How Home Insurance Rates Are Calculated

How much you pay for home insurance depends on a number of factors related to your home and contents. Insurance companies analyze these factors to calculate how likely you (or a group of people with the same set of circumstances) will make a claim and how much that claim will cost.

Factors that affect what you pay for home insurance may include:

  • Where you live.  Some locations are more exposed to crime, vandalism, sewer back up and weather related events. Insurance companies look at  past experience to determine if you live in an area that has these types of events more often.

  •  How good your fire protection is.  Timing is everything when fighting fires. The closer you are to a reliable source of water (hydrants and fire halls), the quicker the response time for fire fighters. Which means, generally speaking, when there is a fire, damage is usually less significant for those that live in urban areas because they are protected by close fire fighting support, resulting in a lower insurance premium.

  •  The replacement cost of your home.  One of the biggest factors related to the cost of insurance is the size and composition of your house and its contents. The quality of construction materials used to build the house may also be taken into consideration.

  • How your home is heated. Homes that use wood (solid fuel) as their primary and/ or auxiliary heat tend to have more fire claims and will therefore increase your insurance premium. Force-air gas furnaces or electric heat are far less risky.

  • How old your home is. What type of condition it is in.  Property rates are generally lower for newer homes. That’s because with newer plumbing, wiring and roofs, there are fewer breakdowns and problems.

  • If you have a wood stove. A common source of house fire and carbon-monoxide poisoning. If you are considering a house with a wood stove, you may want to consult with your insurance representative.

  •  The age of your roof.

  • If your home is built for or used by multiple families.  If your home has more than one self-contained living unit, or you share your property with unrelated individuals, it may be considered a multi-family dwelling. In these instances, there are more items that need to be covered by insurance,  and more opportunities for larger claims.

  • Other factors. Do you have a fire alarm or security alarm that is monitored by an outside service?  Do you have a swimming pool or other structures on your property that are worth more than 10% of the insured value of your home?  This may affect  your insurance.

Your property insurance rate is based on how likely it is that you will experience a loss or damage and how much it will cost to get you back to the position you were in.  Talk to one of our home insurance specialists and we can help you determine  the level of protection that works best for you.

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