Why Are My Home Insurance Quotes So High?

Why Are My Home Insurance Quotes So High? article image.

Home insurance covers the loss or damage of your home and the belongings in it. It is typically required by mortgage lenders to protect the value of your home, and can also be purchased voluntarily for some added peace of mind—but it often doesn't come cheap.

Homeowners insurance costs vary by state, and are on the rise everywhere. The average cost of a monthly premium leapt from $830 in 2008 to $1,211 in 2017, according to data from the National Association of Insurance Commissioners. In addition to industry-wide price increases, your home insurance quotes may also be high because of your credit, a home's age and value, construction type, location, and exposure to catastrophes, among other factors.

What Factors Determine a Home Insurance Quote?

A litany of factors determine a home insurance quote, and insurers calculate their prices differently. These are some of the factors that play into your insurance premium:

  • Your credit: If you live in a state where it's allowed, your insurer can check your credit when you apply for homeowners insurance. They may refer to your credit-based insurance score, which uses your financial history to help insurers determine your likelihood of filing a claim. The worse shape your credit is in, the higher your home insurance quote can be. Typically, though, your credit won't be the sole factor determining your rates. So if your rates are high, there's likely more at play.
  • Your deductible: Like other types of insurance, the amount of your deductible plays a role in determining your premium. In general, asking your insurer for a higher deductible can help you nab a lower rate. However, the consequence of doing so is that you'll be on the hook for a larger portion of upfront expenses when you file a claim, which could put you in a financial bind.
  • Your home's age and materials: Home insurance is partly based on your home's construction materials, features, age, compliance with current building codes and other factors, according to the Insurance Information Institute. Your insurance policy covers repairs to the home if it's damaged, and those costs can vary significantly depending on when and how a home was built. If your home was built with unique features or pricey materials that would be expensive to replace, your home insurance premium may be higher.
  • Your location: The physical location of a home can impact home insurance quotes in a few ways. Homes that are closer to a coast or in areas prone to natural disasters are riskier and usually command higher premiums, while homes in low-risk areas may score lower premiums. Homeowners insurance also tends to be more expensive in densely populated urban areas, and can be influenced by state and local regulations.
  • Extra features: Insurance is all about risk, so additional features such as a swimming pool or hot tub can increase rates since they might add risk and require greater liability coverage.
  • The value of your belongings: Homeowners insurance doesn't just cover your home itself, but the belongings within it. If you own many valuable items you want to protect, you may have to pay more for higher coverage, or even add an additional policy if your standard coverage isn't enough. This helps make sure you'll receive enough compensation to replace any belongings that are destroyed or stolen, but increased coverage can easily increase the cost of your premium.

How to Save on Homeowners Insurance

While the expense of homeowners insurance might be unavoidable, there are some ways to bring down the price of your quote.

  • Compare rates. To land the lowest rate, obtain quotes for comparable coverage from several insurers. Getting a quote doesn't require commitment. It may be worthwhile to compare rates from a few types of insurers, such as online insurance companies and traditional insurers you already do business with.
  • Raise your deductible. When your policy deductible is higher, you'll generally pay a lower ongoing premium in exchange. If your premium quotes are too high, consider selecting a policy with a higher deductible. Just be aware that the consequence is you'll have to pay more money out-of-pocket anytime you file a claim. If you go that route, ensure you have savings so you're covered if you need to pay a larger fee upfront for repairs before your policy kicks in.
  • Improve your credit. Because insurers in many states review your credit when evaluating your application and setting your premium, taking steps to improve your credit score can help you secure a cheaper policy. Bad credit won't necessarily disqualify you from getting approved for home insurance coverage, but it can result in a higher premium than you'd otherwise pay.
  • Bundle your insurance policies. Many insurance companies offer multi-policy discounts if you use them for other types of insurance, which could knock off a chunk of your bill. Progressive, for example, says customers who bundle home and auto insurance policies save an average of 12%.
  • Ask about other discounts. Some insurers offer additional discounts for various reasons. Ways to qualify for a discount include: if you are over 55 and retired, if you work for a certain company, if you have a home security system or if you update your plumbing or electrical system.

Optional Home Insurance Policies to Consider

Standard home insurance covers damage from wind, hail, lightning or fire, though floods and earthquakes typically require their own policies. Here's what you need to know about these two types of insurance:

  • Earthquake insurance: A typical homeowners insurance policy doesn't cover earthquakes, so if you live on the West Coast or another area prone to quakes, you may want to purchase optional earthquake insurance. It will be an additional cost on top of your existing policy, which can be hefty if you live in a high-risk area. In evaluating whether to get it, you'll need to consider your budget, how likely your area is to experience an earthquake and your tolerance for risk. While earthquakes aren't likely in some areas, keep in mind that if your house or belongings are damaged in one, you'll be on the hook for the cost of repairs unless you have an earthquake insurance policy.
  • Flood insurance: Flood damage also isn't covered by standard home insurance policies. If you live in a high-risk area, you may be required to have a flood insurance policy, according to the Federal Emergency Management Agency. But even those in areas of moderate or low risk should consider getting optional flood insurance since even a minor flood can cause massive and expensive damage inside a home.

Boost Your Credit Before You Apply

As we've noted, the shape of your credit could be one of the many factors that helps determine your home insurance quote, and those with stronger credit may benefit from lower premiums. If you plan to apply for homeowners insurance soon, make sure you understand where your credit stands by getting a free copy of your credit reports through AnnualCreditReport.com.

You can also get your free Experian credit report and FICO® Score directly through Experian. Take some time to review the information in your credit reports, and gain an understanding of how it's affecting your scores. If necessary, take steps to improve your scores, including paying all your bills on time and keeping credit card balances low. You might also consider signing up for free credit monitoring, which will help you keep a closer eye on your reports and scores and be alerted to any changes.