Homeowner's Insurance Premium - Rules of Thumb

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Valdeselad
Posts: 248
Joined: Mon Apr 26, 2010 1:42 pm

Homeowner's Insurance Premium - Rules of Thumb

Post by Valdeselad »

Are there any rough guidelines to what the premium increase (or decrease) may be based on the value of your home? I realize this may vary from state to state, but just looking for some rough guidelines.

For example, if you own a 100k home and your homeowner's premium is X, can you assume your premium for a 200k home in the same location would be roughly 2X...for a 400k home roughly 4X? Or is the relationship between home value and insurance premium typically more non-linear?
moneywise3
Posts: 576
Joined: Mon Nov 22, 2010 5:54 pm

Re: Homeowner's Insurance Premium - Rules of Thumb

Post by moneywise3 »

One factor in premiums is cost of constructing the building (sans the land). So 100k and 200k home premiums won't exactly be a factor of 2. Then there are numerous other factors.
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DiscoBunny1979
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Joined: Sun Oct 21, 2007 10:59 am

Re: Homeowner's Insurance Premium - Rules of Thumb

Post by DiscoBunny1979 »

In short, appraisal value or market value is not the same as the cost to reconstruct or tear down and rebuild. Therefore, the cost of insurance is seldom the same as the "value" of the home. One particular added insurance detail is the "contents" of the house - which is often a requirement to insure when seeking a replacement cost policy on the house. Therefore, since the "contents" are not part of rebuilding, you can not assume any relationship between insurance and market value. The final major detail is that land value is often more expensive than the cost to build the house itself. For instance, a 1 Million dollar rat trap in San Jose, CA might only cost $350K to rebuild. The insurance policy will be based on replacement of 'materials' used . . . and therefore if there were no upgrades noted, the 'replacement' might only be for standard builder grade.
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