how is my premium decided?
If you're reading this, we bet you're a pretty smart consumer — the type who wants to know the story behind why something costs what it does. At Esurance, we don't want anyone to be left out of the loop. So we'll draw back the industry curtain to show you what factors your insurer considers when calculating your homeowners premium.
Homeowners insurance: the price for peace of mind
Dollar for dollar, few coverages give you more protection for your premium than homeowners insurance. Major perils like a devastating natural disaster or fire are bad enough, but even routine incidents and repairs can be too costly to handle on your own.
For instance, patching up a leaky roof or swapping a busted air conditioner for a new one can cost thousands. And this doesn't even factor in personal liability costs, like from someone falling on your porch and sticking you with the medical bills.
How your home insurance rate is determined
These are some of the common elements insurers look at when calculating your home insurance cost.
Rebuilding cost of your home
If your house were totally destroyed, this is the amount it would take to get it back to its former condition. The rebuilding cost is often different than the purchase price of your home because it includes factors like rising or falling construction costs in the area and debris removal, which you might need after a major storm, fire, etc.
Included in the estimated cost of rebuilding — aside from the building costs themselves — are labor costs and accessibility of the property (for instance, it would cost more to rebuild on a steep hill than on flat ground). Talk with your insurer for help estimating the true rebuilding cost of your abode.
Materials that make up your home
Your home's bones make a difference. Houses built from brick, stone, stucco (non-artificial), and other hard, dry substances can often get a lower rate than homes made of wood, which is softer and more flammable.
Age of your home
Older houses sometimes have inferior or degrading materials that are likely to cause issues. Or, in some cases, they contain unique architectural features that are costly to replace. That's why recent homes tend to have lower premiums.
Fire protection in your area
Your area's fire protection rating — how far you are from a water source and distance to a responding fire department — matters when a fire breaks out in your home, and it can affect how much you pay for coverage.
Claims history in your area
Neighborhoods that regularly get hit with things like tornadoes or burglaries might have higher home insurance rates.
Your personal claims history
If you've established a pattern of home mishaps and claims, your insurer might want a higher premium to account for it. On the other hand, if you've been a responsible homeowner for years, your insurer will often reward you with a lower rate.
Additionally, if you have homeowners insurance from Esurance, you'll get 5 percent of your premium back for being claim-free for one year. And if you do have a claim, you still get to keep your Claim-Free discount.
Dogs make a cozy addition to the foot of your bed (and may even decrease the cost of your theft and vandalism insurance!), but depending on their breed might attract a higher insurance rate. Certain breeds such as pit bull and Rottweiler are sometimes considered uninsurable altogether.
Of course, this is a big factor in how insurance rates are determined in general. The more protection you need, the higher your premium tends to be.
Your history with your insurance company
Your home is more likely to suffer a loss as it ages, so your premium is also likely to increase commensurately with the risk. But insurers love their loyal customers — and they'll go out of their way to get you the best deal possible.
Ways to save on homeowners insurance
Determining your premium is also up to you. Here's how you can work toward scoring some home insurance savings.
Increase your deductible
By agreeing to pay more out of pocket if a claim arises, you can lower your monthly fee. If you're a careful person with a long track record of accident-free homeownership, this might be a great option for you.
Improve your credit score
Many states let insurers use your credit rating when deciding your premium. By paying bills on time, spending lightly, and getting rid of debt, you can improve your score.
Install extra security devices
Adding an alarm system, deadbolts, or overhead sprinklers are just a few ways to make your pad safer and cheaper to insure.
Bundle your home and auto policies
Most insurers include some price reduction when you combine coverages.
Choose attractive nuisances wisely
Some backyard items can drastically increase your premium (and in some cases, decrease your chances of insurability). So instead of that trampoline to entertain the kids, maybe try a basketball hoop. Instead of building your own pool, get a gym membership and use theirs.
Compare homeowners insurance rates to save
Of course, one of the biggest aspects in determining your premium is choosing the right insurer. It's important to shop around, compare rates, and do your homework when looking for the best quotes.
Here, start with us. Get your free Esurance homeowners quote and kick your search off right.
Insuring your household risks
Learn how umbrella insurance can help if your house includes a lot of attractive nuisances, like pools or pets.
Remodeling your home
Home improvements may or may not increase your homeowners insurance coverage.