Home Insurance

Why Your Neighborhood Affects How Much you Pay for Insurance

The location of your home, including your town and neighborhood, may affect your home insurance premiums. Your home’s age may also affect your insurance rates. Older homes may cost more to insure. Read on to learn exactly how your neighborhood dictates how much you will pay for insurance.

Neighborhoods and Home Insurance

Your city and state affect your overall home insurance rates, but your premiums could also go up or down depending on your neighborhood. Insurance companies use multiple factors to set home insurance rates, and the neighborhood is one of the things used to build your home’s risk profile. Here are a few things in your area that could help or hurt your chances of getting a lower home insurance premium. 

Crime Rate

Living in an area or neighborhood with a high rate of any crime could be a red flag for insurance companies. This includes violent crimes like assault as well as property crimes like vandalism, burglary, and theft. If your neighborhood’s crime rate rises, your premium could also go up accordingly. Some insurance companies offer a discount for policyholders who install and maintain an active security system.

Proximity to Fire Services

If your neighborhood has a dedicated fire department or one nearby, your homeowner’s premiums could be lower than if you live in a remote area far away from emergency services. The logic is that having emergency services near your home would decrease the fire department’s response time, making it less likely that your home would suffer severe damage in a fire

History of Severe Weather

If you live in an area of the country that has recently suffered major damage from a tornado, hurricane, or straight-line winds, it may cost more to insure homes in the entire town or geographical area. 

For example, states in “Tornado Alley” like Louisiana, Iowa, and Mississippi, pay some of the country’s highest homeowner’s insurance premiums due to the damage caused by severe storms. In contrast, Oregon and Utah residents pay relatively low insurance rates because there is only a small chance of property damage caused by severe storms. 

Some insurance companies offer discounts if homeowners make improvements to their properties that may help reduce the size and frequency of claims. For example, impact-resistant roofs that can handle a major hailstorm and storm shutters could earn you insurance premium discounts. 

Risk of flooding

If you live near a body of water or in an area that has experienced catastrophic and widespread flooding in the past, you may not be able to get sewer backup or overland water coverage. In addition, living in an area at high risk of flooding could mean you may pay more for homeowner’s insurance in general. However, flood insurance is available through the National Flood Insurance Program from FEMA. 

Other Factors That Affect Your Home Insurance Premium

Here are a few other factors that insurance companies consider when they set your rates:

  • Credit score: In some states, insurance companies can consider your credit score when setting rates. Those with higher credit scores tend to have lower rates.
  • Claims: If you’ve made several claims on your home insurance in the past, the insurance company may consider it a risk factor for making future claims and raise your rates. 
  • Additional features: If you have a swimming pool or trampoline, disclose those things to your insurance company. These features increase the chances that you will experience a liability claim. 
  • Home age: Older homes may have outdated electrical systems and plumbing that’s prone to failure. Some of the charming aspects of an older home, like woodburning fireplaces, could cause an uptick in your home insurance premiums as well. In addition, your home’s construction may make it more or less prone to fire. For example, a brick home is better able to withstand fire than a wood-frame home. 
  • Upsizing: If you plan to update your older home by building an addition, consult with your home insurance agent to determine how that may impact your insurance rates. A bigger home may increase your premium.
  • Coverage amount: Resist the urge to reduce your coverage amount to lower your premium. If you have a mortgage, your lienholder can mandate the minimum amount of insurance you must maintain on the home. Consult with your insurance agent about other ways to reduce your premiums without sacrificing coverage. 
  • Deductible: In some cases, choosing a higher deductible can lower your premiums. However, before committing to this, consider whether you could afford to pay a higher deductible out of pocket if you needed to make a claim. 

Other Ways to Save Money on Home Insurance

In many cases, home improvements could help reduce your home insurance premium. Installing a home security system, integrating smoke alarms into your smart home system, choosing impact-resistant and hurricane-resistant roofing materials, and installing storm shutters to protect windows and the interior of your home may help you avoid making a claim in the future.

In addition, consider bundling your coverage. If you do not already use the same company for your auto and home insurance, speak with an insurance agent to see whether bundling those policies could earn you a discount.