Principles of Risk Management and Insurance, 13th Edition

Cost of Homeowners Insurance

As an informed consumer, you should understand how the cost of a homeowners policy is determined. Also, certain underwriting factors determine if an applicant for a homeowners policy is acceptable. Major rating and underwriting factors include the following:

• Construction

• Location

• Fire-protection class

• Construction costs

• Age of the home

• Type of policy

• Deductible amount

• Insurance score

• Loss history report

Construction

Construction of the home is an extremely important rating factor. The more fire-resistant the home is, the lower the rate. Thus, wooden homes cost more to insure than brick homes. However, earthquake insurance costs are substantially less for wooden homes.

Location

Location of the home is another important ...