How Your Location Affects Your Homeowners' Insurance Rates
Updated: Feb 24
There are certainly a lot of variables that go into the cost of your homeowners’ insurance. Insurance companies account for various factors including your house, your policy type and your insurance history. Your state, city and even the street you live on all impact the price of your home insurance policy.
Insurance Companies and Risk
Insurance companies quote you a price based on your assessed risk level. From their perspective, they consider how likely you are to file a claim. Each region, state and city has its own unique insurance risks, and your policy is priced to reflect that risk. The frequency and severity of natural disasters have increased in recent years, and the insurance industry has lost a significant amount of money due to these natural catastrophes.
Homeowners’ insurance pays for repairs when your home is damaged by a storm, fire or any other disaster, or if you’re the victim of theft or vandalism. And in turn, insurance rates rise to reflect those expenses. Natural disasters play a huge part in the recent rise in insurance rates. The states with the biggest chance for disaster have the highest insurance costs.
Insurance Rates and Your Location
Your location is very important and your insurance premiums are based on things such as: crime rate, proximity to natural hazards and hazardous areas, your home’s value and your replacement cost for your home and possessions.
Certain parts of the country experience more tornadoes, hurricanes, earthquakes, blizzards or wildfires than others. Each region has its own unique set of risks. Many people don’t realize, however, that homeowners’ insurance rates can vary widely from one geographic area to another.
Insurance and Crime Rate
Crime rates are largely responsible for variations in homeowners’ insurance premiums. Some neighborhoods may be frequent targets for burglaries, some may be more likely to face vandalism, and others may have little or no crime. These discrepancies can be due to home values, how many residences have security systems, how well-lit the streets are, how close houses are to the street and to each other, and even whether there’s a neighborhood watch. Insurance companies base their rates, in part, on how much money they’ve recently paid out in claims.
Homeowners' insurance covers you if you're a victim of theft, vandalism, burglary, and other forms of property crime, so if you live in an area where property crime is abundant, you're going to pay more for homeowners' insurance. Installing deadbolt locks, burglar bars, security cameras and alarm systems may save you money if your insurance company offers discounts for these items.
Proximity to Emergency Services
Proximity to emergency services can also affect the amount you pay for your homeowners’ insurance. If your home is close to a police station, officers could respond quickly if you have a break in. That means a burglar would likely be caught before escaping with your valuables. Thieves might decide to skip your house altogether and target one farther away from the police station. From an insurance company’s perspective, your home would be less risky to insure than one a few streets over or just down the street.
The same applies to fires, which are a frequent source of insurance claims. A fire station could get a nearby house and have the flames extinguished before it could get to a house even just ten minutes away. Damage could be incredibly diminished by proximity alone.
Risks may be increased or decreased based on bigger geographic areas such as coastal communities that are susceptible to hurricanes, earthquakes or wildfires. Insurance providers study these risks and assign a risk value to different regions, and then your rates are based accordingly. You may live in an area for 50 years without a single event, but it’s the potential for disaster that insurance use to determine your rates.
Lowering Your Insurance Rate
If you own a home in a high-risk disaster area, there are things you can do to help lower insurance rates. Adding smoke detectors to your alarm system can improve the response time of your local fire department, and that may be enough to get a lower rate or discount. If your home is in a high crime area, you can upgrade your locks, add security doors or even make changes to your landscape to decrease the risk of burglary. Your agent may also be able to give you additional tips to help save you money.
Two of your home's most vulnerable spots are the roof and windows. By making sure they're in good condition and made of region-appropriate materials, you can avoid a lot of weather-related damage. Storm damage from high winds and hurricanes can sometimes be prevented altogether by making some relatively inexpensive improvements to those areas. Certain roofs are better suited for specific climates, and your roof type and quality plays a big part in the cost of your insurance.
A home's entire roof can be blown away during a hurricane or high wind, leaving the interior of the house exposed to the storm. If a roof has not been attached properly to its structure, it can be blown away fairly easily. In an area subject to hurricanes and high winds, a professional, licensed contractor can add brackets to the home's roof trusses and attach them to the exterior walls, which might prevent the roof from blowing off during a hurricane.
If you live in a hurricane-prone area, keep your windows in good condition. Installing storm windows or adding roll down window shutters can eliminate the danger of broken windows from wind and flying debris. Storm windows can withstand destructive storms and save your home from significant damage.
Earthquakes cause their own unique damage, which can range from broken dishes and fixtures to complete and total structural collapse. Insurance companies base their rates on the assumption that an earthquake could cause complete loss.
In the western United States, the threat of wildfires remains a threat. Homeowners can’t control lightning strikes or keep people from starting wildfires, but they can lower their risk of damage by making sure their home and its surroundings are free from combustible plants, and by using a higher grade of fire resistant roofing material.
Replacement cost is perhaps the most important part of your homeowners’ insurance. Any time your home is damaged or completely destroyed by a fire or natural disaster, the cost of repair or replacement will most assuredly affect your premiums. Your location will affect your building costs because labor and materials are much more costly in bigger cities than in smaller areas.
There are two types of insurance coverages: total replacement cost and actual cash value. Actual cash value is what your home is worth if it is sold, and replacement cost refers to how much it would cost to rebuild. Homes are usually more expensive to rebuild than their value on the market.
If your home is in an area with high insurance risks, you need to do everything you can to save money on your homeowners’ policy. That includes making home improvements, altering your coverage levels and searching for discounts. One of the best ways to get the best deal is to shop around and compare quotes. Different companies charge different rates for identical policies. Finding the company with the best rates will require you to get quotes from multiple insurance providers. It will be a time-consuming process, but it’s the only way to get the best deal and to save yourself some money.