What Affects My Home Insurance Quote?

This Page's Content Was Last Updated: February 1, 2024
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What You Should Know

  • Home insurance covers the physical structure, potential liability to third parties, and replacement costs in case of fire, theft and natural events.
  • The main factors affecting the home insurance premium are home construction cost, location, past claims, and distance from a fire station and hydrant.
  • Insurance companies use various factors to estimate the insurance cost, so the home insurance quotes may differ between home insurance providers.

What Is Home Insurance?

Home Insurance covers you if your home and your belongings get damaged due to fire, theft, or natural events. Insurance companies consider various factors to estimate the expected cost of future claims for every insured home and charge the customer that amount and a certain premium. This means that your home insurance payment depends on many factors, including location, distance to the closest fire station and fire hydrant, house age, heating system, and even past claims.

Average Home Insurance Premium By City

Basic Elements of Home Insurance

Your insurance consists of multiple coverages, liabilities, and endorsements. Home Insurance typically covers rebuilding the same property (up to the policy limit). The overall property coverage limit may depend on the actual cash value or the home's replacement value, which usually includes four basic coverages:

  • Coverage A includes a dwelling such as foundation, flooring, windows, and doors.
  • Coverage B includes detached structures such as a shed or outhouse.
  • Coverage C includes home contents such as furniture, computers, appliances, and clothing. This coverage may have a special limit on jewelry, expensive wines, and other collectible items.
  • Coverage D includes additional expenses such as bad debt on rent for landlords and expenses of tenants or homeowners.

What Factors Affect Home Insurance Quote?

Insurers consider a huge number of factors when determining the insurance premium rate. The following are the key factors that affect your home insurance quote:

Replacement Cost: Replacement cost refers to the estimated rebuilding costs of your house. This amount can vary depending on the size, age, and construction of your home and the materials used in its construction. As a rule of thumb, the more expensive the house, the higher the replacement cost.

Location: The location is a significant factor in home insurance premiums. Insurance companies use the postal code to determine the likelihood of claim occurrence by tracking the claims in that region. If you live in a neighborhood with high crime rates or a high frequency of natural disasters, you are likely to have a higher insurance premium than other areas.

Fire Station and Fire Hydrant: The distance between your home and the nearest fire station or fire hydrant also impacts your home insurance premiums. Homes close to a fire station and fire hydrant are considered less risky. The closer you are to a fire station and fire hydrant, the lower your home insurance premium.

Age of House: The age of the structure of your house is another factor of premium adjustment. Older houses are less valuable and have a higher chance of getting damaged. An old house increases the risks associated with pipes, air ducts, and roof strength. Older homes are charged higher premiums than newer homes.

Past Claims: The more claims you have made on your home insurance policy, the higher your premium rate will likely be. Insurance companies view past claims as a sign of increased risk.

Heating System: Oil and wood-burning heat have an increased fire risk and lead to a higher home insurance premium.

Size: If you live in a three-story house, chances are you have more stuff than someone who lives in a small townhouse – which means it would cost more to rebuild, replace or repair in the event of, say, a fire or flood.

Usage: If you run a home-based business, it’s a good idea to connect with your insurance advisor and discuss whether adding a home business floater to your policy is appropriate. This floater includes coverage for office equipment and inventory pertaining to a business. Home insurance includes personal liability coverage, and when this floater is added to a policy, it also extends that liability coverage to the business. This added coverage means you'll pay more for your insurance.

Coverage and Deductible: The higher your deductible – the amount you agree to pay upfront in the event of a claim – the lower your insurance rate.

Special Discounts: You can reduce your home insurance premiums in other ways. For example, installing centrally monitored systems that detect fire or break-ins can lead to home insurance discounts. Talk to your home insurance provider about discounts they offer.

