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How Insurers Determine Your Premium

Many factors affect the premium you pay, including which insurance company you choose. Different insurance companies charge different premiums for similar coverage. How much insurance coverage you decide to buy will also affect your premium. Some of the other things that are likely to affect your premium are:

The Characteristics of Your Home

  • The cost to rebuild your home. This is not the same as the purchase price or tax-assessed value. Your insurance agent might help you estimate replacement cost using information about your home and its contents. Most insurers use software programs with regional expense data to calculate a replacement cost based on the size and features of your home.
  • Whether your home is made of brick or wood. Premiums are usually lower for homes made primarily of masonry or brick (i.e. fire resistant) than for wood frame homes.
  • The distance to your home from the fire department or a water source and the quality of your community’s fire protection services.
  • The age and condition of your home. The premium often is higher for older homes and homes in poor condition than for newer homes and homes in good condition.
Your Choices & Characteristics
  • The coverages you choose, including optional endorsements.
  • The deductible you choose.
  • Insuring your home and autos with the same insurance company. 
  • The length of time you have been with your current insurer.
  • Your credit history. To access your credit report, the insurance agent might ask you for your Social Security number. In many states, insurers use your credit history as a factor in your risk assessment.
  • Your history of filing claims for water damage, fire, theft or liability on homes you’ve owned.

Other Household Characteristics

  • Having protection devices in your home, such as smoke detectors, a burglar alarm, sprinkler system, and deadbolts on doors or security devices for windows. Many insurers offer a discount if you have any of these.
  • Having a wood-burning appliance or using space heaters.
  • Having a swimming pool or trampoline that could cause injuries.
  • The types of pets you have. Most insurers won’t insure you if you own certain breeds of dogs, or dogs with a history of aggressive behavior.
  • Operating a business from your home.