Your homeowners insurance company bases the rates you pay on several factors. Some of them are directly related to your home and your behavior, and others have nothing to do with you as an individual.
Things Related to You and Your Home
Insurers assign customers insurance scores based on factors that include credit score, claims history and a home’s safety features. A customer who is deemed risky pays higher premiums than someone with a better insurance score. If your credit score went down or you filed several homeowners insurance claims in the past year, that may lead to a spike in premiums.
If you install a feature on your property that can create a safety hazard and increase your liability risk, it can lead to higher insurance rates. Insurers charge higher premiums to customers with an “attractive nuisance,” such as a pool or trampoline, due to the risk that someone (an invited guest or a curious child) could get hurt.
Factors That Have Nothing to Do With You
Insurance companies assess risk and set premiums in a way that helps them minimize potential losses. If your area recently experienced one or more disasters, you (and other policyholders in your region) may have to pay higher premiums to cover claims that insurers paid out.
Construction costs influence homeowners insurance premiums because a house that is declared a total loss may have to be rebuilt from scratch. If costs for building materials and labor go up because of supply and demand, that can be reflected in higher insurance premiums.
Your individual claims history is important, but so are your neighbors’. Insurance companies assess risk among a pool of customers. If others in your area filed numerous claims, your rates may go up, even if you didn’t submit a single claim yourself.
How to Keep Your Premiums Affordable
Your home’s age and condition can affect your rates. You can’t make your old house new again, but you can repair parts of it that are damaged or worn out. Replacing the roof or upgrading the plumbing or electrical system, for example, can make your home less likely to suffer damage. That means you’ll be less likely to file a claim. Your insurance company may reward you with lower premiums, provided you inform them of upgrades you make.
If you’re concerned that higher premiums will strain your budget, you may be able to make changes to your policy to save money. Raising your deductible may score you a significant reduction in premiums. Just be sure that you’ll have enough money available to cover the higher deductible, if necessary.
Another option is to bundle your homeowners insurance with other policies, such as your auto insurance. Many insurers offer substantial discounts to customers who purchase two or more policies.
Sometimes insurance companies raise rates simply to increase profits and dividends to shareholders. If that’s the reason for the rise in your premiums, you may be able to get a lower rate by switching companies.
