Insurance rates—how are they even calculated? It can be complicated, but it all comes down to an algorithm that takes many variables into account. If keeping your rates as low possible is your number one concern, you need to know about these five
factors that can affect your bottom line.
This is one of the most obvious factors and also one of the biggest. The age of your house and the wiring, pipes, roof, lumber, square footage, and even how many corners it has all play a role in the price of your insurance.
It comes down to the risk associated with the house and the costs that come with repair or replacement. For example, if your home was built in 1920, it may have old pipes and wiring that aren’t up to code. These materials come with a much higher
risk of damage or fire, so the insurance companies will charge more to insure it.
Again, if the risk of destruction is high, your insurance will reflect it. If you have a beachfront home on the Gulf Coast, you can expect to pay more than if you’re in an area of the country where flooding is typically not a concern, such as
If you’re in any sort of flood zone and you have a mortgage on your home, your lender will probably require a separate flood insurance policy—and that costs money. Even if you aren’t in a flood zone, your mortgage company may still require coverage,
so be sure to look into your lender’s requirements when you begin shopping around.
In some cases, your family dog can bump up your premiums. Certain breeds, such as pit bulls and “bully” breeds, have a reputation of being more dangerous than others and historically come with larger liability concerns to your insurer, resulting
in a higher rate.
Three things can happen if your dog is considered a “dangerous” dog breed: you could be charged a higher rate from your carrier, your provider may cover you but exclude any liability associated with the dog, or the carrier could decide not to
insure you at all.
Pools, trampolines, and even backyard construction projects are in a category called attractive nuisances, which are recreational amenities added to a home that can raise liability concerns (and your rates) on behalf of an insurer. If there is
something in your yard that can attract the attention of a minor and pose any level of danger, it will probably affect your insurance policy.
If your house were to catch fire, how long would it take for the local fire department to get there? The faster they can get there and handle the situation, the better chance they have of minimizing the damage.
Every homeowner’s policy requires what’s called a Public Protection Class (PPC) rating. A PPC is rated between 1-10 (one being the best) and takes factors like proximity to the fire department, proximity and number of fire hydrants, municipal
water towers, and even railroad tracks into account.
In some cases, you may be able to make some changes to help lower your rates, but never lie or intentionally exclude key information on your application—this could result in your coverage or renewal getting denied. Be honest with your agent, and
they will help you find the right coverage and rate that works for your needs.