Calculating House Insurance

Have you ever wondered how your house insurance rates are determined by insurance companies? Believe it or not, insurance providers don’t simply charge you some arbitrary number, they have a specific formula and set of guidelines they follow in calculating your rates. Once you know how insurance rates are determined, you can figure out about how much a policy should cost you or get ideas for lowering your current rates if you already have a policy. Here are some of the typical factors companies use in coming up with your home insurance rates.

How is Home Insurance Calculated?

  • Possibly the most important aspect in determining your house insurance is the condition of your home. Any problems your home may have could up the cost of insurance, such as damaged roofing, bad electrical wiring, or even a termite infestation. If there are any possible issues with your home’s condition, your best bet is to get them taken care of before applying for insurance. However, you can still make the necessary repairs after you have your policy, just alert your insurance provider so they can inspect and approve the work.
  • Another factor in your house insurance rates are the types of safety features installed in your home. If you have up to date smoke detectors and a decent alarm system, you could potentially save money on your insurance as these protect your home from damage and theft. Unfortunately for smokers, cigarettes are seen as a possible fire hazard and can increase your home insurance costs.
  • You’ve heard it before – location, location, location. You’re house insurance costs could be drastically affected by where your home is located. If you live in a city or state that is prone to natural disasters such as tornadoes, hurricanes, or even earthquakes, you can expect a higher insurance rate. Areas with high rates in thefts or other crimes often carry higher insurance costs too.
  • While most of the factors in calculating home insurance revolve around your house, some have to do with you. Many insurance companies base their rates on demographics such as your marital status, sex, and age. Your credit score may also be used to help determine your insurance costs, so keep it as high as possible.
  • Finally, the overall quality of your home may also come to play when your insurance company decides your rates. Do you have a new home that’s built to last with high quality materials? While you may be paying a pretty penny to actually own your home, your house insurance will probably less expensive than someone’s with an older and less expensive house.

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