What Makes Home Insurance Expensive? (Or Cheap?)

Home InsuranceImagine, you are all set to sign a purchase contract for your new home and the next thing that you have in mind is the selection of a homeowners insurance policy; also known as HOI, Home Insurance or Hazard Insurance. This insurance is essential to cover the home from a standard list of perils. The premium could be expensive depending on various factors. It is important for a homeowner to understand the basic concept of home insurance, the general coverage offered, the optional coverage offered and the major underwriting factors of risk which may impact the price of insurance. Following are some major points that will help you understand the concept behind the  homeowners insurance policy:

Deductible and Coverage:

The easiest way to understand this point is: the lower your deductible, the higher the premium; conversely, the higher the deductible, the lower the premium. The deductible is the amount deducted from your payout of a covered claim. Regarding coverage, the higher the limits of coverage, the higher the premium.

Certain Pets May Make Insurance Unacceptable:

Most Americans are pet lovers mostly including cats and dogs. Those who own pets that are either dangerous or exotic may find it very difficult to purchase home insurance. Most carriers will not accept either an Exotic, Wild or Aggressive breed of animals. The most common pets which are on ‘the list’ of most property insurance carriers as unacceptable breeds are the following: Doberman Pinschers, Pit Bulls, Chow Chows, Wolves and Rottweilers. The main reason behind this is the fact that these pets are associated with numerous injuries to mankind and this makes them risky to insurers. On the other hand, there are other pets with greater propensity to bite such as the common small pet chihuahua which doesn’t rate high on bite severity thus not causing great concern to carriers.

Credit Ratings:

Credit ratings affect everything, including homeowners insurance. Statistics have shown that individuals with lower credit ratings make more insurance claims and insurers vary premium as a result; this practice is known as ‘Credit-Based Insurance Scoring’ which is illegal in only a handful of States including California. In States where credit based insurance scoring is not used, the premium rates are generally higher that in those States which allow the practice.


Insurance companies collect data related to location in terms of claims and other issues. Factors like proximity to the nearest fire station and proximity of a risk from the closest fire hydrant, protection class code assigned to the area and general claims experience in a given area are all necessary in assessing risk.

It is very important for a homeowner to consider all these points before purchasing an insurance contract. The most concise and expeditious way to buy home insurance is to obtain 2 or 3 quotes online and then find a reputable insurance professional who is able to answer all your questions and fairly differentiate between your options.

Since home insurance is thankfully not a daily or weekly decision, it is important to take the time when insuring one’s home; then review the process every 3 to 5 years to make sure that your insurance needs are addressed and you are still paying a fair premium. Keep following these points and rest assured, your home insurance will never be an expensive one.