Homeowner Insurance

Homeowner Insurance Premium Criteria

     Insurance companies use people called actuaries to determine the amount of premiums the company must collect. These actuaries calculate the expected losses that will be incurred, the administrative and marketing costs associated with producing the insurance and factor in the company's cash reserves to protect against major catastrophes.

     To determine the cost for an individual policyholder, an actuary sets certain criteria for the underwriter. These criteria help to make decisions on the amount of premium to charge. Each company has its own underwriting standards, which means one company can reject your application where another would accept it.

     Some of the major factors to consider in determining the premium for a homeowner's insurance policy are:

1. Amount of coverage – the more you insure, the more it will affect the price of the insurance.

2. Type of coverage - which policy form is used (i.e.- HO-2 vs. HO-3); the more protection, the higher the cost.

3. Type of construction - whether your home and other structures are made of wood, stucco siding, brick, concrete, or steel frame construction.

4. Available fire protection – how far you live from the nearest fire station or hydrant, as well as the type and quality of your community’s fire protection.

5. Age of home - as a general rule, older homes are more vulnerable to loss than homes of newer construction. Also old wiring and building codes make an older home more susceptible to loss.

6. Location of home - the home might be located in a stable sub-division as opposed to struggling inner city, Where it sits might be more susceptible to earthquakes or hurricanes.

7. Actual cash value vs. replacement cost - whether valuation of losses are set at the lower actual cash value or to full replacement cost.

8. Riders - which riders and other options -- as well as the amount of coverage for each -- will be added to the base policy form.

9. Deductible - the amount that you pay out-of-pocket for each claim before the insurance company will “foot the bill” for payment of a claim. Lower deductibles are more expensive than higher deductibles.