What Are the Factors That Affect Your Home Insurance Premiums?

Home insurance policies differ from person to person. There are determining factors that will influence your home insurance premiums. These factors can include things such as:

Your Personal Information

Your credit history, claims history, and marital status can all contribute to your premium costs:

Credit history: In most cases, insurance companies will consider your credit history when calculating your home insurance premium. Insurance companies will look at how good you are at making payments and how much debt you currently have. Typically, the better your credit score, the lower your insurance premium.
Claims history: Your insurance company will assess any claims you’ve made at previous residences when determining your premium. The type and frequency of the claims you’ve filed can lead to higher premiums.

Your Policy

The following are policy items that have the greatest impact on the amount you pay:

Type of coverage: There are three different coverage options you can purchase for your home insurance policy:
- Actual cash value will replace your home or damaged belongings, minus depreciation. Depreciation is the decrease in an item’s value over time due to wear and tear.
- Replacement cost pays to repair or replace your home or belongings without any deduction for depreciation.
- Extended replacement cost is the most expensive coverage option- but, it will pay to rebuild your home even if the replacement cost exceeds your policy limit.
Limit: Your policy limit is the maximum amount your insurance will pay in case of a covered loss.
Deductible: Your deductible is the amount you pay in order for your insurance coverage to kick in to help cover a loss.
Additional coverage: You may purchase additional coverage for items or circumstances that may not be fully covered under a standard home insurance policy. Possible circumstances may include keeping more expensive items at your home (e.g. boats, fine art, or jewelry), or living in an area more susceptible to disasters that aren’t already covered under your existing policy.

Your Home

There are a few factors about your home that may affect your premiums:

Home value: Your home’s value can also influence your insurance cost. Typically, the greater the value of your home the higher your insurance premiums will be.
Age of property: Older buildings tend to have costlier premiums since the materials they’re built with may be more expensive and harder to replace. For example, if you have stained-glass windows in your home, that would cost more to replace than a standard window since stained-glass windows are far less common.
Remodeling: Any improvements made to your home will increase your premiums since renovations typically increase the value of your home- therefore increasing your home’s replacement costs. Although, repairs made to your roof, electrical, or plumbing that increase safety or efficiency may allow you to receive discounts that can reduce your premiums. Always alert your broker about new home remodels to ensure they can be replaced if damaged or destroyed.

2023 Home Renovation Report Quick Facts

61% of US homeowners are planning renovations to their homes in 2023 with one in four (25%) planning major renovations.

34% of US homeowners planning major renovations in the next year do not plan to or do not know they need to tell their insurance company about the changes made to their home.

Source: Hanover Insurance

Location

If your home is in a high-risk area, you commonly pay more for your home insurance. Homes that are considered at a higher risk for damage or loss are those located near coastlines farther away from response teams (fire or police departments) or are in areas that are more susceptible to natural disasters.

Home-based Businesses

You may need additional coverage if your home is being used for work. Most standard home insurance policies will provide some liability coverage and limited protection for business equipment you may keep at your home, but it may not be enough. You may purchase additional coverage to add to your home insurance policy to ensure you are sufficiently covered.

If a homeowner adds space to their property for a home office without discussing coverage needs with their insurance agent, the home’s value would be based on an outdated assessment. If an accident occurred and a claim was filed to recoup the loss on the updated space, the insurance company may not be able to fully reimburse the claim based on the coverage limits provided.

Attractive Nuisances

Attractive nuisances are potentially dangerous objects that could attract people, including children, onto your property. The most common attractive nuisances are pools and trampolines- if you have either on your property, you will pay more for your insurance premium.

Dogs

Depending on your insurance policy, your dog may be covered under your home insurance policy if involved in a liability claim. But, some dog breeds marked “aggressive” may have limited coverage or none at all. The most common dog breeds insurance companies are wary to cover are Rottweilers and pit bulls.