Home » How Are Homeowners Insurance Rates Calculated? 
May 17, 2024

How Are Homeowners Insurance Rates Calculated? 

man in purple suit jacket using laptop computer showing how homeowners insurance rates calculated When it comes to personal finance and security, few investments are as essential as home insurance. While it may seem like an unnecessary additional expense, the financial protections home insurance can offer in times of crisis are invaluable.

Without adequate coverage, homeowners would have to cover a significant amount for an incident out of pocket.

How Insurance Companies Determine Homeowners Insurance Rates

Insurance companies may use the following factors to determine homeowners insurance rates:

  • Location—Homes in areas prone to severe weather, such as hurricanes or wildfires, typically have higher insurance premiums due to the increased risk of damage.
  • Construction and age of home—Older homes or those constructed with materials prone to damage may result in higher premiums. Additionally, the cost to rebuild or repair these homes can affect insurance rates.
  • Coverage limits and deductibles—Choosing higher coverage limits or lower deductibles can increase premiums. Conversely, lower coverage limits or higher deductibles may result in lower premiums; however, this could leave homeowners with more expenses they must pay out of pocket.
  • Home features and amenities—Homes with features such as swimming pools, trampolines or extensive landscaping may increase liability risks, leading to higher premiums.
  • Claims history—Homeowners who have filed multiple claims in the past may be considered higher risk by insurance companies, resulting in higher premiums.

Tips for Lowing Homeowners Insurance Costs

Consider the following tips to potentially save on your homeowners insurance premium:

  • Bundle policies. Most insurance providers offer a discount for bundling insurance policies, most commonly homeowners and auto insurance.
  • Install security features. Improving your home’s safety, such as adding security cameras or alarm systems, may qualify you for discounts on your insurance premium.
  • Review and update coverage. Consider reviewing your homeowners policy annually to see if there are ways you can save on coverage.
  • Ask about discounts. Insurance providers often offer discounts for paperless billing, automated payments or making payments in full. Don’t be afraid to ask for ways to save on your next payment.
  • Avoid small claims. Insurers may see you as a high-risk client if you have a history of filing multiple claims, even if they are small. Instead, try to pay for less expensive incidents out of pocket to avoid premium increases.

Homeowners Insurance in Little Rock, AR

Contact Sunstar Insurance of Arkansas to discuss your homeowners insurance policy. We can help you get appropriate homeowners insurance coverage at a favorable rate.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.


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