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How Does My Location Affect My Home Insurance?

Fact-checked with HomeInsurance.com

Owning a beachfront property or a canyon ranch house may spark visions of familial bliss, but before you make an offer, you need to understand the insurance consequences of purchasing such a dream home. Factors such as a home’s age, build quality and special features impact the amount you’ll pay for home insurance. However, a home’s location has the greatest impact on its insurance costs and, in some cases, whether it is insurable at all. 

Natural disasters such as hurricanes, tropical storms and wildfires cost insurance companies a bundle of money every year, so they mitigate their losses by charging higher home insurance rates to homeowners who live in areas prone to these disasters. If you’re in the market for a new home, you can avoid buying a property in a high-risk area. If you already own a home in an area plagued by high homeowners insurance costs, you can make a few property improvements to help reduce your rate. You can do this by knowing the location factors that affect home insurance rates.

Why does home insurance cost vary by state? 

The location of your home plays a major role in your homeowners insurance premiums. For example, if you live in a high-crime area, prone to burglaries or vandalism, you can expect to pay a higher rate than homeowners living in low-crime neighborhoods.

Insurers also consider your home’s proximity to the nearest fire hydrant and fire station and the quality of fire protection. Homes located within five miles of a fire station usually receive more favorable home insurance rates. If you own a home in a rural area, serviced by volunteer firefighters, you can expect to pay a higher premium.

Some states have low overall home insurance rates but exorbitant rates in certain areas within the state. For instance, California enjoys below average homeowners insurance rates at $1,108 compared to the national average of $1,211, but the frequency and severity of wildfires has driven up rates in some areas and led some carriers to drop coverage altogether. According to PBS Newshour, in late 2019, many large insurers, including Allstate and State Farm, refused to renew around 350,000 California homeowners policies following wildfires that ravaged the state earlier in the year.  

Homes located in states prone to tornadoes also cost more to insure. Louisiana, Iowa and Mississippi have the highest homeowners rates because they lie in the nation’s Tornado Alley. Tornadoes can produce massive damage over a short period. For example, twisters that touched down during a three-day period in May 2017, cost more than $3 billion in insurance losses, according to the Insurance Information Institute (III).  Between 1997 and 2016, tornadoes accounted for nearly 40 percent of all catastrophic losses.

Likewise, homeowners in states prone to hurricanes, including Florida and Texas, also pay high home insurance rates. In recent years, the number of hurricanes has increased during the Atlantic hurricane season. In 2019, the season produced three major hurricanes, including the Category 4 Hurricane Dorian, which caused insured losses of $500 million to $1.6 billion. The infamous Hurricane Katrina, which pummeled the Alabama, Florida, Georgia, Louisiana and Mississippi coasts in 2005, caused nearly $52 billion in insurance losses, according to III estimates.

States with the highest average annual homeowners insurance rates based on the latest available data, collected from 2017, include:

  • Louisiana: $1,968
  • Florida: $1,951
  • Texas: $1,893
  • Oklahoma: $1,885
  • Kansas: $1,584

States with the lowest average annual homeowners insurance rates include:

  • Oregon: $677
  • Utah: $692 

Remember the basics

The state you live in can determine how much you pay for insurance. Weather, proximity to safety features and crime are also location factors that can change your rate.

How does location impact my home insurance coverage? 

Homeowners who live in areas prone to natural disasters need more than a standard home insurance policy. Most standard policies don’t cover damages caused by floods. If you live in a flood zone, you can purchase flood insurance through FEMA’s National Flood Insurance Program, which provides coverage for businesses, homeowners and renters.

Most standard policies don’t cover earthquake damage, either. Only a few companies, including USAA, feature earthquake insurance in standard policies, but many providers offer the coverage as an add-on.

Folks living along the Gulf or Atlantic Coasts may need flood insurance, but they also should consider purchasing homeowners insurance from a company that specializes in covering storm-prone areas, like UPC Insurance. UPC writes home insurance policies in 12 coastal states, on the mainland and Hawaii.

There’s only so much you can do to protect your home against the destruction of natural disasters. However, fortifying and securing your home can help protect its structure and your belongings. Best yet, many carriers offer discounts for home improvements that reduce claims. For instance, State Farm offers a discount for installing impact-resistant roofs, which can withstand hailstorms. Amica Mutual, along with many other insurers, offer discounts for homes equipped with alarm systems and smart home components such as temperature monitoring systems and water detectors. Allstate extends home insurance discounts for houses with storm shutters.

Home improvement discount programs vary by state. Oftentimes, insurers design discounts based on the perils homes face according to their location. 

What can impact my home insurance cost?

Location and perils are just two factors that affect your home insurance rate. Luckily, you can control some rating factors, but others, you can’t. Common factors insurers use to determine your home insurance rate include:

  • Age of the home: Older homes usually cost more to insure than newly constructed structures. When an older home is damaged, construction costs often run high because the contractor must make repairs and restore the structure to meet current building codes.
  • Claims: You’re likely aware that filing a homeowners claim may lead to a rate increase. If a previous owner filed multiple claims on a home you want to purchase, you could also end up paying more for coverage. Carriers enter home insurance claims into the Comprehensive Loss Underwriting Exchange database, which other insurers can access when determining rates.
  • Credit score: In most states, providers can use your credit score as a rating factor. Homeowners with poor credit scores usually pay higher home insurance rates.
  • Dogs: Dogs are members of our families, but they also increase your liability risk due to potential biting incidents. Households that have dogs usually pay higher insurance rates.
  • Features: Special features such as fireplaces and swimming pools make a home more enjoyable, but they also create more risk for insurance companies. Carriers mitigate this risk by charging higher premium rates.
  • Home construction: Certain types of construction cost more to insure because they are more prone to perils such as fire. For example, typically a brick home costs less to insure than a wood frame, clapboard home.
  • Home improvements: Building an addition on your home or installing a swimming pool may increase its value, but it may also increase its insurance rate.
  • Marital status: Typically, married couples enjoy the lowest homeowners insurance rates.
  • Safety and security: If you equip your home with safety features such as an alarm system and smoke detectors, most insurers will offer you a lower rate.

The takeaway

Home shoppers must research what affects home insurance costs in areas where they plan to buy and avoid purchasing a property in high risk zones. It also helps to understand insurance rating factors such as the effects of credit, prior claims and property features on home insurance rates. For new home buyers, avoiding a costly mistake is easy because they can turn their attention to neighborhoods with lower insurance risks.

Homeowners who pay high insurance rates due to their property’s location can take several steps to bring down costs. Home improvements such as impact-resistant roofing, storm windows and burglar and smoke alarm systems can go a long way in making their dwelling more resistant to environmental perils and more secure. Best of all, safety improvements can increase their homes’ values while earning the homeowner discounts on their home insurance policies.

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