Home Insurance - Why Are the Rates So Random?

Person A has pretty good credit and has never filed claims on her home insurance. Person B has pretty good credit and has never filed claims on her home insurance. You would think that a quote from the same company on home insurance would yield similar, if not identical, results, right? Unless they are getting a quote on the same house at the same time, their quotes will most likely be different. Why is that? Why do home insurance rates seem to be so random?

Home insurance rates are actually not random at all. Each insurance company doing business in Nevada has to file their rating structure with the Nevada Department of Insurance. The DOI can reject the rating structure if they deem it to be unfair or unlawful. Once the rating system is approved, the insurance company must then apply the rating structure to all potential insureds equally.

So why the random prices? Well, they seem random because there are so many different factors that go into rating a home insurance policy. Below are a few of the things that can be used to rate a home insurance policy.

*Amount of Coverage: You may want to over-insure your home because you think it's better to be safe than sorry, but you'll be overpaying for coverage you do not need. The amount of coverage affects the price with all insurance companies. Make sure you have enough coverage, but don't over-do it either.

*Local Fire Protection: If you have a volunteer fire station 20 miles away, you're going to pay a little more for your home insurance due to the increased risk. Many companies will not insure a home that only has a volunteer fire station nearby, which limits your options.

*Type of Construction: Whether you have a brick home or a frame-stucco home, your insurance company needs to know. Your insurance company also wants to know what type of roof you have. Wood shake roofs and not as desirable as concrete tile roofs because they are a little more flammable.

*Age of House: The older the house, the more likely it is to have a claim. Thus, older houses are usually going to cost more to insure.

*Deductible Amount: No matter who your insurance company is, the higher the deductible, the lower the premium. Make sure that you compare similar deductibles when you are comparing policies.

*Discounts: Every insurance company will have discounts, but not all are the same and not all are applied equally. One company may provide a 3% discount for a monitored alarm system, while another company will offer a 5% discount. Check with your agent to make sure you are getting all the discounts you deserve.

*Insurance Score: Some companies will use what we like to call an "insurance score," which is based on your credit history. It isn't the same FICO score you use when getting a loan on your home, but it uses much of the same information.

*Claims History: Most people assume that their personal claim history is all that is accounted for when rating a policy, but that's not always the case. If you are purchasing a new home, claims made on that home by the previous owners could affect your ability to obtain insurance through certain carriers.

As you can see, there are a lot of variables that go into rating a home insurance policy. What makes it even more complicated is the fact that each insurance company will have different ways to apply the different factors. Guessing prices can be a tricky business to say the least.

Questions about home insurance? Contact Western Pacific Insurance today at (702) 932-3105 or visit us online at http://www.wpinsure.com.