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Why Does My Home Insurance Cost More Than My Friends?

Home insurance rates vary drastically from state to state, from a low of $337 annually in Hawaii to $3,575 in Florida, according to a 2018 study.* With the average rounding out to $1,083 a year, you can expect to pay about $3.50 for every $1,000 of your property’s value.

Having decent homeowners insurance provides coverage for the major assets in and around your home. Typically, the following items are covered in any policy:

  • The actual house, including exterior, plumbing, electric, and in some cases furnace or heat and air conditioning unit.
  • Exterior structures like fence, patio, garage, and any buildings on the property like sheds or detached garages.
  • Home appliances, televisions, computers, and other valuable possessions.
  • Temporary housing if your home is damaged and you need a place to live.
  • Personal liability is covered in your policy if someone gets injured on your property.

The largest issues impacting homeowner insurance rates have little to do with your actual home. When issuing homeowners insurance policies, insurance companies weigh different variables that impact the premiums.

Credit rating. Before issuing a homeowners insurance policy, your insurance company will check your credit. Therefore, it’s a good idea to check your credit reports from all three major credit bureaus–Experian, Equifax, and TransUnion–before you start shopping for a new home. You’ll also want to avoid making large purchases or taking out a major loan during this time because it can negatively affect your credit score and increase your rate for homeowners insurance.

Home insurance score. Often mistaken for credit scores, home insurance scores determine risk. Factors used in the insurance point system are similar to those that make up your credit score, but the two types of scores are used for very different reasons. Insurers use your credit information to determine the likelihood that you’ll file a claim during the term of your policy.

Location of property. Where your home is located is a big one when it comes to the cost of your homeowners insurance. Living close to a fire hydrant or fire station, is one factor that lowers premiums. Being located near a coastline increases the odds of hurricanes and heavy winds, which can easily damage a home, and therefore, increases insurance premiums. Being in an area that isn’t prone to natural disasters like floods or earthquakes is a benefit that can lower premiums.

Age of the house. Another factor insurance company focus on to determine your rate will be the age of the home being insured. Many people buy older homes for the charm and appeal, but with older homes come certain risk factors. Old plumbing and electrical systems can break down and often require repair. These factors will boost the price of a homeowners policy.

Age of the roof. A roof protects your home from rain, snow, and heavy winds, all of which can cause severe damage. Ideally, you want a new roof on any new home you are considering purchasing. If it turns out that your new home has an older roof, your homeowners insurance rate will reflect it, as leaks and missing components can lead to damage resulting in a hefty insurance payout.

Pool or hot tub. A pool or hot tub is a great entertainment feature in a new home, but due to the risk of someone getting injured, you’ll likely have to pay more in liability insurance. Before purchasing a home with a pool or hot tub, consider checking with your insurance company to see how much more you’ll pay in increased liability.

Planning ahead with homeowners insurance is a best practice we recommend. Give your insurance company a heads-up call to start the process of getting the best policy that will meet your needs, but also get quotes from two to three other insurance companies before you make a final decision. You can also ask your family, friends, and neighbors to get their opinions on the best policies.

By being proactive in your house hunting process, you will avoid any surprises and allow time to get the best policy for you and one that best protects your new home.

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