10 surprising things that impact home insurance costs

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10 surprising things that impact home insurance costs

The cost of homeowners insurance is based on more than how big your home is, where it’s located or how much stuff you own.

Some insurance companies just charge more than others for the same quality and level of insurance coverage, which is why it’s so important to shop around for coverage.

But there are some hidden factors that can impact rates in a big way. Here are 10 surprising things that affect your home insurance costs.

1. Replacement cost is king

Knowing your home’s market value is useful for setting a sales price, taking out a second mortgage or disputing your property taxes. But it doesn’t really matter when it comes to homeowners insurance.

Insurance rates are actually based on the home’s replacement cost, or the amount it would cost to rebuild your home in the event of a total loss. It doesn’t take into account the value of the property itself, or how big your front yard is — just the cost of construction materials and labor.

The market value of your home is usually higher than its replacement cost, so be certain you’re getting quoted on the latter, not the former.

2. Small claims have a big impact

You may not think much of the small insurance claims you filed in the past, but your insurance company sure did.

“Small claims can have a pretty significant impact on rates, especially if there are more than one,” said Jonathan Ruggiero, property and casualty sales manager at Policygenius. “Two small claims can be just as bad if not worse than one large one.”

Here's what to do if your rate rises.

One of Ruggiero’s recent clients had filed three claims in the last two years for fairly miniscule amounts. But they were unable to qualify for a standard homeowners insurance policy due to the frequent claims history.

3. Fido may be driving up your rates

While it may be surprising to get asked if you have a dog while shopping for homeowners insurance, certain breeds actually have an enormous impact on your rates, said Fabio Faschi, property and casualty lead at Policygenius.

Dogs are all objectively good boys, but insurance companies aren’t fond of breeds with aggressive reputations (like pit bulls and rottweilers). If you have what insurers deem a “dangerous” breed, you could get higher rates. The insurer may even exclude your breed from coverage.

4. Attractive nuisances = higher premiums

Trampolines, tree houses, pools and the large aluminum sculpture in your front yard that you made for Burning Man all qualify as “attractive nuisances.” It’s defined as any potential liability on the property that increases guests’ injury risk.

You’re also on the hook if a child wanders onto your property and falls in your pool. If your pool is in a secured enclosure, the insurer will take that into consideration and potentially lower your rates.

5. The single life could be costing you

Your marital status, profession and how often you’re in your home all affect your rates, said Faschi.

Insurance companies tend to view a married couples as far less risky to insure, because the chances of someone being home are higher. Having people home means there’s someone to alert the authorities in the event of a break-in or fire.

6. Insurance companies do credit checks, too

Insurance companies typically will use your credit history to set your rates. According to the National Association of Insurance Commissioners, the typical credit factors insurance companies look for are:

  • Your payment history
  • How much credit card debt you have
  • How recently you’ve applied for new credit
  • How long you’ve had an open line of credit
  • Your credit mix (how many different types of credit you have open)

Not happy with your score? Here’s how to give it a boost in 30 days or less.

7. Proximity to a fire station or hydrant is important

In the insurance application, you’ll be asked about your home’s distance from a fire station or fire hydrant.

Simply put, fire stations and hydrants protect your home in the event of a fire. The closer you live to one, the lower your home insurance rates will be.

8. Home-based businesses need additional insurance

While your home insurance policy protects your personal belongings, it has low coverage limits when it comes to business property. Business liability isn’t covered at all.

If you run a business out of your home, you’ll need additional coverage for your work inventory and liability, which you can typically add to your homeowners insurance via a policy endorsement. That additional coverage could cost you a considerable amount.

Here are some other common homeowners insurance questions.

9. Remodeling can lower your rates

“It may seem like common sense, but be sure to let your insurance company know when you make updates to your roof, electrical or plumbing,” said Ruggiero.

Homes with old roofs, a history of plumbing issues or aluminum wiring are going to have higher insurance costs than updated or newly renovated homes.

If you upgrade any built-in appliances or make any structural improvements, be sure to let your insurance company know — it could result in lower rates.

10. Your deductible could just be too low

Deductibles are often overlooked cost factors in homeowners insurance. If you’re the type who doesn’t sweat the small stuff, or your home is in a relatively safe area with mild weather, consider raising your deductible.

Want to learn more? Here are some hidden costs of homeowning.

Image: Chris Jongkind