We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content, by enabling you to conduct research and compare information for free – so that you can make financial decisions with confidence. The offers that appear on this site are from companies from which TheSimpleDollar.com receives compensation. This compensation may impact how and where products appear on this site including, for example, the order in which they appear. The Simple Dollar does not include all card/financial services companies or all card/financial services offers available in the marketplace. The Simple Dollar has partnerships with issuers including, but not limited to, American Express, Capital One, Chase & Discover. View our full advertiser disclosure to learn more.
Homeowners Insurance Rates Vary by Location
For Free Online Home Insurance Quotes, Visit Our Home Insurance Resource Center.
Homeowners insurance rates can, and do, vary based on location. Rates can vary from neighborhood to neighborhood or even street to street. Insurance companies calculate risk and adjust coverage accordingly. Homes in areas determined to be higher risk will have higher insurance premiums, and homes in lower risk areas will have lower premiums.
Homeowner’s Insurance Comparison Tool
Let’s take a look at the factors affect homeowners insurance rates by location.
How Location Affects Homeowners Insurance Rates
Imagine two identical homes on opposite sides of the street. The house on the left is in city limits and is serviced by a professional fire department, and the house across the street lies outside city limits and is served by the volunteer fire department. One fire department may have average response time of under 5 minutes, while the other has an average response time of 15 minutes.
Even though everything appears to be the same, there is more risk of fire damage to the home outside of city limits because of the longer response time of its local fire department. This difference will impact the homeowners insurance rates of each home.
Factors That Affect Home Insurance Rates
External risks are made up of all sorts of variables. Local crime rate, proximity to natural hazards, home value, and replacement cost all play a role in determining your homeowners insurance rate.
Crime rates in one city aren’t the same within every square mile of that city or even within each neighborhood. Your homeowners insurance policy likely protects against theft or property damage, so it stands to reason that the higher the likelihood of those type of incidents at your address, the higher the insurance costs.
Some sources of increased or decreased risk are based on larger geographic areas, like coastal gulf communities that are susceptible to hurricanes or California’s risk of earthquakes or wildfires. Insurance companies track and chart natural phenomena and assign risk values to different regions and base their rates accordingly. We’ve all heard the expression you can’t control the weather and while that may be the case, we can influence the amount of damage that occurs. Remember that it’s the potential for damage that insurance companies use to determine your rates.
What Can You Do to Decrease Risk
If you live in one of these higher risk areas, there are ways to lower your home insurance rate without pulling up stakes, selling your home, and relocating. You can take proactive steps wherever possible in order to reduce the risks that caused your insurance carrier to charge you a higher rate in the first place.
For example, if you are paying a higher premium for higher fire risk, adding central station monitoring of your smoke detectors to your burglar alarm system may be enough to improve the response time of your local fire company that your insurer could actually lower your rate.
If you live in an area with a higher crime risk, upgrading locks, adding security doors, or even trimming the back shrubbery around your house, could be enough to decrease your risk of burglary.
When it comes to lowering homeowners insurance rates, you first need to understand why you are paying what you’re paying, and then you can talk with your insurance agent about what you can do to lower your risk and lower your rates.
Other Precautionary Measures
Storm damage from hurricanes and high winds can be reduced and often eliminated by making low and moderately costed improvements. Residents of hurricane-prone areas pay a higher rate for their homeowners insurance because the potential for wind damage is so much greater, but the easy addition of roll down window shutters virtually eliminates the danger of broken windows from wind and flying debris.
Hurricanes and other major wind events can lift off the entire roofs of a house, leaving the interiors exposed to the elements and providing a double dose of damage. This happens because most roofs are not securely attached to the walls of the house – instead, they’re often held in place by little more than their own weight. Having a licensed contractor add inexpensive brackets to roof trusses and attaching them to exterior walls may be enough to stop them from blowing off.
Damage caused by earthquakes ranges from broken dishes to complete structural collapse and insurance companies base their rates on this very real risk. However, many older structures can be reinforced to make them more earthquake resistant and thereby decreasing the potential for damage which can result in a lower homeowners rate.
The threat of wildfire exists throughout the American West. Homeowners may not be able to control lightning strikes or careless humans from starting wildfires but they can lower the risk of damage by keeping the area surrounding their homes free of combustible plants and shrubs, and using a higher level of fire resistant roofing material.
Homeowners Insurance Replacement Cost
The final component of your homeowners insurance rate is replacement cost. If your home is damaged or destroyed by fire or natural disaster, the cost of repair and or replacement will have a big effect on the premium you pay.
Where you live makes a big difference in determining building costs. Labor and materials are far more costly in New York or Los Angeles than they are in Birmingham or Des Moines. That’s why your brother-in-law who lives in a bigger home in Omaha pays a lower rate than you do for a small craftsman style cottage in Southern California.
While there is not a lot you can do about lowering building costs in your area in order to reduce your homeowners premium, you should be aware that there are two types of coverage: total replacement cost and actual cash value. These are two completely different things with very different rate structures.
Actual cash value refers to what your home is worth if sold. Replacement cost refers to how much it would cost to rebuild. Homes are often more expensive to rebuild than their value when they are on the open market. So it is very important to be aware of the difference between the two when seeking to lower your homeowners insurance premium.