4 Factors That Affect Home Insurance Rates

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4 Factors That Affect Home Insurance Rates

Searching for a home requires more than attending open houses and scouring through listings. If you open a mortgage, lenders will usually require you to purchase home insurance before you can make the deal official. Even if you pay for the entire home in cash and choose to add a policy later, there could be downsides to waiting - the condition of the home itself can influence your rates, and you may end up wishing you had considered home insurance costs earlier. So before you go house hunting, explore these various factors that impact home insurance rates.

Characteristics of the House

How old your home is and the structure and materials it's made out of commonly impact your premium. The longer your home has been around, the more likely it is to run into issues and cost a lot to patch up, so insurance companies may charge you more for coverage. Whether your home is constructed with wood or brick also makes a difference in how insurance companies view the associated risk.

Location

Where you plan on living impacts more than your everyday commute. An insurer is often going to check how far you live from a fire hydrant or fire station, for example. Living in a remote area where it could take a long time for a fire truck to reach you could cost you. Your neighborhood's crime levels could make an impact on premiums too. On the other hand, you may be able to get a premium reduction by equipping your home with alarms and security cameras. Making your home safer lowers the possibility of someone successfully breaking in, which can reassure insurance companies.

Claims History

If you've filed your share of insurance claims in the past, you might end up paying for that now. A thick claims history could indicate that you're more likely to file claims in the future. It suggests that you have a tendency to file claims for events that could've been prevented or damage that wasn't that serious. Your past behavior may depict you as an expensive risk, whether or not that's still currently true.

Credit History

Insurance companies may also use a credit-based insurance score to help determine premiums. Like a credit score, your home insurance score is based on your credit report. Your payment history and credit utilization, amongst others, are major influencing factors. Unlike credit scores, though, this score is used by insurance companies to help predict insurance risk, not how likely you are to repay your debts. Insurance providers have found that irresponsible credit behavior is correlated with higher insurance risk. Not everyone agrees with this practice, however. A handful of states ban using credit-based insurance scores to determine home insurance premiums, so check with your state insurance department if you're concerned about your credit affecting your insurance rates.

Bottom Line

Consider all of these factors when you're searching for a home and a home insurance policy. You might not be able to influence the rate that an insurer gives you, but you can control some of these factors.

Remember to check your credit report and make sure everything's in order, so that your home insurance score is based off of accurate information. Tracking your home insurance score on Credit Karma can also give you a big-picture look at how your financial actions influence your score over time.

Speaking of time, shopping around for a home insurance policy takes patience. But keep these factors in mind during your quest for a home, and you'll be on your way!

About the Author: Charmaine Ng is the Communications Coordinator at Credit Karma. When she isn't writing her way through life, you can find her reading about the latest in entertainment and watching television almost every night of the week. Say "hi" @noodlemaine!

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All Comments

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1 Contribution
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Helpful to 19 out of 19 people

The difference between my "real" credit scores and my insurance scores is ridiculous.  I have GREAT credit and zero history of negative remarks.  Never late on a payment of any kind and my house is paid off... I am mortgage free!  Even with three vehicles insured, I have not made a claim on the house or any of the vehicles in DECADES!  I consider these insurance scores to be outrageous and derogatory.  Of course, there's no way to fight it.  Guess I'm just stuck with whatever some pencil-pusher chooses to say about me.  If there is a way to appeal these low marks, I would like to know.

Credit Karma Team
Top Contributor
2949 Contributions
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Helpful to 3 out of 9 people

Hi chiefdesk, There's no way to appeal a credit score. However, before getting too upset, I suggest contacting your insurance agent directly. Not all insurance companies use these scores. Insurance scores are just one piece of the puzzle that insurers can use to evaluate risk - your agent can tell you whether or not they use these scores. 

Reply by
DanielMelesse

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Enter Your Reply

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Reply by
Tojomar4

35 Contributions
58 People Helped
Helpful to 1 out of 1 people

Amen!!! Stupid because just like you no negitive remarks on my credit and dont have and didn't need home insurance SO for that I get penalized on home insurance .. that's just SCREWY!!!!!  

2 Contributions
15 People Helped

Helpful to 14 out of 15 people

It would have been helpful had you just named the states since there aren't that many, anyway. See below:

A few states prohibit insurers from using consumer credit information – California, Massachusetts and Hawaii for auto insurance and Maryland and Hawaii for homeowners insurance. In other states, state or federal law requires the insurance company to provide you some important notifications – the most important of which is the federal Fair Credit Reporting Act (FCRA) Adverse Action Notification. The FCRA requires any user of a credit report to notify the consumer if the use of that report resulted in an adverse action, which, in the case of insurance, would be denial of coverage or a higher premium than a consumer with an average insurance credit score. These adverse action notices come with your policy or policy renewal information, but may be hard to identify because insurers don’t like to use the word “adverse!”

