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Four Factors that Affect Homeowners Insurance Rates

homeowners-insuranceBuying a new home is one of the most important investments that you will make in your entire life. However, getting a new house doesn’t just entail visiting open houses and hunting through listings, it also requires concrete steps towards protecting your investment. One of the ways that you can protect your investment and ensure its security is through getting a homeowners insurance policy.

In obtaining a policy, one of the questions that may come to your mind is “when is the best time to get  homeowners insurance?” If you’ll obtain a mortgage, chances are that the mortgagor may require you to get an insurance policy before finalizing the deal. While if you’ll pay in cash, chances are that you’ll only feel the need to obtain a policy later on. However, what you may not know is that there is really no fixed time to obtain a homeowners insurance policy; rather, the best time to get insurance may be made according to the different factors which affects or influences its rates.

So before you buy that dream home and find a policy for it, consider these factors first thing:

Features of the House

How big is your house? Is the house new or is it old? What are the materials used in making it? The answers to these questions will very much affect the rate of your insurance policy. If your house is big or is already old, the tendency is that it will require more work to be patched up so insurance companies may charge you for more coverage. Also the materials used in constructing your house as well as the design and other features of your house also affect how insurance companies set the rate for your premium.


Location plays a very big role in home insurance rates. Of course, if your house is located in an area which is more prone to earthquake, typhoons, floods and other calamities, then it’s no wonder that the premiums that insurance companies would fix for your policy would be higher than those which have houses located in non disaster-prone areas. Other factors that affect your insurance rates would also include the crime rate in your neighborhood and the proximity of your house to the fire station or police station. However, you can also have a reduced premium if you would make your house safer such as when you would install security cameras, anti burglar alarms and other devices which would reassure insurance companies that your house is less open to risks.

Claims History

Your claims history can be an indication for insurance companies on how you’ll file claims in the future. If your claims history shows that you’ve filed a lot of claims in the past, this fact alone may alert insurance companies to the probability of you as being a high risk or expensive risk. Insurance companies may feel that you tend to file claims even for those risks which are not covered or risks which could have been prevented by proper diligence on your part. Hence, in these cases, insurance companies may demand a higher premium because they may see you as an expensive risk, whether or not it’s currently true.

Credit History

Your credit report may also be used by insurance companies to determine the premium that you’ll have to pay. This is because homeowners insurance providers have found out that there is a correlation between irresponsible credit behavior and higher insurance risk.

Thus, your credit utilization and payment history can be used by insurance companies as factors for your home insurance score. This home insurance score will in turn be used by the said companies to predict your insurance risk. In order to determine your credit-based insurance scores, these companies will look into your payment history, outstanding debt, credit history length, pursuit of new credit and credit mix.

To Conclude

If you’re a homeowner (or soon to be one), you must consider these factors as they may greatly influence your home insurance rate. You may not influence the rates that are fixed by the insurance companies but you can still influence how they fix these rates by looking and controlling these factors. Thus, take note of the location of your house, remember to check your credit report and make sure that everything is in order so that you’re assured that you’re home insurance score is based on accurate information. You can also track your home insurance score in Credit Karma so that you can have an overview of how your financial actions affect your credit score overtime.

The quest to finding your perfect home may require a lot of patience and perseverance. But just keep these factors in mind and you’re sure to find the perfect house and the right homeowners insurance policy in no time!


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