House insurance is an essential expense for most people’s lives. According to data from insurance.com, as of 2025, homeowners in the United States pay an average of $2,601 annually for home insurance.
But how do insurance companies determine your premiums? There are many factors that influence premium rates.
The state you live in and your postal code are important factors in rate calculations. For example, according to insurance.com, in 2025, Oklahoma has the highest home insurance premiums in the U.S.; the annual average premium for a $300,000 home is $5,858, mainly due to frequent storms in the state leading to significant property damage.
On the other hand, Hawaii has the lowest home insurance premiums, with an annual average premium of only $613 for a $300,000 home.
The reconstruction cost of your home differs from its market value. Insurance companies focus on the reconstruction cost, which depends on the expenses required to rebuild the home.
In other words, the higher the reconstruction cost, the higher the premium.
Deductible is the amount of loss you need to bear before the insurance company pays out.
The higher the deductible, the lower the premium. For instance, according to data from insurance.com, increasing the deductible from $500 to $2,500 can reduce the premium by around $512 annually.
However, remember that you need sufficient savings to cover the difference in the event of a loss.
The breed of your dog can also affect your home insurance premiums because insurance companies categorize certain breeds as “dangerous dogs”.
According to the Insurance Information Institute, the average payout for dog bite claims in the U.S. increased by 18.3% in 2024, rising from $58,545 in 2023 to $69,272 in 2024. California had the highest average dog bite claim amount in 2024, reaching up to $86,229 per incident.
Policygenius, a New York insurance company, indicates that homeowners’ insurance typically does not cover high-risk dog breeds such as Akitas, Alaskan Malamutes, any wolf breeds, Chow Chows, German Shepherds, Great Danes, Pit Bulls, Presa Canarios, Siberian Huskies, and Staffordshire Terriers.
Generally, muscle-bulky and thick-chested dog breeds are often excluded by insurance companies, especially wolf hybrids. However, some insurers may provide coverage for these breeds if the dog has no history of biting. But premiums are likely to increase as a result.
Insurance companies base their rates on homeowners’ conditions, such as credit history, claims history, home location, building materials, risk assessment, etc., and assign them to different rate classes accordingly.
When your three-year policy expires, the insurance company may reassess your rate class.
While insurance is purchased for claims, excessive claims could lead to insurers considering you as high-risk and subsequently increasing your premiums. Frequent claim records for theft, water damage, dog bites, etc., are red flags for insurers.
Additionally, insurance companies consider the overall risk in your locality. Even if you have not filed any claims, premiums may increase if your neighbors or residents in the same area have submitted claims.
Insurance companies may also track claim numbers in your area. Premiums are generally higher in disaster-prone areas. If an insurer notices an increase in disaster claims in your state, they may raise rates across the board.
However, many states have legal restrictions on the extent of premium increases.
The broader the coverage, the higher the premium. For example, you may want to increase the limits of liability or personal property insurance.
Since home values are based on reconstruction costs, you may also need to purchase inflation guard coverage to account for rising material and labor costs. But adding any new items will increase premiums.
Swimming pools or trampolines are considered “attractive nuisances”.
According to data from the Centers for Disease Control and Prevention, drowning is the leading cause of death for children aged 1 to 4 in the U.S. This increases liability risks when you have a pool on your property, potentially requiring an increase in liability insurance coverage.
In addition to the increased cost of liability insurance, the pool itself needs to be included in the insurance. Allstate, for example, typically categorizes in-ground pools (those built in the yard) under “other structures” coverage, usually at 10% of the home’s value. For instance, if the home is valued at $400,000, the pool coverage would be approximately $40,000.
If your property has other structures, it’s crucial to ensure that coverage is sufficient.
Insurance companies view a new roof as better able to withstand weather conditions and may offer discounts.
However, Policygenius data reveals that a poor roof condition or one over 10 to 15 years old could lead to premium increases due to additional costs.
Home insurance premiums are made up of various factors, some of which you can control. For instance, you can choose lower-risk dog breeds or replace the roof. But some factors are beyond your control.
It is recommended to spend time reviewing the policy with an insurance agent to ensure all discounts that can reduce premiums are obtained.