7 factors that affect homeowners insurance rates

The location of your home, its construction and its condition all play a part in how much you pay for home insurance.

Insurance companies assess risk in different ways, so it’s important to compare homeowner insurance quotes to be sure you get the most affordable rate.

“It’s about knowing your risk, and what you can do to minimize that risk,” says Lynne McChristian, Florida representative for the Insurance Information Institute.

Here are seven factors that influence your home’s insurance rates.

Age and construction of your home

Exterior view of a home. The age of your home and how it was constructed are big factors in your home insurance rates. Even your home’s previous claims history can play a part in setting rates.

“Size, location and new-ness of the construction can all affect the cost to rebuild a home; and that affects the coverage needed,” explains Allstate spokesman Justin Herndon.

And Janet Ruiz, a California representative for the Insurance Information Institute, says it’s important that insurance buyers estimate the true cost of rebuilding their home if it should be damaged.

Would the house be difficult to replace or repair? These are all things to consider before buying and insuring a home.

“Many insurance companies will have some kind of tool you can use and it will give you an approximate cost to rebuild,” Ruiz says. “The second way is to check with a local contractor in your area to find out what the average building costs are. It’s good to do both.”

It is likely that people with older homes will pay more to rebuild their homes if they are damaged or destroyed and that’s why they face higher insurance rates.

“It’s possible that an older home may cost more to insure, as the materials [and] features in older homes can be more costly to repair and replace, things like plaster walls, ornate moldings, stained-glass windows, hardwood floors,” Herndon explains. “That said, updates to roofs, plumbing, electrical and heating may positively impact the rate for an older home, since these things being upgraded reduce the likelihood of loss. Anytime you make a home improvement, you should talk to your insurance agent to be sure you’re covered and realizing any savings that may come along with the improvement.”

Other home construction factors can include whether the home is brick or wood, the age of the electrical system and whether the home has smoke detectors, a security system and a sprinkler system.

Having a swimming pool, hot tub or outdoor spa

Rear exterior and swimming pool of contemporary home. These nice-to-have features are each going to increase your home insurance rates because you will need additional liability coverage in case someone is injured, according to Ruiz.

“A swimming pool or other special feature could affect your liability insurance,” Ruiz says.

Most homeowner policies include a minimum of $100,000 of liability protection, but the Insurance Information Institute recommends pool owners increase their liability amount to $300,000 or $500,000. This will add between $50 and $75 per year to your home insurance bill.

And the Insurance Information Institute suggests homeowners with swimming pools and other special features, such as spas, consider an umbrella policy to provide additional protection in the event someone gets injured on your property and decides to sue. A $1 million umbrella policy costs between $200 and $300 per year.

Condition of the roof

Aerial view of house roofs in suburban neighborhood. How good a shape a home’s roof is in will play a factor in your homeowner’s insurance.

“The condition of the roof affects your homeowners policy. New/newer roofs will typically see a reduced premium, while homes with older roofs will pay more,” Herndon explains. “Anytime you make a home improvement, especially replacing or repairing a roof, you should talk to your insurance agent to be sure you’re covered and realizing any savings that may come along with the improvement.”

Ruiz concurs adding the older roofs may have difficulty withstanding wind and hail.

“If you have a new roof, you’re not going to have roof losses,” Ruiz explains. “A newer roof is preferable.”

How close your home is to a fire department

Fire truck parked in the street of a historic district in Alexandria, Virginia, USA.  If you live near a fire station, you’ll pay less of your home insurance. Homes that are located near permanently staffed fire departments usually cost less to insure, according to the Insurance Information Institute. And that’s also true for homes located near fire hydrants.

Urban and suburban homes usually get better ratings for fire protection than rural areas.

Having the fire department nearby will help to keep your home safe in case of fire. And it will also help to lower your home insurance rates, a win-win.

How close your home is to coastline or body of water

. According to the Insurance Information Institute, homes located near the coast or coastline are generally more expensive to insure than those that are inland. And homeowners who live near the coastline may have a separate deductible for hurricanes or need a separate windstorm insurance policy for their homes.

But Ruiz adds having a home near any body of water could affect home insurance rates because of the risk of flooding.

“Any body of water could mean flooding,” Ruiz says.

Flood damage is not covered by standard home insurance policies. You may want to purchase separate flood insurance even if your home isn’t considered a high-risk for flooding. Insurance Information Institute estimates that 25 percent of flood insurance claims come from homes that are not in high-risk areas.

Flood insurance can be purchased through the National Flood Insurance Program, which his run by the Federal Emergency Management Agency.

Your credit history

Close up of Credit History form.  In all states except California, Hawaii and Massachusetts, insurance companies can use your credit history when creating rates. Each insurance company has its own credit formula, which is different than a credit score.

Here is a typical example of factors insurers review, and how those factors are weighted in a credit-based insurance score, according to the National Association of Insurance Commissioners:

  • Payment history: 40 percent: How well you have made payments on your outstanding debt in the past.
  • Outstanding debt: 30 percent: How much debt you currently have.
  • Credit history length: 15 percent: How long you have had a line of credit.
  • Pursuit of new credit: 10 percent: How much you’ve recently applied for new credit.
  • Credit mix: 5 percent: The types of credit you have (credit card, mortgage, auto loans, etc.)

Your claims history

Man looking at claim documents. You may have moved into a new home, but the claims you filed at your previous residence will follow you.

“There’s a significant correlation between claims that are made and future additional likelihood of claims being made,”  says Chris Hackett, senior director of personal lines policy at the Property Casualty Insurers Association of America.

You can request one free copy of your C.L.U.E. (Comprehensive Loss Underwriting Exchange) Personal Properly report, which includes all the claims you’ve filed in the past seven years. The report includes date of the loss, type of loss and the amount paid out to cover the claim. McChristian says the amount of the claim may be less important than the reason for the claim.

You can order your copy of the report online at or by phone at 1-866-312-8076.

As you can see, insurance companies use multiple factors when setting your home insurance rates. These factors point to the importance of shopping for home insurance. If you’re not getting quotes from multiple insurance companies, you may be paying too much for your home insurance.


Lucy Lazarony

Susan Ladika contributed to this article.


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