Factors Impacting Homeowners Insurance Rates

Factors Impacting Homeowners Insurance Rates

Find Cheap Homeowners Insurance Quotes in Your Area

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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, but now you can also get an accurate quote online in about five minutes. Online is the best place to start when you’re shopping for home insurance.

You already know most of the information an insurance company needs 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 insurance quote calculators ask for below and explained how they use that information to calculate your quote.

The cost of your homeowners insurance is determined by:

Factors that impact your homeowners insurance rates

Here are some examples of what home insurance companies factor into your quote:

  • Replacement cost
  • Age of the home
  • Square footage of the home
  • Number of primary inhabitants
  • Construction type (materials used)
  • Roof type
  • Fire protection
  • Area claim history
  • Personal claim history
  • Pets
  • Owner's credit score
  • Owner's insurance score
  • Security or alarm system
  • Fire alarm system
  • Deadbolt locks
  • Crime in a neighborhood

Estimated replacement cost: The most important number to get right

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. Higher deductibles generally mean lower premiums. In fact, 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 percentage of your coverage. If your policy is worth $300,000, then a 1% deductible would equal $3,000.

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 scores. The credit check, called a "soft pull," 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 policyholder’s premium.

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, and are more resistant to damage from hail or wind, than ones made of asphalt.
  • 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 online quote calculators 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 if you live in a high-risk area or want to take extra precautions to protect the value of your home. These additional coverages 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 whether you need coverage.

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