Skip to main content
Personal Insurance

Home insurance rates: How they’re calculated and factors that affect them

By September 6, 2018December 6th, 2018No Comments

Because your home’s estimated value is typically calculated mathematically, the biggest driving force behind your home ​insurance premium and the amount of coverage your policy grants you. But the values of your home and its contents aren’t the only factors that dictate how much you’ll pay every year.

What Is The Basis for Rates?

​Home insurance premiums vary largely by respective region and insuring agency; every home insurance company generally uses its own specified criteria in the process of determining customer rates. So what exactly is the true driving force behind high rates? According to the experts at EAB Insurance, an insurance brokerage based out of Green Brook, New Jersey, it’s the likelihood that the homeowner will file a claim: the perceived and potential “risk.”

A risky insurance policy could eventually place heavy financial strain on a home insurance company if multiple claims are predicted and expected to be filed and paid out. To determine risk factor, home insurance companies allocate significant consideration to past home insurance claims submitted by the homeowner, claims related to the appropriate property and the credit history belonging to the owner.

“In general, the frequency of filed claims as well as severity of the claim often play a considerable role in determining individual rates, especially if there’s more than one claim relating to an issue previously field (i.e. water damage, wind storms and infestation),” says Joe Boniakowski, President of EAB Insurance.

While insurers are there to pay claims, they’re in it to profit off of that, as much as they can. Insuring a home that has had multiple claims filed within the past 3 to 7 years, regardless of who the claim was filed by, can bump your personal home insurance premium into a higher pricing tier. In some instances, you may not even be eligible for home insurance depending on the number of claims previously filed.

The Causes to Most Claims

Past weather-related claims are largely the major culprit for driving up rates. According to data collected by the Insurance Information Institute (III), homeowner insurance claims related to wind or hail are the most frequent type of claim, while the most expensive types of home insurance claims are ones relating to fire, lightning or removal of debris.

The III also says roughly one in 20 insured homes have a claim once a year and about one in 30 insured homes have a wind related property damage claim each year. Water damage claims are also common; one in 55 homeowners files a property damage claim caused by water damage or freezing each year.

Other Impacts on Rates

Accessibility to resources and labor to rebuild is amongst other major drivers of high annual premiums, as said by Joe. “What’s the distance of the home to the nearest fire station, fire hydrant or other water source for putting out fires; a home’s closeness to the coast, or its distance from a high crime area or wildfire prone areas are also just a few other pricing considerations.”

“Pricing and eligibility for home owners insurance can vary on the insurer’s appetite for specific building construction, roof and exoskeleton type, the condition or age of the home and property, heating type (if there is an oil tank either on premise or underground), the proximity to the desirable locations (i.e. the coast, cities), as well as the number of potential other liabilities (like pets),” says Joe.“The condition of your home could also reduce a home insurance company’s interest in providing a strong policy or even any coverage at all,” says Joe. “Homes that are poorly maintained increase the odds that the insured will have to pay a higher insurance premium based on the home’s existing poor condition.”

The Bottom Line

Doris E. Zampella, VP of EAB Insurance says that despite the fact that most home insurance companies generally have their own unique rubric and criteria for determining home insurance premium, the most important factor to consider is the homeowner’s personal credit score. Although the other factors, (like the ones listed above) definitely contribute to your annual premiums, Doris says that the other factors aren’t weighed as heavily by most home insurance companies as the credit score.

About EAB Insurance

EAB offers a complete analysis of your insurance needs by taking the time to understand the needs of your family and/or business and match the proper coverage in areas you may not have identified as a potential risk.

Whether you need to make a policy change, have a question about billing or need to report a claim, our customer service representatives will handle your request professionally and quickly. Our web site is also available 24/7 to accommodate your busy schedule.

Close Menu
Green Brook, NJ

929 Washington Ave
Green Brook, NJ 08812

Boulder, CO

150 Murray St #605
Niwot, CO 80544

Skip to content