5 factors that affect home insurance rates
Updated October 16, 2024, 2:41 AM EDT
Several factors can increase your home insurance costs, but consumers can shop around and bundle their rates to slash them.
What causes insurance rates to go up?
The environment in your neighborhood can change over time, increasing your risk of flooding and being impacted by wildfires and earthquakes. If you live in a rural area, the closure of a fire department can also be a factor. Changes to your credit score and the age of your home can also increase rates.
Here are five factors that can affect your home insurance rates.
- Natural disasters
- Rural areas
- Credit score changes
- Older homes
- Home improvements
1. Natural disasters
If your area has been impacted by more than one instance of severe flooding, hurricane, or wildfire in recent years, your premium could increase.
"Homes in areas with severe weather, such as earthquakes, tornadoes, and hurricanes also tend to have higher premiums along with homes near the coast in flood zones, ones with pools or trampolines as well," said Leslie Tayne, a Melville, N.Y., attorney specializing in debt relief.
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2. Rural areas
If you live in the country, the amount of time it would take firefighters to reach your home can be a major factor, especially if one closed recently.
"Living in a rural area, being near a fire hydrant or volunteer fire department makes a difference," said Jackie Boies, a senior director of housing and bankruptcy services for Money Management International, a Sugar Land, Texas-based nonprofit debt counseling organization.
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3. Credit score changes
Your insurance score can also influence your home insurance premium and shares similarities to credit scores, said Tayne.
"Insurance companies often consider an individual’s number of credit inquiries and accounts, listed bankruptcies or collection activity and payment history when underwriting an insurance policy," she said.
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4. Older homes
Older homes are typically more expensive to insure than newer homes due to the need for repairs and some not having the latest safety and security features, Tayne said.
5. Home improvements
If you have added a pool, another room, or an outdoor kitchen, your home insurance could increase because the likelihood of accidents or more people visiting you has likely risen.
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How to reduce insurance costs
Shopping around or making home improvements can lower your premium. One strategy is to improve your home security while bundling your policies can also help you receive discounts. You can also explore these other tips:
- Comparison shop
- Making home improvements
- Increase home security
- Bundling policies
1. Comparison shop
Consumers should shop around for homeowners insurance, but don’t make your choice on price alone, said Boies.
"Begin by taking a close look at your existing policy and see if changes should be made," Boies said. "Homeowners should review their policy annually to ensure they have the coverage they need."
Some policies automatically increase the amount of coverage annually, which also increases the cost. You may not need to raise your coverage, she said.
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2. Making home improvements
Updating your home can lower your premium. Adding a new roof, in particular, can be an advantage.
"Agencies offer discounts from energy-efficient upgrades to fencing, so make sure you review the list annually for any changes or improvements you’ve made," Boies said.
Let your insurance company know if you have renovated your home or upgraded your roof to receive discounts you may qualify for, Tayne said.
3. Increase home security
Adding cameras, a fence, or other home security improvements can also net you a reduction on your home insurance policy.
"If you are in the market to make upgrades to your home, talk with your insurance agent about items that might bring you the largest discounts, such as sprinkler, fire, and burglar alarm systems," Boies said.
4. Bundling policies
Consider purchasing hurricane, wind, or earthquake insurance policies from the same insurance company to receive a discount, especially if you already have auto insurance with them. Bundling policies could save you as much as 15%, Boies said.
"In a coastal home, you’ll want to know if the structure has been built or retrofitted to be hurricane resistant," she said. "If you are purchasing in a flood-prone or earthquake area, you may need a separate policy for these coverages."
When you review your policy each year, make sure you are receiving every possible discount.
"Maintaining your homeowners insurance is just one piece of your financial puzzle," Boies said. "If you’re having difficulty putting it all together, reach out to a HUD-approved housing counseling agency, such as Money Management International for a free-financial analysis and budget review."