Major Factors that Affect Homeowners Insurance Rates

The reason you have homeowner’s insurance is to protect your financial interest in the event of a claim. Likewise, the insurance company has a financial interest to protect. In order to determine your insurance rates, the insurance company must first try to determine the likelihood that you will have a claim and the value of that potential claim. This is not an easy task, so insurance companies must use what resources they have available to determine your risk factors.

Keep in mind that many factors are considered in the rating process. Despite the fact that certain factors increase rates, there are plenty of others that can decrease rates. While it may not seem fair to those who end up paying higher rates based on this system, it has proven to be extremely accurate in most cases. Whether or not you agree with the rating process, you should be aware of the factors that are used to determine your homeowner’s insurance rates.

Credit Score

Most insurance companies now use something called ‘insurance scoring’ as a basis in determining rates. Insurance companies have found a direct correlation between credit score and the number of claims filed. The lower your credit score, the more likely you are to have a claim. Consumers with higher credit scores have been found to file fewer claims and those with lower scores not only file more claims, but the value of claims filed is larger among this group.

Claims History

Another important factor in your rate is your claims history. Historically, persons who have had at least one claim are far more likely to file a claim than someone who has never had a claim. With each claim you have, the risk of having additional claims increases.


Your home’s location also plays a huge role in the determining of your rates. It will certainly cost more to insure a home located in an area prone to hurricanes and tornadoes, or in an inner city area prone to theft and vandalism.


Homes located in rural communities with little or no access to fire hydrants or not within a reasonable distance of fire and emergency departments, are more likely to suffer a total loss since response time would be longer than in largely populated urban areas. If you have deadbolt locks, fire extinguishers and smoke alarms, you will receive a discount. You will also receive a discount if you have a central station monitored alarm system for fire and burglary.


You should seriously consider putting all of your insurance with one company. Bundling several policies with your homeowner’s insurance company will usually qualify you for discounts. For instance, placing your home and auto insurance with the same company could result in a significant savings. Ask your agent what multi-policy discounts are offered by your homeowner’s insurance company.


The deductible you choose can also greatly impact your homeowner’s insurance premium. By selecting a larger deductible, you are assuring your insurance company that you are willing to absorb small losses, therefore making you less likely to file a claim. 

Other Factors

Even factors such as age and marital status are considered in the rating process. How long you have owned your home might be a factor as well. Some companies are even using your education level, employment status, and occupation as a means of either applying rate increases or giving additional discounts.

While the factors applied to determine homeowner’s insurance rates vary from company to company, they all have one thing in common. In the end, it always comes down to risk. The higher your risk of having a claim, the higher your rate will be.