Factors that Affect Home Insurance Rates

Home insurance rates or the premium that you pay for your home insurance is determined by a number of factors. These rates are likely to vary from one insurer to the next, and according the the way that the risk is assessed. 

The Insurer
The first factor is the insurer itself. If you’re using an intermediary or broker to purchase home insurance, the commission due will be factored into the price. Insurance companies by and large use the same methods to calculate risk. Nevertheless, there could be a substantial difference between the premium charged by the different companies. A start-up company may be lowering prices in an attempt to increase market share. Another insurance company could have a very high turnover that allows for lower margins. Yet another may charge a premium for its superior customer service. 

When looking at insurance premiums it’s important to look look at the company’s claim settlement record. Will the lower price tag for insurance be worth it if the company manages to wriggle out of most claims or consistently delays the payment process? Sometimes paying a little extra to feel secure that any claim will be dealt with speedily and efficiently makes more sense.

The Risk
The other major factor that influences home insurance rates is the risk itself. The risk can be broken down into a number of categories. The area where the home is situated is of prime importance. The simple truth is that homes in some areas are more likely to be robbed than in others. Some areas have higher rates of crime, some are almost crime-free. Some areas are more prone to hurricanes, fires and flood damage than others. These facts are calculated into the premium.

Next is the home itself. Has the insured applied measures to minimize the risk of theft, fire and other damage? Has an alarm system been installed? Are there fire extinguishers?  

The materials used to build a home are also of great importance. A thatch roof, for instance, presents a higher risk of fire than a tin or tiled roof. 

A well-maintained home is also less likely to be damaged than a poorly maintained home. 

The final factor is the insured. Is there a long claim history? Does the insured have a good credit record? Some people present a higher risk than others. Insurance companies guard against high-risk individuals and against the risk of insurance fraud. All of these factors will play a part in determining the cost of your policy.