8 Factors Affecting Average Home Insurance Cost

There are many things that contribute to the cost of home insurance and determine what the insurance premium for a particular home should be. Here are eight factors that affect the average home insurance cost that homeowners need to know.

  1. Your State: There’s not much that can be done about it once a house is built, but the state that a home is in impacts insurance rates. Some states simply have a higher premium than others, so for those who live near a state border and are about to build or move, a comparison of home insurance rates is a smart idea.
  2. Home Value in Your State: Since home insurance coverage requirements are directly related to the value of a home, the amount that it would cost to replace a home is an important factor impacting home insurance rates. In areas where construction costs are particularly high, home values will be high, meaning that insurance rates will be high. This is particularly true in cities where real estate is in demand or for homes close to popular vacation destinations. Also, homes that are made of expensive materials will cost more to replace than those with inexpensive materials.
  3. Weather: The weather that is most likely to impact a home has a direct impact on the cost of home insurance. For example, in areas prone to natural disasters such as forest fires or hurricanes, home insurance rates will be based upon the possibility that one of these events may strike. In areas with mild weather and little risk of such natural disasters, the rates will not include this premium. This increased premium comes from both the increased cost to build to the standards necessary to withstand these weather events and for the increased likelihood of a weather-related claim.
  4. Crime: Safety of a neighborhood is a contributor to home insurance rates. In neighborhoods that have a higher crime rate and where there are more claims filed, especially for vandalism or burglary, rates will be higher than in statistically safer neighborhoods. The possibility of riots is also a consideration in setting rates, meaning a property inside a big city is likely to see a higher premium based on this possibility than a property in a small town or rural setting.
  5. Risk of Fire: The degree to which a home would suffer from a fire has a direct relationship to the cost of home insurance. This assessment is made up primarily of the location and the construction of the home. For example, a home’s proximity to a fire hydrant or the nearest fire station is used to calculate rates. Also, homes that are more flammable, such as ones that are made of wood, are at a higher risk than those made of brick. Other ways to lower rates are to use central-wired fire detectors with battery backups and for residents to be non-smokers.
  6. Valuables: The items that you are insuring in your home make up a portion of your total premium. A homeowner that has many valuable possessions inside the home will pay a higher premium for that property coverage than a homeowner with few items of any significant value. It is a good idea to inspect a policy periodically to insure that all valuable possessions are covered and to make sure that something no longer owned has been removed from the policy.
  7. Year Built: New homes will typically enjoy a lower premium than older homes of the same value. This is because there is a much lower chance of a claim on a new home with a new roof, new windows, and new construction in general than on an older home that is aging.
  8. Deductible: Like other insurance policies, home insurance policies will have a lower premium cost if the deductible is raised. Likewise, homeowners who demand a low deductible can expect to pay a higher premium for this potential benefit. Raising the deductible is typically the fastest and easiest way to lower the cost of home insurance since it only takes a phone call to an agent to set the deductible.

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