Home insurance is an extremely complicated product. There are literally hundreds of different factors that underwriters consider when determining home insurance premiums. Despite the complexity of the product, there are a few common factors that affect premiums for most companies.

Location Matters

One of the largest determinants in home insurance premiums is the location being insured. Some locations are much safer than others, and as a result, premiums are much lower. Areas of the country that have frequent natural disasters typically have higher insurance premiums, while areas with few natural disasters typically have lower insurance premiums. Texas home insurance rates, for example, are typically higher than their counterparts elsewhere due to the high frequency of tornadoes, hail storms, hurricanes, and more.

Claims Matter

In addition to location, the number of claims filed on the property also drives the premium. The more claims the property has, typically the higher the insurance premium will be. This is true for claims like theft, water damage (burst pipe), vandalism, etc. Claims that can be attributed to acts of God typically will not raise an individual’s home insurance premium, but can raise premiums across a geographic region for all owners.

Age Matters

Age can also play a vital role in the home insurance premium price. With most home insurance companies, newer homes can receive significant discounts that can drastically lower the insurance premium. All else being equal, a home built in 2012 will typically have lower insurance costs than one built in 1925. It makes sense that a home built of brand new materials should hold up better than a home built nearly 100 years ago.

Owner-Profile Matters

One important determinant of home insurance premiums actually has nothing to do with the property, but rather the people who are in it. The profile of the owner of the property can play a very important role in the insurance premium for the property. Homes don’t file claims; people do. As a result, many home insurance companies will raise or lower insurance premiums depending on the profile of the owner. Does the owner pay his or her bills (credit rating)? Does he or she file lots of claims with other insurance products? These questions matter when it comes to determining home insurance rates.