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How is Home Insurance Calculated?

by Precise Leads

March 14, 2019

Homeowners can save on insurance if they understand how premiums are set.

There are several online calculators providing home insurance quotes, but how are they calculated? The shortcut to calculate what your home insurance should generally be is to take $3.50 for every $1000 a home is valued at. This doesn’t provide nuance into how homeowners can influence your premiums. Here are the main factors affecting home insurance, aside from home value.

Credit Rating

All insurances use credit rating to calculate the likelihood a policyholder will pay their premium. It’s the easiest way for insurance companies to calculate risk.


Insurance companies want to know how much of a user of insurance you are. If you have a history of filing home insurance claims, insurance companies will take note. Conversely, if you have never filed a home claim, you could be looking at a significant discount.


Location affects premiums in myriad ways. Higher density usually means higher premiums because fires are more likely. However proximity to fire stations or even hydrants can reduce premiums. Areas with higher crime rates can raise premiums. Property located in flood zones, wildfires or other areas of natural disaster may increase premiums, even though home insurance does not coverage these.

Age of House

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Home insurance companies love houses made in the last ten years. They have new roofs, sound electrical and plumbing. Older houses are more prone to have leaks and electrical problems.

Pool or Hot Tub

Expect to pay more if you have one of these, as the likelihood of someone getting injured increases exponentially.

Expensive Belongings

If you own expensive jewelry, art or other collectables totaling more than $100,000, you will want to consider contents coverage.

What’s the simplest way to save on home insurance? Having smoke detectors and a security system can save you upwards of 15%.

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