10 factors that affect your home insurance premiums

Your home’s location, its reconstruction cost, and your credit history are all factors that can affect the cost of your homeowners insurance policy.

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Like most insurance products that protect against financial losses, the cost of homeowners insurance depends on how much of a risk you are to insure. You might already know that the size of your home, its location, and its construction style all affect your home insurance premiums. But there are also some lesser known rate factors that aren’t necessarily related to the home itself. 

Every home insurance company evaluates risk in its own way, which is why it’s so important to compare quotes from multiple insurers to ensure you’re getting the best rate possible. Read on to learn about what insurers may consider when calculating your homeowners insurance premiums.

Key Takeaways

  • When setting your policy rates, insurance companies will consider details like your home’s rebuild value, the breed of your dog, and your claims history

  • Insurers provide policy discounts if your home has safety and protective features like central station fire alarms, home security systems, and a fortified roof

  • Consider increasing your home insurance policy deductible to quickly lower your rate

What factors impact the cost of homeowners insurance?

The average cost of home insurance is $1,249 a year, according to the National Association of Insurance Commissioners (NAIC). [1] But you could pay significantly more or less in premiums depending on details about your home, your policy, and your lifestyle. Here are 10 factors that could be affecting your home insurance costs.

  1. The location of your home

  2. The replacement cost cost of your home

  3. Your policy deductible

  4. The condition of your roof

  5. Your dog’s breed

  6. Your claims history

  7. A home renovation or remodeling project

  8. A swimming pool or trampoline

  9. Your credit history

  10. Home safety and protective features

1. The location of your home

Home location is perhaps the biggest factor that insurers use to determine homeowners insurance premiums. Generally speaking, if you live in an area that is prone to natural disasters like hurricanes, tornadoes, or wildfires, you’ll pay more for homeowners insurance since the risk of insuring your home is higher.

Insurers will likely also consider more granular location factors like ZIP code and proximity to fire stations when setting your rates. Policy rates tend to be higher in cities than that of suburban or rural areas, for example, since homes typically cost more to build in population centers. If you live within a particular ZIP code that has a high incidence of property crime, that could also result in higher rates. On the flip side, if your home is less than 100 feet from a fire hydrant or close to a fire station, that could lower your policy premiums. 

2. The replacement cost of your home

Replacement cost refers to the amount it would cost to rebuild your home with construction materials of similar type and quality. Your home’s replacement cost, or rebuild value, is based on factors like its age, square footage, architectural style, number of rooms, and the local rebuild costs per square foot. Replacement cost is not the same thing as market value, a figure which includes the land value as well as the home’s rebuild cost. 

Your homeowners insurance premiums will be based largely on the rebuild cost of your home, and therefore the amount of dwelling coverage you need. Here are the average homeowners insurance rates for five different ranges of coverage.

Coverage amountAverage annual premium
$100,000 to $200,000$956
$200,000 to $300,000$1,114
$300,000 to $400,000$1,272
$400,000 to $500,000$1,482
$500,000 and over$2,148

Average annual premium data based on a 2020 NAIC report

3. Your policy deductible

Another thing that directly impacts your home insurance premiums is your policy deductible amount. When you file a claim, your policy deductible is the out of pocket amount you’re responsible for paying before your insurance company will cover the remainder of a loss. Simply put, the higher your policy deductible is, the lower your insurance premiums will be. 

Though it may be tempting to set your deductible as high as possible, be weary of setting it to an amount that you won’t be able to afford in the event your home is damaged or burglarized. If you’re comfortable paying for smaller losses out of pocket and only filing claims on extensive property damage, opting for a higher deductible is an effective way to save on homeowners insurance.

4. The condition of your roof

The age and condition of your roof can also significantly impact your policy premiums. A newer roof has a greater likelihood of protecting your home against the elements than an older roof. For that reason, insurers will often provide policy discounts if your roof is under a certain number of years old or if it’s constructed with fortified roofing materials. Conversely, if your roof is over 10–15 years old or is just in bad shape, you’ll likely see a policy surcharge. 

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5. Your dog’s breed

Having a dog breed that home insurance companies categorize as “dangerous” can also affect your home insurance costs. Although most dogs are cute and good, certain breeds are statistically more likely than others to attack and bite humans or other dogs. Dog bite liability payouts are an expensive problem for insurers, costing around $50,000 per claim as of 2020, according to the Insurance Information Institute (III). [2]  To limit their exposure, many insurers will either exclude certain breeds from coverage, or charge higher premiums if you have a German shepherd, pit bull, Rottweiler, or another breed that is considered dangerous.

6. Your claims history

Although filing a claim or two within a three or five-year span shouldn’t have too much of an affect on your premiums, be careful not to file too many. Yes, you pay for homeowners insurance to help cover financial losses in the event of unexpected damage or loss, but your insurance company will view a frequent claims record as a big red flag. Theft, water damage, and dog bite claims in particular can have a significant impact on your policy rates.

7. A home renovation or remodeling project

Home renovations and remodeling projects can also impact your home insurance premiums. Adding onto your home, renovating your kitchen, replacing your roof, or building a pool all increase your home’s replacement cost, and more insurance on the home typically means higher insurance rates.

For example, adding a wood-burning fireplace or stove to your home could mean higher rates, since your home is at greater risk of fire.

If you recently renovated your home or plan on doing so, be sure to give your insurer a heads up so that they can extend your dwelling coverage to cover the updates.

8. A swimming pool or trampoline

Having a swimming pool, trampoline, or any other “attractive nuisance” on your property increases your personal liability risk and necessitates higher liability protection limits. The more liability coverage you have in your policy, the higher your rates will be. 

Most insurance companies offer a minimum of $100,000 in liability coverage, but if you have a swimming pool or trampoline, you may want to consider increasing these limits to $500,000 or more. In the event a guest is badly injured while using your trampoline or pool, having that extra amount of protection could be the difference between being able to cover an expensive lawsuit and having to forfeit assets to cover the settlement.

9. Your credit history

Insurance companies will also run their own version of a credit check to determine how much of a risk you are to insure. If you have good credit, you’ll be considered less of an insurance risk than if you had bad credit. The reason for this is simple: Homeowners who have a low credit score are considered more likely to file insurance claims than homeowners with a high credit score. The less prone you are to filing claims, the lower your insurance rates will be. 

→ Learn more about how your credit history affects your insurance rates

10. Home safety and protective features

Home security systems, fire sprinklers, impact-resistant garage doors and windows, water-leak sensors, and other preventative features can all lead to discounts on your homeowners insurance rates. Taking measures to better protect your home and decrease the likelihood of storm damage or burglary lowers your policy cost for a couple of reasons: it directly lowers the risk of damage or loss, and it signals to your insurance company that you provide your property with proper care and upkeep.

Frequently asked questions

Does my age affect home insurance?

While policyholder age doesn’t have a huge impact on homeowners insurance rates, most insurers offer small discounts on coverage for senior citizens. Policyholders who are of the retirement age are more likely to spend more time around the home than younger policyholders who work a 9–5 job. More frequently occupied homes aren’t as prone to break-ins and sustained damage from house fires or burst pipes. For that reason, being a senior citizen can earn you a policy discount.

What factors affect insurance premiums the most?

Factors like where you live, your home’s replacement cost, and your policy deductible generally affect your home insurance premiums the most.

How can I lower my homeowners insurance?

There are several ways to lower your homeowners insurance: raising your policy deductible, informing your insurer if you recently installed a security camera or new roof, bundling your home and auto insurance with a single insurer, and re-shopping your homeowners insurance can all lead to lower policy premiums.

→ Read about 5 home improvements that can lower your home insurance rates

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