5 Factors That Drive Up Home Insurance Cost

Couple admiring a new home

If you’re planning to buy a home, you’re likely curious about how much the insurance is going to cost. While home insurance cost can be based on the condition and age of your prospective new home, it can also vary greatly can be based on the area the home is located in. To avoid surprises and stay within your budget while house hunting, consider these five major factors that affect premiums by location.

Factor #1: Crime rates in the area

Thief breaking into a house

The cost of a home’s insurance premium is influenced by its surrounding area. Each neighborhood has a record of multiple factors that insurance companies take note of, including crime rates in the area.

Based on statistics provided by the FBI, the state, and other departments, each community is given a grade by insurance companies. The frequency of crimes, like burglaries and vandalism, within a community is compared against the city’s population. Neighborhoods with lower grades are considered higher risk, so homes within these areas are subjected to higher home insurance costs.

Factor #2: Proximity to a fire department

Fire hydrant in front of houses
Image by Rebecca Moninghoff from Pixabay

Every community has a public-protection class rating based on their fire protection amenities. The grade is determined by the community’s water system, which is evaluated by the following factors:

  • The number of fire hydrants within the area and the strength of the water pressure
  • The quality and quantity of water available, in case there is more than one fire at the same time
  • The quality of the fire department, including the training level of the employees (i.e., whether the fire department is full of volunteers or seasoned workers, etc.)
  • The availability of fire-suppression supplies within the area
  • The presence of a railroad within the community, which may create a need for multiple fire departments (i.e., one on each side of the railroad), unless there is a bridge over the top

Communities with better grades are considered safer and less at risk for fire damage and will receive lower insurance premiums.

Factor #3: Claims history within the area

Tiny house on insurance document

Insurance companies evaluate the history of all claims within the community where a home is located before calculating its premium. Past claims could have been due to weather-related issues or issues relating to the decade during which the community was built.

Homes in older neighborhoods may have outdated wiring or plumbing systems that are not up to current state code, which can cause higher premiums. Additionally, older homes with outdated fixtures in need of maintenance will have higher home insurance cost.

Factor #4: The age of the neighborhood

Old home being remodeled

In addition to claims history, insurance companies will take the age of a home’s surrounding neighborhood into consideration. Some people believe that older homes with cheaper price tags will have more affordable insurance, but this is not the case. Older homes carry a much higher risk for insurance companies, as they are much more likely to require maintenance or be a danger to the owner.

In addition to the plumbing and electrical systems, insurance companies are also interested in the status of a home’s roof. Water damage is one of the biggest home insurance claims, and a well-maintained roof is crucial to prevent it. Insurance companies also assume that owners of newer homes will maintain upkeep better than owners of older homes, which further contributes to lower premiums for them.

Factor #5: Risk of tornado and hail damage within the region

Tornadoes and hail go hand in hand, and these storms cause some of the costliest weather-related home insurance claims. The areas known as Tornado Alley and Dixie Alley are more susceptible to tornado and hail damage, and home insurance rates within these areas reflect that.

disaster preparedness

Homes within these regions aren’t automatically doomed to have high insurance rates. Houses with weather-resistant construction features will receive lower rates. For example, homes that have been built with or upgraded to newer roofs with hail-resistant, dent-proof shingles remove a huge amount of risk for weather-related claims.

Knowing the impact of location on insurance cost can remove a lot of the stress and confusion from the home-buying process. If you have further questions about home insurance or are interested in quotes, an independent insurance agent can help you. Visit trustedchoice.com to get matched up with an independent insurance agent today so they can help you get started on your journey.