How your home insurance premium is calculated is hardly transparent. It's difficult to figure out what factors affect how much you pay for coverage. This can result in you paying more than you need to for your policy. We assembled this guide to help you know the factors that can lead to higher home insurance rates, such as:

Why am I paying too much for homeowners insurance?

There are many mistakes you can make that lead to you paying more than you should for a home insurance policy. They include:

Not comparing home insurance quotes

Different home insurance providers use different models to calculate your policy premium, which can vary dramatically depending on several factors, like:

  • The age of your home
  • The construction materials used
  • Your ZIP code
  • Your insurance claim history

That's why it's important to compare quotes from multiple home insurance companies to get the best coverage at the cheapest price.

As an example, say there's a family in Idaho and a family in Florida with homes of similar market value. Despite being of similar value, because of the different amounts of risk associated with each location, each family will pay different premiums. The family in Idaho will have a lower risk of natural disasters occurring than the family in Florida, for example, meaning the Idaho family should pay a lower premium.

When comparing quotes, also look at how different coverage types compare across multiple companies. One provider might have a great premium price on a standard homeowners policy, but that doesn't mean you're getting the right type or amount of coverage for your particular home. Take the time to dig deep and find the right coverage as well as the right price.

Discounts are another difference to look at between home insurance companies. The home insurance industry is highly competitive, and providers offer different discounts to stay competitive. Being retired, adding security features and securing your home against extreme weather can all be qualifiers for a discount.

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Not bundling your insurance policies

If you have home, auto and life insurance policies with different providers, this could lead to you overpaying for all of them. By bundling your insurance policies with one provider, you should be able to save money. Discounts for bundling will vary from insurer to insurer and the policy types you're looking to put together, so shop around to find the best deal for your situation.

You've filed many insurance claims

The more claims you've filed, the higher your premiums will be. Your rate will be adjusted in part depending on the incidents you've filed for and how many claims you've filed. If you've filed several insurance claims in the past, your provider could view you as high risk and increase your rates to offset their potential costs. In the worst case scenario, it may even cancel your policy.

The best way to avoid this is to keep claim filing to a minimum and only file when major issues with your home occur. Every claim you file is entered into the Comprehensive Loss Underwriting Exchange (CLUE) database and remains on it for seven years. If you change your home insurance provider, your new provider will have access to the CLUE database and will probably increase your rate with them based on your past history.

Your deductible is low

The lower your home insurance policy deductible, the higher your premium. If you can afford it and live in a relatively new house, consider increasing your deductible. You could lower your premium considerably that way.

You have too much coverage

One surefire way to pay too much for homeowners insurance is to have coverage for highly unlikely potential issues. You should talk with your insurer and assess the main risks your home faces, and from there you can adjust your coverage. With the cost of homeowners insurance, you don't want to pay more for coverage than you need to, especially if you don't need much.

Lack of safety features

Home security is easy to overlook, but taking simple measures such as installing a burglar alarm or a carbon monoxide detector can reduce the risk to your home and thus reduce your home insurance premiums.

Attractive nuisances on your property

An attractive nuisance is a dangerous item on your property that attracts people, such as a swimming pool or trampoline. If someone were to come onto your property to use your pool, for example, you can be liable even if they did it without your consent. Homeowners insurance companies take attractive nuisances seriously due to the high rate of injuries they cause.

Poor credit

Home insurers may look at your credit score when quoting you for home insurance. They see high credit scores as low financial risk. This can be reflected in your policy premium.

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