Components Affecting Your Dwelling Insurance Charge –

The average premium for homeowners insurance in the US is $ 1,312 per year. However, homeowners are likely to find a large variance in the country averages. For example, in Oklahoma, you might have an annual premium of $ 3,519, while in Hawaii you might only see premiums averaging $ 376 per year. So what is the impact on home insurance tariffs? Each insurer assesses the risk of writing a particular home, including estimating the number of claims likely to be payable.

Weather is just one of the factors influencing home insurance rates. Oklahoma, at the heart of Tornado Alley, is a high risk state facing higher average premiums. However, other locations, such as Hawaii, may not face as many or the same significant natural disaster threats. While the likelihood of catastrophic natural disasters is an important factor in home insurance premiums, it is far from the only factor.

Factors That Affect Your Home Insurance Tariff

In order to set reasonable premiums for a policy, Earl Jones of the Earl L. Jones Insurance Agency in Sunnyvale, Calif. Stated that "home insurance companies use a cost estimator to determine the initial replacement cost of the home."

Jones added that an important part of the process is determining how the insured's home compares to others. The replacement value is "typically based on the national average of similar homes," said Jones. “There are three to five different classifications of houses: Standard, Average, Above Average, Premium and Custom. The tool pulls data from the county records to analyze the specific house components – the number of bedrooms / bathrooms / square material / year of construction, etc. – to determine how much it will cost to rebuild the house from scratch. "

Replacement costs

Sean Harper, Kin Insurance co-founder and CEO, stated that the more it costs to replace your home, the more coverage you are likely to pay.

"The replacement cost takes into account many variables, such as the total area of ​​your home, local construction costs, the construction of the home, its unique features and architecture, the number of rooms, and so on," said Harper. "That said, you can get a rough estimate of the replacement cost by multiplying the square footage of your home by the local construction cost per square foot."

Harded added that "people often mistake the market value of the home for its replacement cost." The numbers may match but cannot be guaranteed as the cost of replacing your home will either be higher or lower than its current market value. Because the market value explains how intangible features such as neighborhood, view, property and proximity to local amenities affect the attractiveness of a property for buyers. In contrast, replacement costs only relate to the expense of rebuilding a home after a loss.

Credit history

Like bank lenders, many insurers check the creditworthiness of homeowners to assess the level of risk taken. A good credit rating could lead to their perception of being less risky and interest rates are often lowered accordingly. Insurers often use loans as an indicator of the likelihood that the premium will be paid on time. In addition, insurers believe that homeowners with poor credit ratings are more likely to make claims under their policy than homeowners with very good credit ratings.

"Most insurance carriers use credit as part of the tariff setting process in states that allow it," said P.J. Miller, partner and independent insurance agent at Wallace & Turner Insurance in Springfield, Ohio. "While it's supposed to be a 'part' of the tariff calculation, most believe it plays an important role in determining the price of home insurance."

Claims history

Insurance companies often base their decisions on behavioral patterns. If a homeowner reports a claim, the home contents insurance assumes that they are more likely to make further claims in the future. The history of filing a number of claims could indicate an even greater risk for the insurance company.

Miller went on to explain how the type and number of claims you make can affect tariffs. "Even if claims were made in a previous home, this story will follow you," Miller said.

marital status

Marriage can affect tariffs on a number of insurance policies, including household items and auto. Insurers usually charge married couples lower tariffs because of the assumed lower risk. The graphic below shows the general way insurers think when considering marital status in tariffs.

marital status Amount of commonly filed claims details Effects on premiums
Married Less than average Statistically, married couples have fewer claims than unmarried people. These couples are considered to be more stable and “settled” than singles. Likely to see lower prices
singles More than average Single people have more demands. This group is also perceived as being less responsible and more risk-taking. Probably higher rates

Age of home

If you live in an older house, or if you live in a house that is likely to need a lot of improvement when remodeled, you will likely pay a higher home insurance premium.

