Person A has a fairly good credit history and has never filed claims on their homeowners insurance. Person B has a fairly good credit history and has never filed claims on their homeowners insurance. You’d think a home insurance quote from the same company would yield similar, if not identical, results, right? Unless they get a quote on the same house at the same time, chances are their quotes will be different. Why is that? Why do home insurance rates seem so random?
Home insurance rates are not really random at all. Every insurance company doing business in Nevada is required to file its rating structure with the Nevada Department of Insurance. The DOI may reject the rating structure if it deems it unfair or illegal. Once the rating system is approved, the insurance company must apply the rating structure to all potential policyholders equally.
So why the random prices? Well, they seem random because there are so many different factors that go into qualifying for a home insurance policy. Below are some of the things that can be used to qualify a home insurance policy.
*Coverage amount: You may want to over-insure your home because you think it’s better to be safe than sorry, but you’ll pay more for coverage you don’t need. The amount of coverage affects the price with all insurance companies. Make sure you have enough coverage, but don’t go overboard either.
*Local fire protection: If you have a volunteer fire station 20 miles away, you’ll pay a little more for your home insurance because of the increased risk. Many companies won’t insure a home with only one volunteer fire station nearby, limiting your options.
*Build Type – Whether you have a brick home or a stucco frame home, your insurance company needs to know. Your insurance company also wants to know what type of roof you have. Wood-slat roofs are not as desirable as concrete tile roofs because they are slightly more flammable.
*Age of the house: The older the house, the more likely it is to have a claim. Therefore, older houses will generally cost more to insure.
* Deductible amount: No matter who your insurance company is, the higher the deductible, the lower the premium. Be sure to compare similar deductibles when comparing policies.
*Discounts: All insurance companies will have discounts, but not all are the same and not all are applied equally. One company may offer a 3% discount for a monitored alarm system, while another company will offer a 5% discount. Check with your agent to make sure you’re getting all the discounts you deserve.
*Insurance Score – Some companies use what we like to call an “insurance score,” which is based on your credit history. It’s not the same FICO score you use when you get a home loan, but it uses much of the same information.
*Claims History – Most people assume that your personal claims history is all that counts when rating a policy, but that’s not always the case. If you are purchasing a new home, claims made on that home by previous owners could affect your ability to obtain insurance through certain companies.
As you can see, there are many variables that go into qualifying for a home insurance policy. What makes it even more complicated is the fact that each insurance company will have different ways of applying the different factors. Guessing prices can be tricky business, to say the least.