9 Significant Factors That Affect The Cost of Home Insurance

Factors that affect the cost of home insurance

As an informed consumer, you should understand how the cost of a homeowner’s policy is determined. Furthermore, certain underwriting factors determine whether or not an applicant for a homeowners policy is acceptable. The following are the factors that affect the cost of home insurance:

  • Construction
  • Location
  • Fire-protection class
  • Costs of construction
  • Home’s age
  • Policy type
  • Deductible amount
  • Insurance score
  • Loss history report
cost of home insurance
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The construction of the home is a critical rating factor.

The lower the rate, the more fire-resistant the home. As a result, wooden homes are more expensive to insure than brick homes.

However, the cost of earthquake insurance is significantly lower for wooden homes.


Another important rating factor is the home’s location.

The loss experience of each rating territory is determined for rating purposes.

Insureds who live in areas with high losses due to fires, storms, natural disasters, or crime must pay higher rates than those who live in low-loss areas.

Fire-Protection Class

The rates charged are affected by the fire-protection class.

The Insurance Services Office (ISO) assigns a one-to-ten rating to public fire departments.

A lower number indicates a lower rate. Access to the fire department and water supply (e.g., fire hydrants) is also critical. Rural homes typically have higher rates than homes in major cities.

cost of home insurance

Costs of construction

Rates are heavily influenced by construction costs. Labor and material costs vary greatly in the United States.

The more expensive it is to repair or rebuild your home, the higher your premium is likely to be.

Home’s Age

The rate charged is also affected by the age of the home. Newer homes are less expensive to insure than older homes.

Older homes may be more vulnerable to fire and storm damage, have older wiring, and may have been built when building codes were less stringent.

Policy Types

The type of policy is critical in determining the total premium. Because the coverage is broader, the HO-3 Homeowners 3 policy (special form) is more expensive than the HO-2 Homeowners 2 policy (broad form).

The most expensive contract is the HO-5 Homeowners 5 policy (comprehensive form), because the dwelling, other structures, and personal property are covered on an “all risks” or “open perils” basis. Except for losses specifically excluded, all direct physical damage losses are covered.

Deductible Amount

The deductible amount has a significant impact on cost. The lower the premium, the higher the deductible. When premiums are reduced, the deductible can be increased.

The deductible does not apply to a fire department service charge, coverage for credit or ATM cards, specifically insured scheduled property, or personal liability coverages.

Insurance Score

Many insurers also use the applicant’s credit history for underwriting and rating purposes. An insurance score is determined based on the applicant’s credit history.

An insurance score is a credit-based score that predicts future claim costs very well. Insurance scores forecast average claim behavior for a group of insureds with similar credit histories.

Insureds with poor credit and low insurance scores file more homeowner claims as a group than insureds with good credit and higher insurance scores.

Loss History Report

A loss history report, which reveals a home’s prior claim history, is also used by insurers for underwriting and rating purposes. The use of loss history reports is debatable.

According to critics, insurers are concerned about mold claims and water damage and will not insure homes that have suffered such losses.

Some homebuyers have struggled to obtain homeowners insurance because the loss history report revealed a history of previous claims on the home. they want to buy.

Similarly, some homeowners selling their homes may not receive the best price if the home has been rejected by multiple insurers due to prior claims.

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