Ways To Reduce Your Home Insurance Premiums

  • Bundling your home insurance with other insurance, like auto insurance, can help save money on insurance premiums.
  • Having a centrally monitored fire alarm and/or burglar alarm that sends alerts can provide added protection to the home and more savings.
  • New homes are considered less risky because they have newer appliances, electrical systems, plumbing, and HVAC. Newer homes tend to have lower premiums.
  • Residing in a safe neighborhood from crimes and natural disasters can reduce risk and, therefore, the premium.

How to Choose the Best Home Insurance Company

Choosing the cheapest home insurance provider when shopping for one may be tempting, but it may not be the best idea in the long term. Insurance companies are very specific about the cases when they cover the customer. Sometimes, they may not even be able to cover their customers, so it is important to have home insurance with a reliable provider. The following factors can help you recognize a reliable home insurance provider.

Financial Strength: Check for the financial strength of the insurer. Insurance companies need financial stability to be able to pay out large claims.

Customer Reviews: Word-of-mouth marketing has always worked in the past, and today, the internet helps spread the word using customer reviews or recommendations. Be sure to check those out before choosing the right insurer for yourself.

Market Share: Compare your chosen insurer's market share and industry rankings with other market competitors to better understand which insurer meets your needs.

Deals and Discounts: Insurance companies offer discounts from time to time. It is best to check the deals they offer on their insurance products, what kind of savings you may earn by bundling with them, how they accept payments, and how quickly they respond to queries.

Coverages Offered: Another important tip is to understand that you get fair coverage for the amount you are paying. Each insurer can have different coverages with different deductible options. Once you know what kind of coverage you want, comparing the insurers that suit your needs will be easier.

Frequently Asked Questions

icon Will I Get Home Insurance if I Have a Pet Dog?

Dogs are considered a part of the property, and you will be provided coverage against personal liability in case your dog bites someone in your house. Keep in mind that this coverage is not the same as pet insurance. Some insurance companies might increase your insurance if you have a large breed dog, for example, a pit bull, rottweiler, cane corso, etc. It is important to check with your insurance before you finalize your policy.

iconDoes My Home Insurance Cover Natural Disasters?

It is a myth that natural disasters are not covered by a home insurance policy. A typical insurance policy covers “named-perils” and contains a clause for “unpredictable weather conditions”. For example, most insurance policies in Alberta cover hailstorms.

icon Will Having a Swimming Pool or Hot Tub Increase My Home Insurance?

Open water sources in the house can increase your home insurance. This is because it can increase the risk of personal liability, and adds an additional layer of repair cost if it were to be rebuilt. There is also a risk of the pool leaking and water entering the foundation of the house. The insurance companies account for such risks and charge accordingly.

iconWill Regular Repair or Renovation Affect My Home Insurance?

Major renovations in the house can reduce the insurance risk. For example, if you repaired a 10-year-old roof, this can help reduce the risk. On the other hand, if you make structural changes like adding a bedroom without a permit, this can lead to increased insurance rates.

iconHow Are Home Insurance Premiums Calculated?

Every insurance company will provide a different insurance quote for the same house. This is because of the unique factors and algorithms insurance companies use to estimate home insurance rates. While some home insurance calculators use only the mentioned factors, most companies use more comprehensive models to estimate home insurance costs. Those factors can be your credit rating, roof type, heat source, the presence of any home business, pets, pools, fireplaces, and many more.

iconWhy Is The Actual Home Insurance Premium Different From Online Calculators?

Many online home insurance calculators do not account for these factors and end up providing inaccurate or ballpark figures for your actual home insurance quote. On the bright side, online home insurance calculators are extremely fast and provide an estimated figure for your insurance premium within a few minutes instead of hours on call waiting for an agent.

Online insurance calculators try to curate all the general factors that could apply to everyone and leave the parameters that pertain to someone’s personal insurance history aside. This is the main reason for getting inaccurate but not completely unreliable results.

An online home insurance calculator is a tool that can help in getting the results for you to budget for your insurance, but should only be used as a rough estimate.

The calculators and content on this page are provided for general information purposes only. WOWA does not guarantee the accuracy of information shown and is not responsible for any consequences of the use of the calculator.