums.

Other information used to calculate your quote

Calculators typically give you the option to provide your social security number, which companies use to check your credit and insurance score. The credit check is called a “soft pull” and is a less detailed credit check than most and will not affect your credit score.

Your insurance score, like your credit score, is determined by your credit report and used by companies to calculate your premium. Scores and the frequency of claim filings are related so insurance companies use the information to determine the appropriate cost of the premium each policyholder owes.

Additional information about the insured home is used as well. Much of it is listed in the box with this guide. Your homeowners insurance premium may be influenced by:

  • Your home's square footage: Larger homes tend to cost more to insure because there would be more space to repair if it were damaged.
  • The material of your home's roof: Clay and concrete roofs last longer than ones made of asphalt, and are more resistant to damage from hail or wind.
  • Your property's construction type: A steel-beamed home is less likely to suffer extensive fire damage than a wooden-frame structure.
  • The type of dog you have: Your personal liability coverage could be impacted if you own certain types of dogs, like a pit bull or doberman, which tend to generate more homeowners claims for biting.
  • Special on-property risks: Trampolines and swimming pools can raise the cost of your homeowners insurance.

Costs that quote calculators do not include

Almost all of the quote calculators online generate some version of an HO-3 policy form, the most common type of policy purchased. For most people, this is an adequate amount of coverage and protection, and the quote delivered is going to be close to the premium they can expect to pay. However, some homeowners may need more coverage.

Standard home insurance policies do not cover damages or loss due to earthquakes, flooding or sinkholes. You might need a separate policy to protect you and your home from one or more of those perils.

Even if you don’t think so, you might need one of those coverages which can be expensive and, in some cases, dramatically increase what you can expect to pay in premiums to protect your home. Reference our guides specifically to those perils to determine if you need coverage.

Chris Moon

Chris is a Product Manager for ValuePenguin with years of experience in addressing critical questions about mortgages and homeowners insurance. He spends his time evaluating insurance providers and policy features to understand where consumers might find the most cost-effective coverage. Chris has contributed insights to the New York Times and many other publications.

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.