Rates And Types of Coverages

What Factors Determine My Homeowners Rates?

When shopping for homeowners insurance you may find yourself asking a few questions. One of the most commonly asked questions is, how will my homeowners rate be determined? In order to understand this question there are a few factors we must first determine. 

The first is that insurers will use a variety of factors to determine your rate. The majority of these factors will be personalized to you and your individual policy.This means that all homeowners rates are not fixed and will vary case by case. 

The key to determining your homeowners rate is to break down each of these factors used by insurers. Understanding each of these can help you save money on your policy.

Homeowners Insurance

Homeowners insurance was designed to protect your home and belongings. While not required, most lenders will not extend a loan without proof of coverage. Even renters will usually require a renters insurance policy for any tenants. This is one of the many reasons why a homeowner’s insurance policy is a wise choice. 

The Policy

While policies are extremely customizable the main elements of each often resemble one another. Most policies will cover damage to both the interior & exterior of your home. Your belongings and appliances will also be protected if damaged during an insurable event.

Some standard insurable events include:

  • Fire
  • Hurricane
  • Vandalism
  • Lightening 

Events including additional rider for coverage 

Not all events will be covered under a traditional homeowners policy. You will want to add on additional riders to your policy for some forms of coverage.

Some events not typically covered include:

  • Floods
  • Earthquakes
  • Poor upkeep
  • Acts of war

What Affects My Homeowners Rates?

Your homeowners rate or premium is the cost you are expected to pay in exchange for coverage. When gathering an idea for what this cost may be, you will want to obtain a homeowners quote. This quote can be achieved online or through a licensed agent.

The agent will typically ask you a series of questions in order to obtain an accurate quote. These questions will be used to determine your homeowners rate. Many of these questions will be personal to you and your property. Some of the factors that go into determining your rate will be fixed while others you will be able to change. Here are some common factors that go into determining your homeowners rate. 


Your location or state of residency will play a large role in determining your homeowners rate. Costs can vary dramatically from state to state. Because of this, the average homeowners rates will vary depending on where you live. For example, the average yearly homeowners rate in California is about $1974, whereas the average yearly homeowners rate in Utah is a mere $677. This equates to up to a $1297 cost difference from location alone. 

Even within the same states your homeowners rates can vary by zip code. This is due to the fact that those with homes along coastlines face higher risks. Since perceived risk directly increases your rates, those with coastline zips will experience higher costs.This increased risk is associated with an increased possibility for flooding or hurricane damage. 

Average Cost of Homeowners Insurance By State

Past Claims

Past insurance claims will also influence your current premium rate.This means that when purchasing a new homeowners policy, insurers will take a look into your previous claims history. Big or small, any past claims will cause your premium to rise. From a house fire claim in a different state to a damaged property claim from a previous home. 

Credit Score

Like with many other forms of insurance your credit score will affect your rates.This is because those with lower credit scores are viewed at a higher risk for missing a payment. In order to compensate for that risk insurers will charge higher premiums to those with lower credit ratings. Alternatively those with higher credit scores may qualify for a lower premium. 

Home Condition

The condition of your home will also go into determining your homeowners rate. This is commonly correlated with the age of your home as well. Whether your home is newer or older will be used to determine the cost of insuring your home. 

While some may believe that the older a home is, the more risk it will be assigned, it is the opposite. Older homes with outdated appliances will usually be cheaper to insure. On the other hand newer homes with expensive builds and gadgets will cost you more to insure. 

An older home will usually cost insurers less to replace or rebuild when damaged. Newer homes can be costly to repair or replace. This will be reflected throughout your premium costs.

Amount of coverage

Raising your amount of coverage or coverage limit will also raise your premium. The higher you raise your coverage amount the more you raise insurers possibilities for a potentially higher payout. In order to compensate for this added possibility, insurers will raise your yearly premium amount. 

Policy type

When it comes to homeowners insurance policies, there are many options.The type of policy you elect will impact your premium rate. While the liability portion tends to remain relatively the same, dwelling, and personal belonging coverage can vary. Knowing which type of policy you need starts with understanding each of the different types of coverage. 

Types of Policies

  • HO-1 – The most basic policy
  • HO-2 – A broad form policy 
  • HO-3 – The most common homeowners policy 
  • HO-4 – For renters
  • HO-5 – Extensive homeowners coverage
  • HO-6 – Designed for condo owners
  • HO-7 – Ideal for mobile or manufactured homes
  • HO-8 – Exists for all other special types of homes 

Choosing a Policy Type

The type of policy will depend largely on the type of home you own and how much coverage you are looking for. Each of the different coverage options are designed with a specific purpose in mind.

Types of Homeowners Coverage

Named Peril

Named peril insurance offers protection against events explicitly stated within your policy. With named peril your belongings are only protected against certain events.

Some of these events may include:

  • Fire
  • Theft
  • Vandalism
  • Windstorms

Named peril insurance offers limited coverage and is often cheaper.

What does it cover?

Named peril insurance will only cover your belongings against specific stated events. These events or perils must be specifically stated within your policy.

The most common named perils are as follows:

  • Explosion
  • Vandalism
  • Fire
  • Theft
  • Windstorm
  • Riots
  • Snow,ice, sleet damage
  • Aircraft
  • Smoke
  • Freezing
  • Volcanic eruption
  • Short circuiting
  • Tearing, cracking, burning
  • Falling objects
  • Water overflow
  • Vehicles

Open Peril

Open peril insurance offers coverage for your home and belongings against virtually any event. This does not include any events explicitly excluded from your policy. Open peril insurance offers more coverage and is often more expensive. You can also upgrade your named peril policy to an open peril policy. 

What does it cover?

Open peril insurance will protect your belongings against pretty much any event. The only events excluded from an open peril policy are the ones specifically stated as excluded.

Some examples on what open peril may protect against are:

  • Theft- If someone steals your belongings from a store
  • Flooding – Water damage to your belongings

Finding the Right Policy

Shopping for homeowners insurance doesn’t have to be complicated. It simply takes a little time and research. Learning about the different options and what is best suited for your home is key. Working with a licensed professional can help simplify this process even further. 

When shopping for homeowners insurance you want to find the right policy for your home.

Other factors to keep in mind when shopping for homeowners insurance include: 

  • Shop the market
  • Research more than one insurer
  • Do some research
  • Compare quotes
  • Learn 
  • about discounts 

How to Find Discounts

You can save on your homeowners insurance through discounts. The key is knowing where to find the best discounts. Discount percentages will vary by carrier but could save you anywhere from 10-25 % on your premiums.

Some commonly seen homeowners discounts include:

  • New home discount- For homes built in the past 10-15 years
  • Home & Auto discount- Bundling your home and auto insurance can help you save
  • Full premium discount- Savings for paying your annual premium in full 
  • 0 claims history discount- If you have no past claims you may qualify for savings
  • Security system discount- Homes with a security systems may qualify for savings


  • Homeowners insurance rates are not fixed
  • There are ways to save on your policy with discounts
  • Different factors can impact your homeowners rates

Understanding how insurers determine rates can help you achieve the best rates. There are some factors which you can manipulate to achieve better rates.There are also some factors which are out of your control. Learning more about each of these factors can help you understand your rates. 

Most expensive states for homeowners 

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