7 Factors That Affect the Cost of Home Insurance

 

Homeowners insurance underwriters have a long list of factors to consider when writing a home insurance policy, all of which go into a formula for determining policy premium costs.  Two of the major factors determining the cost of your home insurance includes the geographic location of your home and how much it would cost to rebuild your home in the event that it's totally destroyed by a covered peril such as an all consuming house fire.

Here is a list of factors that affect the cost of your home insurance:

1.  Location, location, location.  Where your home is located is one of the primary determinants affecting your home insurance premium costs.  In states like Florida or Louisiana, where natural disasters are prevalent, premium costs may be as much as three times as expensive as costs in areas statistically safer from natural disasters such as Oregon or Utah.  Home insurance in North Carolina is the 30th least expensive of the 50 U.S. states.  Other location factors show policies are typically more expensive in urban rather than rural areas and in locations with statistically higher crime rates.
2. Home value and rebuilding costs.  Coverage for repairing or rebuilding your home is a major factor in the price of your home insurance.  Higher priced homes cost more to insure because they generally cost more to repair or rebuild.  These repair/rebuild costs will depend on the size of your home and local construction prices.
3. You'll pay more for more coverage.  Higher levels of coverage bring higher policy premiums.  The value of your personal possessions may be higher than standard policy limits and you may want to raise your limits, making your coverage more expensive.  Liability protection on your policy may be limited to $100K, but experts agree you may want to increase this limit to cover the total amount of your assets.  Consider an umbrella policy for extra protection.  This will add to the cost of your coverage.
4. Age and Condition.  An older home may be more expensive to insure.  Outdated electrical, plumbing and heating/cooling systems may be seen as higher risks by insurers.
5. Your credit history.  Many insurers use your credit history data when underwriting your policy.  Poor credit may mean higher insurance costs.
6. Deductible Amount.  Choosing a higher deductible amount should translate to a lower premium amount.
7. Ask about any discounts available from your insurer such as a bundling discount.  Other discounts may also be available.