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What Factors Determine a Home Insurance Quote?

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Shopping for homeowners insurance can be a complicated process. You need to take stock of not only the structure of your home and the contents in it, but the materials used to build your home and any special features included in its construction.

You’ll also need to consider your home’s location, the different types of coverage you might need and the deductible amount you’re comfortable paying out of pocket if disaster strikes. All these factors will determine how much you’ll pay for homeowners insurance.

The first step of purchasing a new insurance policy is requesting a quote. Below, we break down the most common components that affect the price you see in a home insurance quote.

What does home insurance cover?

Homeowners insurance protects your house and personal belongings in the event of a loss, whether it’s from an accident, disaster or theft. Your insurance provides coverage according to the named perils on your policy — but not every possible peril that could hit your home is covered.

The National Association of Insurance Commissioners says that most homeowners insurance covers the following:

  • Your dwelling: This includes your house and structures attached to your house, as well as your HVAC system, plumbing and wiring.
  • Your other structures: Fences, free-standing garages, tool sheds and other structures that aren’t attached to your house.
  • Your personal property: Appliances, clothing, electronics, furniture, etc.
  • Loss of use: This helps cover living expenses incurred when residing elsewhere while your home is being repaired.
  • Personal liability: If you’re held responsible for injuries or damage to someone and sued, this covers your financial losses.
  • Medical payments: Covers the medical expenses for someone who was hurt on your property or injured by your pet.

7 factors that determine a homeowners insurance quote

Insurance carriers review factors that are both directly and indirectly related to your house and personal property to calculate an estimated homeowners insurance premium. Below are several common characteristics that can determine your home insurance quote.

Where you live

Your community and neighborhood affect what you’ll pay for homeowners insurance. If you live in a high-crime area, expect to pay more for your coverage — just as you would pay more for your auto insurance policy.

Insurance carriers also care about your proximity to a fire station or water source. Being located too far from one of these places could mean that your property is more of a fire risk.

Your home’s age and other features

Older homes tend to have higher insurance rates than newer homes, and the same goes for homes in poor condition versus those that have been properly maintained.

The materials used to build your home and the cost to rebuild your home also factor into your home insurance quote. For example, brick homes typically cost less to insure than homes with wood framing. Here are some other considerations related to your home’s structure, according to the Insurance Information Institute (III):

  • The style of your home
  • The number of bathrooms and other rooms
  • Your roofing material
  • Fireplaces, arched windows or exterior trim
  • Any customizations, additions or renovations

Actual cash value vs. replacement cost

Be sure you’re insuring your home for what it would cost to rebuild it rather than its purchase price. You’ll have two choices for what your homeowners insurance will cover:

  • The cash value, which deducts for depreciation
  • Replacement cost, which doesn’t include a depreciation deduction.

If there happens to be an unexpected surge in construction costs that pushes the cost to rebuild your home over the limit mentioned in your policy, you also have the option to add coverage that would pay for those extra costs — often referred to as guaranteed replacement cost.

The types of coverage you want

Your policy type will have a dollar limit on each of your coverage types — how much the insurance company will pay to repair or replace structure of your home, your personal belongings and how much they’ll cover in liability protection and additional living expenses. This affects your home insurance quote.

If you have pricey art pieces or jewelry to protect, you’ll likely need to purchase extra coverage for those items. Additionally, if you don’t think $100,000 in liability insurance is enough to cover you from legal issues, you might want to bump up that coverage to $300,000. Extra coverage translates into a higher premium.

Your deductible

The lower your deductible, the higher your home insurance premium, and vice versa. If you can afford to raise your home insurance deductible, you could see a reduction as much 20% in your premium, depending on the amount.

Keep in mind there are two types of deductibles: dollar amount and percentage amount. For the dollar amount, you would pay whatever the stated deductible amount is on your policy each time you file a claim, such as $1,000, for example. If your policy calls for you to pay a percentage amount, it’s based on the home’s insured value, according to the III.

Let’s say your home is insured for $200,000 and you have a 2% deductible. Based on these numbers, your deductible would be $4,000 for every claim you file.

Your credit history

Yes, your credit reports and scores help determine more than just what mortgage interest rate you end up with. Insurance companies use “insurance scores,” which predict a policyholder’s likelihood of filing an insurance claim and are based on the information found in a credit report.

People with poorer credit histories and scores are usually charged more for home insurance because they are considered to be a higher risk than those with good credit profiles.

Available discounts

Do you have any protection devices inside your home, such as a burglar alarm and smoke detectors? What about any disaster-resistant features? All of these items can help you save on your homeowners insurance premium.

It’s also beneficial to bundle your home and auto insurance policies with the same company and check with your insurer about any affinity discounts they may offer for alumni groups or professional associations.

The bottom line

Purchasing the right amount of homeowners insurance coverage involves reviewing several components of your home and personal belongings before making a decision. Be sure you have a thorough understanding of which types of coverage will work best for your property and family, and gather multiple home insurance quotes before committing to a particular insurer.

For extra help, here’s how to find your best home insurance deal this year.


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