What really goes into Determining your Home Insurance Rate?

How your home insurance rate is determined depends on multiple factors with regards to risk. These risks are then analyzed by insurance companies to figure out how you will make a claim and how much the claim will cost the company.

The value of your home is one of the main driving forces for the rate set and the coverage that you receive. Apart from the value of your home and your belongings, there are many other factors which determine your home insurance rates. Some of the factors are:

  • The location of your home – The area you live in makes a huge difference. Insurers keep a tab on the number of claims from your neighborhood. If burglary is common in your neighborhood then rates would be high for your home.
  • Nearness to a water body – If your house is located near a large body of water, you might be at a higher risk of damage, producing more claims. This may lead to higher insurance premiums.
  • Replacement cost - The replacement cost will be higher when the house is larger and has more contents. Other things taken into consideration before the insurance rate is determined are the quality of materials used in building your home.
  • Electricity – Houses that have breakers are less risky and so are those with new types of wiring. If your electricity flow is lower, it can lead to overloading and fire. Insurers inspect the home and then reach a decision on the rates.
  • Age of roof – Insurers would view your house favorably if its roof has been replaced within the last twenty years. Some insurance companies pay only 25% for damages caused by roofs which are near the end of their service life.
  • Additional structures like swimming pools – Anything which is worth more than 10% of the insured value of your home will come under consideration and add to your insurance rate.