Wondering why your insurance bill went up? Home insurance rates are determined by two categories of factors: those tied to your property and location — like your home’s building materials and ZIP code — and those tied to your policy choices and personal history — like your deductible selections and credit history.
The first category is largely outside your control, while the second category you can typically influence.
Property and location factors
You can’t easily change where your home is located or when it was built. But understanding the factors that affect home insurance rates helps explain why two similar homes can come with very different policy costs (called premiums in insurance-speak).
Your home’s age, construction, and roof
Older homes typically cost more to insure. Outdated electrical systems, aging plumbing, and worn roofing all increase the likelihood of a claim and the cost to repair or replace them. A home with knob-and-tube wiring or galvanized pipes has a different risk profile than one with modern systems, even if the two look identical from the street.
Construction materials matter, too. Wood-frame homes are more vulnerable to fire than brick masonry construction, which translates to higher premiums in many cases.
Roofing is often scrutinized on its own. Age, material, and condition all factor into your rate.
An aging asphalt shingle roof is likely riskier than a newer metal or impact-resistant roof. Some insurers even offer discounts for impact-resistant roofing — especially in storm-prone states.
Your location and local risk
Where your home is located can affect your rate as much as what it’s made of. Insurers look at factors like proximity to:
-
Fire stations
-
Hurricane-prone coastlines
-
Wildfire risk areas
-
High-crime ZIP codes
Each signals a different type and frequency of potential claim.
Your location also shapes your rate in a less visible way: state regulation. Insurers file their rates with state regulators, and how much oversight those rates receive varies. In some states, regulators have more authority to push back on rate increases, which can hold premiums down. In others, insurers have more pricing flexibility — and rates can reflect that.
Your home's insured value
Your home's market value and what it would actually cost to rebuild it are two different numbers — and they don't always line up.
A home might appraise at $400,000, but if labor and material costs have risen since it was built, rebuilding it from the ground up could run $500,000 or more. That gap matters. If your coverage limit is based on market value — what you could sell it for today — or if you haven't revisited it in a few years, you could be left covering a significant chunk of a total loss out of pocket.
This is where understanding the difference between replacement cost value (RCV) and actual cash value (ACV) comes in. RCV coverage pays to rebuild or repair your home at current prices, up to your policy limits. ACV coverage factors in depreciation, meaning a payout could fall short of what rebuilding truly costs today.
Revisiting your coverage limit regularly — especially after major renovations or periods of high construction costs — helps make sure your policy keeps pace with reality.
Policy and personal factors
Unlike property and location factors, many of the following factors are within your control.
Your coverage choices
Your policy is built around several types of coverage, but the biggest driver of your premium is your dwelling coverage — the part of your policy that pays to repair or rebuild the physical structure of your home after a covered loss. The higher that limit, the larger the potential payout from your insurer and the higher your premium.
Setting that limit too low leaves you underinsured after a loss. Setting it too high means paying for more coverage than you're likely to need.
Dwelling coverage is just the foundation, though. You can expand your policy with endorsements — optional add-ons that cover things a standard policy doesn't, like floods, earthquakes, or high-value personal property such as jewelry or art. Each one adds to your premium, but they exist to fill gaps that could otherwise leave you paying out of pocket after a loss.
Your deductible is another lever. A higher deductible lowers your policy cost because you're agreeing to absorb more of the loss yourself when something goes wrong. Just make sure it’s an amount you could realistically cover if you needed to file a claim.
Your claims history and credit
Prior claims follow you. Insurers check the Comprehensive Loss Underwriting Exchange — commonly called a CLUE report — which records claims tied to both a property and its owners, typically going back seven years. That includes claims filed with a previous insurer and claims filed by a prior owner of the home.
A property with a history of water damage or repeated claims can be more expensive to insure even if you personally have never filed a claim. You can check your CLUE report once per year for free on the LexisNexis website.
In most states, insurers can also use a credit-based insurance score as a rating factor. It draws on similar data to your regular credit score but is calculated differently and used specifically to predict claim likelihood. Generally, the better your score, the lower your rate.
Note: California, Maryland, and Massachusetts ban the use of credit scores in homeowners insurance pricing. A handful of other states limit how credit can be used.
How to lower your home insurance rates
-
Bundle home and auto policies with the same insurer.
-
Adjust your deductible — but make sure it’s an amount you can easily cover out of pocket if you need to file a claim.
-
Upgrade your roof or install storm-resistant features like impact-resistant windows or hurricane shutters.
-
Add a monitored security system or smoke and fire detectors.
-
Get quotes from at least three insurers about 30 to 45 days before your renewal date to give yourself enough time to compare without feeling rushed. Just make sure the policies you're comparing offer the same coverage types and policy limits. A lower premium that comes with less protection isn't really a better deal.
Explore more ways to lower your home insurance premium.
Frequently asked questions
Why did my home insurance rate go up?
Several things can push a premium higher: inflation driving up rebuild costs, worsening local risk from wildfires or hurricanes, or an insurer adjusting rates across the board. Rate increases have been widespread in recent years. Annual insurance premiums for a typical homeowner increased by 24% from 2021 to 2024, according to an analysis by the Consumer Federation of America.
Does my credit score affect my home insurance?
In most states, yes. Insurers use a credit-based insurance score, which is related to but distinct from a regular credit score. It draws on similar underlying data but is calculated specifically to predict the likelihood of a claim.
How much is homeowners insurance on average?
The answer varies by state, home value, and coverage level. A homeowner with a mid-range credit score and a house with a $350,000 replacement value pays an average premium of $3,303 per year, according to a Consumer Federation of America analysis.