Wallace & Turner Insurance's Miller explained that age and location are important factors in determining the cost of rebuilding a home. "Insurers will assess the difficulty of replacing or repairing your home to determine tariffs," Miller said. He added that home improvements like replacing the roof, upgrading your electrical, heating or plumbing systems, and installing a security system "can all have a positive impact on your rate when the likelihood of loss decreases".

Miller noted that your insurance agent should be informed of any upgrades to your home.


A household insurance deductible defines the amount that you pay out of pocket. Agreeing to a higher deductible lowers your premium, but can also result in higher costs in the event of a claim.

"Many insurers also offer zero deductibles, which means they'll cut your deductible if you haven't been eligible for a period of time," Miller said.

Surprising factors that affect your home insurance tariff

While the above factors are important when it comes to building a home, history, and financial background of the insured, there are many other factors that are often overlooked that are taken into account when setting tariffs.

  • Distance to the water: "The closer a home is to the coast, the more likely it is to suffer flooding or hurricane damage, and that tends to increase insurance costs," said Harper of Kin Insurance. Says Harper, “Flood zones play a key role in whether or not you need flood insurance. If you have a government-secured mortgage, such as an FHA loan, and your home is in a high-risk zone, you will need to get flood insurance.
  • Assertion of minor claims: From the point of view of many insurance companies, even a small claim report is an indicator that you will probably report more claims in the future, possibly also larger ones.
  • Living near a fire station: Wherever you live, the premiums you pay for home insurance are likely to be influenced by your home's proximity to a fire department. The closer you are to a fire station, the greater the likelihood that a fire can be put out quickly and serious damage or complete destruction of your home averted. The insurance industry generally uses the Insurance Services Office (ISO) Fire Suppression Rating Schedule (FSRS) to assess fire safety. On the 10-point scale, the lower the number of points, the safer the house is from the risk of fire. If your home is more than five miles from the nearest fire department, the rating will automatically be set to 10.
  • Dog breed: Pets and dog breeds can also affect your prices. Harper explained that "some companies simply increase their tariffs to accommodate the increased risk of being bitten." Certain dogs can even be completely excluded from home insurance. "Even if your dog is not a 'restricted breed,' 'a history of bite could also affect your rate or ability to receive coverage," said Harper.
  • Attractive nuisances: If you have attractive nuisances or things on your property that could be potentially dangerous and attractive, especially to children, you can also have higher home insurance rates. As Harper points out, attractive nuisances include "swimming pools, trampolines, tree houses, fountains, fountains, swings, construction projects – anything tempting that could attract intruders or increase the risk of injury to an invited guest."

This is just a snapshot. There are tons of additional factors that can be included in your home insurance, making it difficult to determine exactly which factor affects insurance premiums the most.

For example, Jones of the Earl L. Jones Insurance Agency mentioned several circumstances, including living in an area prone to forest fires, a trampoline, and a swimming pool that could affect rates. Various activities in your home, such as Operating your home as an Airbnb, for example, can also be a factor.

Additional household insurance

The usual household contents insurance offers protection for the building structure, the insured contents and the liability. However, you may either be faced with insufficient limits or damage that is completely excluded from your existing policy. Additional policies can vary in price but can make a huge difference in filling potential loopholes in your coverage. Two key types stand out:

  • Flood insurance: Flood insurance is not included in most household insurance. It is covered separately by policies from the National Flood Insurance Program (NFIP) and some private companies. While flood insurance is generally available to everyone, it is most widespread in high risk areas. The states with the most flood protection measures in 2019 were Texas, Louisiana, Florida, and California.
  • Umbrella policy: "(Umbrella policies) complement your personal liability insurance and are a more cost-effective way to increase liability limits," said Harper. He advises that if you have a large fortune, are a landlord, do a lot of community volunteering, have regular parties or gatherings, or have an attractive nuisance, it might make sense to consider an umbrella policy.

You may want to add more options. You can speak to your insurance company and agent about optional coverage and additional policies to create a robust insurance package.

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