10 Factors That Affect Home Insurance Costs

Where you live is one of the biggest factors that determine how much you’ll pay for home insurance. On average, Louisiana homeowners paid almost three times as much for their premiums in 2020 ($1,965) as homeowners in Oregon ($763), according to the NAIC.³ Natural disasters are a primary reason for that startling difference: When hurricanes hit coastal states like Louisiana and Florida, insurers sometimes have to pay for billions of dollars in damages, so they raise home insurance premiums.⁴
 
Local factors within each state also affect homeowner insurance costs, including your city and your zip code. For example, your cost could be lower if your neighborhood is near a permanently staffed fire department.⁵

Your homeowner insurance premium may be higher if you have a vintage home.⁶ One reason is that older homes often have features or construction materials that are costly to replace, like original siding or ornate trim.⁵ Another reason is that older homes may have outdated plumbing or electrical systems that insurers view as higher risk.⁵ The home’s condition is also important, even if it’s newer. Insurers often pay special attention to the roof, because leaks due to a worn-out roof can cause expensive damage inside your home.⁴

Insurers may reward you with a discount if you install security or safety systems that reduce the risk of home insurance claims. You may earn discounts on premiums if you add a security system or fire alarms that automatically alert local authorities, or even if you secure doors and windows with strong locks and deadbolts.⁷ Of course, you need to weigh the potential benefit of each feature against its cost – and not all insurers offer the same discounts.

The way you use credit may affect your home insurance premium. In some states, insurers are allowed to use a credit-based “insurance score” as a factor when setting premiums. Your insurance score is different from your credit score, but it’s based on some of the same factors, including your payment history and how much debt you have. You can improve your insurance score using the same methods that you’d use to improve your credit score, such as making sure you pay credit card bills on time.⁸

Depending on your situation, you may consider buying additional types of coverage, either as an extension of your homeowner insurance or as a separate policy. Some disasters, like earthquakes and floods, generally aren’t covered by regular home insurance, so if you live in an area vulnerable to those catastrophes and you want coverage you’ll probably need to buy it separately.⁹ In one Consumer Reports survey, the organization’s members listed hailstorms as the leading cause of damage that resulted in filing claims. You may have to pay extra to cover hail damage.¹⁰

You may have the option of choosing higher or lower deductibles on your home insurance policy. A deductible is the amount you pay towards a claim. For example, if you have a $500 deductible and your home suffers damage that costs $2,000 to fix, you’d pay $500 and the insurer would pay the rest, assuming it approves the repair bill. A higher deductible reduces the insurer’s risk, so the company may reduce your premium accordingly.¹¹

Many insurers offer a discount if you buy multiple types of insurance from them. For example, you may be able to save money if you get homeowners insurance and auto insurance from the same provider.¹²