How Are Homeowners Insurance Rates Determined?

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There are a variety of factors that can impact the rate of homeowners insurance. The amount you pay for homeowners insurance varies from case to case because of the personal details that come into play when determining your rate.

Understanding how your rate is determined is a key part of getting a competitive rate on homeowners insurance while making sure you’re protected with the right coverage.

Factors that Affect the Cost of Homeowners Insurance

Your homeowners insurance rate can increase, after weighing the factors, if an insurer decides that you have a high risk of making a claim. Here are some factors that can affect your rates:

  • Replacement cost
  • Credit history
  • Claims history
  • Marital status
  • Age of home
  • Deductible
  • Location

Replacement Cost

The more your home costs to replace, the more you’re likely to pay to insure it. Replacement cost is not the same as market value cost, as it could either fall higher or lower than that number. The replacement cost only refers to the residential building that must be replaced, while the market value takes into consideration location, land, neighborhood, view, etc.

Credit History

Insurers often check their customer’s credit history in order to get an idea of the risk that they are accepting. If you have a good credit score, this could mean lower risk for the insurer, who wants to keep the risk as low as possible, and a reduced rate.

If you have poor credit, an insurer may assume that you are less likely to pay premiums on time and more likely to file claims under your policy, which could increase your rate.

Claims History

Patterns of behavior can help insurers make informed decisions about rates. If you have filed a claim in the past, an insurer might assume that you are more likely to file claims in the future, which could mean a higher degree of risk for the insurance company.

Even if you made a claim on a previous home, that history will follow you to your next residence.

Marital Status

Insurers will typically assume lower risk for a married couple since, statistically, they file fewer claims, so they will assign lower rates to them.

Age of Home

You will most likely pay a higher homeowners insurance premium if your home is older or requires a lot of improvements. If you upgrade your home in the way of electrical, heating, or plumbing work, or install a security system, your risk goes down and this could potentially reduce your rate.


If you agree to a higher deductible (the amount you pay out-of-pocket), you will decrease your premium – but doing so could also cost you more if you file a claim.


If you are located in a zip code that has a history of perils such as vandalism, theft, or weather-related events, this could increase the cost of your homeowners policy. Location can also have a positive impact, like if you’re located near an active fire station.

Other Factors

There are other factors that can influence the amount you pay in premiums that often get overlooked. Some of these factors include:

  • Distance From Water
    • The closer your home is to the coast, the more likely it is to incur damage from flooding or hurricanes, and that increases the cost of insurance.
  • Filing Small Claims
    • Insurers will look into your claims history, and if you have a history of filing even small claims, you may be more likely to file larger ones, which they view as a risk.
  • Living Near a Fire Station
    • The closer you live to a fire station, the quicker a fire at your home can be put out without doing severe damage. The lower your score on the Fire Suppression Rating Schedule (FSRS) from 1-10, the safer your home is from risk of fire. If you are further than 5 miles away from the station, your score automatically defaults to a 10.
  • Dog Breed
    • If your dog is seen as having an increased ‘bite risk,’ this could increase your homeowners insurance rate. Some dogs may be restricted from a homeowners policy completely, and even if they aren’t a restricted breed, they could affect your rate or your ability to secure coverage.
  • Attractive Nuisances
    • Attractive nuisances include swimming pools, trampolines, treehouses, wells, fountains, swing sets, construction projects, and anything that could attract trespassers or put an invited guest at risk of injury. Having attractive nuisances at your home could increase your rate.

Lott & Gaylor Insurance

Lott & Gaylor values reliability, integrity, and peace of mind. We always put our customers’ protection front and center, which is why we find it so important to share vital information regarding homeowners insurance rates and the factors used to calculate them.

If you’re interested in homeowners insurance coverage in Southwest Florida, contact us today for a free quote.

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