The title pretty much says it all. In the last two days, I’ve gotten four quotes on homeowner’s insurance, all for the same house, all given exactly the same information about age, construction, distance from a fire hydrant, occupants, deductible, etc. The annual premiums have varied from $927 to 1,865. Why such a spread?
I work for an insurance company, but I’m not an underwriter, and the group to which I’m attached doesn’t write homeowner’s policies. So, I’m just making some general observations.
Part of it is each company’s risk exposure. Company A may already have lots of exposure in your state and may want to limit its further exposure, so it asks for a higher premium, while Company B wants to increase its exposure in your state, and so asks for a bit less in premium in order to ramp up in that area.
Companies constantly review their area exposure so that if there were, say, a tremendous thunderstorm with lots of tornadoes, they don’t get hit too badly - at least not any worse than they’ve modeled.
Another aspect is each carrier’s loss experience for your particular risk (area, coverage, construction, etc.). Company B with the lower premium may have had good experience over the past few years with risks with your attributes, whether due to good underwriting or just luck, and so is willing to offer a lower premium.
I’m sorry this is so general, but hopefully it is some insight.
Raza has given some valid reasons. Actuarial models have to “bucket” exposure categories, and it’s not unexpected that you might sometimes find a case where (say) your property is on a marginal street that one model lumps with the crime-ridden side of town.
But I’ve always found huge disparities in pricing among major companies for home insurance, vastly greater than for other types of insurance. Most recently one major company was 2.5x more expensive than another major company. I’m as perplexed as the OP about the size of these differences.
Some insurers have different models from others, in particular with respect to catastrophe risk, like hurricanes, tornadoes, etc.
There can be a pretty large difference in expense structure by company, and how they allocate those expenses. They may also have different capital bases, and different ways of allocating that capital when determining return on capital.
As Raza points out, different companies have different risk appetites, particularly geographically.
More subtly, different companies have different ways of determining subcoverages and their limits, so it might not always be apples to apples.
Something else to check - are things like floods, tornadoes, etc. covered or not? Company A might cover them; Company B might exclude them (but will add a rider for an additional charge). Look into the claims-paying practices of the companies. Allstate is known for being pretty quick with payouts, and payouts are higher. Thus, premiums are higher. Another company might delay payments, fight with homeowners over worth, etc.
Ooh - ooh! Another big thing - is it for “worth” of the contents, or “replacement” of the contents? “Worth” is going to give you $0.28 for a pair of underwear burnt up in a fire, because that’s all it’s worth; “replacement” will give you $2.50 to buy a new pair.
You need to read 100% of the fine print in all 4 policies to compare them. There’s no law requiring that all policies called “homeowner’s insurance” be identical from every vendor.
There will probably be big differences in what perils each policy includes and excludes. There may also be big differences in specific peril limitations. e.g. one policy will ensure your house contents in general, but for electronics and computers will only pay up to a total of $500. Another policy might cover the same stuff up to $5000.