Above info found here: http://uphelp.org/pubs/credit-scoring-insurance-unfair-practice

Credit Karma Team
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Hi L101,

Thanks for providing this information. Since the list of states could change at any time, we left this information out. We don't want to provide an out of date list. 

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Reply by
Tojomar4

35 Contributions
58 People Helped

Pardon me!!! ... Massachusetts just tells you the choices of both auto and home insurance HOWEVER, I can have a perfect insurance record, STILL going to pay high outrageous rates regardless of (example) my driving is perfect vs anyone with points against them, I am going to pay the same as the bad driver with points in the STATE of "TAXACHUSETTS" .. Like it or not that is how it works!!!!!!!!!

3 Contributions
14 People Helped

Helpful to 8 out of 9 people

I keep it simple. My credit is good enough. I use banks minimally for my mortgage etc. .....I never use credit cards ever.....and I flat out won't use insurance companies that rip off their customers with their voodoo scoring scam that jack the rates up. I've got no claims, no tickets, no risk factors, so give me a good rate or I call the next insurance company and if you think you will jack my rates the 2nd or later years to be slick, I shop for cheapest rates every year and hold no loyalty to these scammers. All surance is such a scam anyways. .....but ya can't go without it . Necessary evil!! 

Credit Karma Team
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5208 People Helped
Helpful to 0 out of 4 people

Thanks for posting! It's smart to comparison shop every year for the best rates and services. 

2 Contributions
16 People Helped

Helpful to 7 out of 9 people

I find Home Insurance Ratings downright lies.If I can, I will explore a class action lawsuit.. There is no corralation betwwen my Excellant Credit rating and my homeowners claim record. I have never made a claim against my home owners insurance as long as I have owned my home, 15 years! Just plain crap.

Reply by
Cabesmojo

3 Contributions
12 People Helped
Helpful to 10 out of 11 people

Home insurance scores are voodoo. Mine has fluctuated massively with little to no changes to anything I do. House is less than 15 years old, never filed a claim, I can see a **** fire station from my bedroom window, have an alarm system, and live in a low crime area. My score.......under 800 in the poor range. At one point it was peaked at 850 then fell to 692 for lord knows what reason. I could strangle a chicken in the back yard and read its entrails and have about as good idea as to what is going on here.

1 Contribution
5 People Helped

Helpful to 5 out of 6 people

The Score for the Insurance is a fabrication of fantasy, erroneous, false, and set to defraud the individual. The 4 factors of influence on the score are fictitious at best. EXAMPLE and prove me wrong! 1. I have never filed a claim against my Insurance... PROVE ME WRONG. I have had auto Insurance since 1971 with no filings...PROVE ME WRONG! 2. I have had Insurance on Every Home I own and NEVER filed a Claim... PROVE ME WRONG! My current home is in a low crime area, according to the Appraiser, in excellent shape, with a new roof installed the year I purchased the property (2011)... PROVE ME WRONG!.. 3. Credit History... unless paying all my bills on time 100% of the time is a detriment to my credit score, then it validates as long as you are willing to be a SLAVE to the Financial Companies all your life, YOU ARE A CREDIT RISK...NOW PROVE ME WRONG... I paid off 3 vehicles all on time, never late..I paid off 2 mortgages in teh past 10 years..PAID IN FULL and FULLY SATISFIED... But.. I am rated POOR in the Insurance Score!!! So who is providing false and misleading information... ? Certainly not me! Oh yes... crime rate is 7.8% lower than National Average... Never an incident... House is a CONDO with good security monitoring service, Fire extinguisher in every building as well as in my Condo Kitchen... Locked and secure with double locks. wiring and plumbing to code... SO, what gives... am I an insurance risk!

Credit Karma Team
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Hi torja,

The score is calculated using credit report data, not your claim history. Your claim history is obviously a major component of other parts of the process. The credit score is just one small portion of the data insurance companies can use to set rets. 

6 Contributions
6 People Helped

Helpful to 1 out of 1 people

Could it be the agent being paid on commission gets a bigger like say a bonus commission the first year and decreases in subsequent year that was a bad year for him.  Does he input your insurance credit score to renew your premium?  Just a question  I didn't know until just reading these factors that affect home insurance that there was a home insurance credit rating.....

Credit Karma Team
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2949 Contributions
5208 People Helped
Helpful to 0 out of 1 people

Hi ausgmblr,

Any bonus for new clients would likely vary from company to company. Remember that not all states allow the use of credit-based inusrance scores, so it's best to ask your agent if their company uses these scores. 

Top Contributor
23 Contributions
305 People Helped

Helpful to 3 out of 7 people

Very good information in this.  I think you don't have a lot of questions and comments because people don't like the confusion of insurance.  It takes work to understand it all even with my great agent.  I'm glad I came back and read it.  Thank you Charmaine. 

Top Contributor

Reply by
CKCharmaine

512 Contributions
1138 People Helped
Helpful to 3 out of 6 people

Insurance is indeed very confusing! I'm glad you found the article helpful :)

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