Factors Impacting Homeowners Insurance Rates
Consumers can still walk into an insurance company's office or call an agent to get a quote, but you can now get an accurate quote online in about five minutes. When looking for home insurance, the best place to start is online.
You already have the majority of the information an insurance company requires to create a personalized quote for you. Some things you may not remember off the top of your head, but can easily figure out. We've broken down the information insurance quote calculators request and explained how they use it to calculate your quote below.
Estimated replacement cost: The most important number to get right
The estimated replacement cost is the amount of money required to build the exact same home as it currently stands.
The estimated replacement cost of the home is the most important number and piece of information when determining the cost of homeowners insurance. This is distinct from the home's market value, which includes factors such as the value of the plot of land. This number will be required by every online quote calculator.
Many companies, such as State Farm, use tools on their online quote forms to estimate the replacement value of your home once you enter your address if you don't know the replacement value of your home. Companies typically send their own appraisers to personally estimate the replacement cost. It might also be a good idea to hire an appraiser.
The majority of appraisals cost between $200 and $400, but they can cost up to $500 or more depending on how far the appraiser must travel to your property. Getting your own assessment gives you a starting point for comparison when your home insurance company sends you their quote.
The deductible you choose
Increasing your deductible — the amount you pay before filing an insurance claim — is one of the ways you can significantly reduce the cost of your premium while using an online quote calculator. In general, higher deductibles result in lower premiums. In fact, raising your deductible from $500 to $1,000 can cut your homeowners insurance costs by 13%.
Choosing the appropriate homeowners insurance deductible can be difficult. The higher the deductible you select, the lower the premium quoted. However, choosing an excessively high deductible will limit the types of property losses for which you can file claims.
Some home insurance companies require you to choose a deductible as a percentage of your coverage. If your policy is worth $300,000, a 1% deductible is $3,000.
Other information used to calculate your quote
Calculators typically ask for your social security number, which is used by companies to check your credit and insurance scores. The credit check, known as a "soft pull," is less detailed than most and will have no effect on your credit score.
Your insurance score, like your credit score, is determined by your credit report and is used to calculate your premium by companies. Because claim filing frequency and score are related, insurance companies use the information to determine the appropriate cost of the policyholder's premium.
In addition, additional information about the insured home is used. Much of it is listed in the guide's box. Your homeowners insurance premium may be influenced by the following factors:
- Your home's square footage: Larger homes tend to cost more to insure because there is more space to repair if it is damaged.
- The material of your home's roof: Clay and concrete roofs last longer and are more resistant to hail and wind damage than asphalt roofs.
- The construction of your home: A steel-beamed home is less likely to sustain extensive fire damage than a wooden-frame structure.
- Your dog's breed: If you own a pit bull or a doberman, your personal liability coverage may be affected because these breeds are more likely to bite homeowners.
- Special risks on your property: Trampolines and swimming pools can increase the cost of your homeowners insurance.
Costs that quote calculators do not include
Almost all online quote calculators generate some form of a HO-3 policy form, which is the most commonly purchased type of policy. For most people, this is sufficient coverage and protection, and the quote provided will be close to the premium they can expect to pay. Some homeowners, however, may require additional coverage.
Standard home insurance policies do not cover earthquake, flooding, or sinkhole damage or loss. A separate policy may be required to protect you and your home from one or more of these perils.
Even if you don't think so, if you live in a high-risk area or want to take extra precautions to protect the value of your home, you might need one of those coverages. These extra coverages can be costly and, in some cases, significantly increase the premiums you can expect to pay to protect your home. To determine whether you require coverage, consult our guides specific to those perils.