So what's the driving force behind rates? According to Noah J. Bank, a vice president and insurance advisor at HUB International, it's the likelihood a homeowner will file a claim—the insurer's perceived "risk." And to determine risk, home insurance companies give significant consideration to past home insurance claims submitted by the homeowner as well as claims related to that property and the homeowner’s credit. “Claim frequency and severity of the claim play a considerable role in determining rates, especially if there's more than one claim relating to the same issue like water damage, wind storms, etc.,” Bank says.
While insurers are there to pay claims, they're also in it to make money. Insuring a home that has had multiple claims in the past three to seven years, even if a previous owner filed the claim, can bump your home insurance premium into a higher pricing tier. You may not even be eligible for home insurance based on the number of recent past claims filed, notes Bank.
The neighborhood, crime rate, and building material availability will all play a part in determining rates, too. And of course, coverage options such as deductibles or added riders for art, wine, jewelry, etc.—and the coverage amount desired—also factor into the size of an annual premium.
“Pricing and eligibility for home insurance can also vary depending on an insurer’s appetite for certain building construction, roof type, condition or age of the home, heating type (if an oil tank is on-premise or underground), the proximity to the coast, swimming pool, trampoline, security systems, and more,” says Bank.
What else affects your rates? “The condition of your home could also reduce a home insurance company’s interest in providing coverage,” says Bill Van Jura, an insurance planning consultant in Poughkeepsie, N.Y. “A home that’s not well-maintained increases the odds the insurer will pay on a claim for damage.” Even the presence of a pup residing at your home can raise your home insurance rates. Some dogs can do a lot of damage, depending on the breed.