You’ve obtained insurance quotes for your home. One insurance company seems reasonably priced, while another appears to be exorbitantly high.

If you’ve ever wondered why insurance quotes can be so different from one insurance company to the next, let’s peel back that premium and explore the top five factors affecting your home insurance quote.

 

Credit History

There are many reasons a company may want to check your credit history. Most often it is when you are looking to secure a loan or increase credit limits. But why would your homeowners’ insurance company want to know your credit score?

Your credit history not only tells companies your ability to pay down debt but also whether you make payments on time. This is important to insurance companies as they do not want to have a claim filed if you are past due on your premium.

Insurance companies look at a number of credit factors including your:

• Credit mix
• Payment history
• Outstanding debt
• Credit history length
• Pursuit of new credit

Each insurance company has their own formula. Some companies have found greater correlations between credit history and claims filed; while others are more concerned about receiving timely premium payments.

 

Your Location

Location is very important when determining your insurance premium. We are insuring real estate, after all. Where your home is located determines the number of credits or debits for specific covered perils.

Perils are specific risks or causes of loss insured under a homeowners’ policy. Geographic location exposes homes to difference perils. For example, homes along the Atlantic and Gulf Coasts are exposed to the potential threat of hurricanes. California residences may be near a fault line. Houses built in the Midwest may find themselves in tornado alley.

Mother Nature is not the only reason location affects your home insurance quotes. How far away your home is from a fire hydrant or station also plays a role in determining your premium. High crime areas also will see higher insurance costs than low crime locations.

 

Home Age and Construction

The materials your home is made from can make a significant impact on your homeowners’ quote. Concrete masonry homes are better prepared to withstand a fire than a frame house. For structures in wind prone areas, such as the southeastern United States, your home’s roof shape is important. Studies have shown hip roofs perform much better than gable roofs when a tropical storm approaches.

When your home was constructed is also an important rating factor. In general, older homes carry a higher insurance premium than newer houses. Typically rate tables will follow the years in which building codes are updated. The newer the code, the lower the premium rate as different building ages could mean different electrical wiring, roof to wall attachments, window types, and other construction requirements.

 

Additional Risk Exposures

Many homeowners will have additional risk exposures which must be included in developing insurance premiums. Often referred to as “attractive nuisances,” these additional exposures increase the liability risk to your insurance company.

Common attractive nuisances include:

• Ponds
• Fountains
• Playgrounds
• Tree Houses
• Trampolines
• Swimming pools

What makes an item an attractive nuisance is their ability to peak the curiosity of children. To the homeowner, a fountain is just a decorative item. But to a child, that fountain can be a mini-water park. Each poses their own set of liability exposures and may cause your insurance company to apply an additional premium to your homeowners’ quote.

 

Coverage and Terms

All homeowners’ insurance policies are not created equal. Even when insuring identical, neighboring homes, the insurance premiums could still be hundreds or thousands of dollars apart. In the case of identical homes, the premium difference can be found in each policy’s coverage and terms.

What you will have covered in your insurance policy plays a crucial role in your homeowners’ quote. Coverage for your home will make up the largest portion of your premium. But adding coverage for jewelry, collectibles, or fine art will increase your rate. Having liability coverage for certain breeds of dogs can also increase insurance costs.

Once it has been determined what will be covered, the next step is deciding the terms of coverage. Lower deductibles can reduce your homeowners’ quote while adding replacement cost will certainly increase the premium. The number of combinations of your coverage options and policy terms can be nearly infinite.

 

Other Factors

We’ve reviewed the top five factors which affect your homeowners’ quote. Although the top five will make up the bulk of your total premium, other factors are considered. Your marriage status, ownership of a wood burning stove, or operating a home-based business are just a few additional factors your insurance agent will want to know about.

To learn more about the factors affecting your home insurance quote, contact our team at www.protectiveagency.com  at (877) 739-9367. Our licensed insurance agents will be happy to answer any questions you have.