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The Cost of Homeowner Insurance

Insurance companies base homeowner rates on a variety of factors. Your premium consists of a “base rate” amount the insurance company adjusts up or down to reflect specific risk factors. While the weight given to these risk factors will vary by company, the major factors are fairly universal. They include:

Territory Rating
Homeowner rates may vary according to geographical region. Some areas are more prone to wind or water damage. The crime rate and emergency response time in an area also can impact your rate.

Wood frame construction is at greater risk from fire and other types of loss than homes built with concrete or masonry. However, masonry structures are more susceptible to earthquake damage than wood structures.

Amount of Insurance
Your premium will vary depending on the replacement cost of your home. Remember, the cost to actually rebuild your home may exceed its current market value or sales price. Talk to your agent to find out if you have an adequate amount of coverage.

Credit History
Under federal law (Fair Credit Reporting Act), insurance companies can use credit history as one factor that impacts your homeowner rate. They may assign you an insurance score based on your credit history. They use your score as one factor to decide whether to accept or decline your coverage, or how much to charge you.

Claims History
Some companies may charge you more based on the number of claims you have filed. They may even cancel your coverage if you made several claims. Every company is different. Talk to your agent to find out how his or her company handles claims history.