Home Insurance Cost Factors

How your home insurance rate is calculated

If you’re shopping for home insurance you’re probably wondering how your rate will be determined. There are a variety of factors that go into calculating your home owner insurance rate. These factors include how old the home is, your financial background, what home insurance limits you require, where your home is located, and more. To secure the right coverage for the best cost, it’s important to know how each factor impacts your overall home insurance rate.

Use the below to get an assessment of how each factor may impact your yearly home insurance rate.

Home Insurance Coverage Limits

Home insurance policies can vary greatly, just like each home is unique. There are many aspects to home insurance coverage that you should understand.

Dwelling Insurance (hazard insurance) covers the actual structure of the home against perils covered by the policy. The amount of dwelling insurance you may need is based on the cost to replace your roof, walls, and other physical parts. Your dwelling insurance limit is used to calculate the base limits of your policy.

Personal Property Insurance is the portion of your home insurance that covers destruction or damage by perils covered by your policy to your belongings. This can include coverage for items like clothing, electronics, furniture, and more. Personal property insurance covers between 20% and 50% of your dwelling insurance.

Actual cash value and replacement cost are two options you’ll need to consider when purchasing home insurance. Your home insurer can pay out on your claims in two ways, with actual cash value or replacement cost. Replacement costs can be higher for an insurer, so that type of coverage costs more.

Liability insurance covers you in the event that someone gets injured or suffers property damage due to you or a family member. It could also cover injury by your pets. The recommended amount of liability insurance coverage is between $300k and $500k. The difference in your premium costs is not much between the two amounts, so compare rates.

Deductibles can go up or down depending on how much you’re willing to spend on premiums. Common deductible amounts offered range from $500 and $1,000. People tend to go with the $1,000 deductible more often.

Home Age and Quality

The age of your home and the quality of the materials used to build it will impact your home insurance costs. A brick home could result in lower premiums than homes made of wood, because there is a lower fire risk, for example.

Location

When buying home, it’s all about “location, location, location,” but that’s also true when it comes to home insurance. Your home’s proximity to emergency services can impact your home insurance rates. If you live in an area known for natural disasters, this can negatively affect your home insurance rate. The crime in your neighborhood could also impact your insurance rate.

Credit History

Your credit history can impact your home insurance rate in some states. However, states like California, Maryland, and Massachusetts have made it illegal to charge more for home insurance based on credit scores.

Home Security and Safety

If you have installed a home security system, sprinkler system, and/or carbon monoxide detectors you could bring down your home insurance costs.

Save on home insurance now by requesting a free quote from Insurance Best Prices.