Basis of Rating for a Homeowners Policy

A homeowners policy is rated according to several factors that determine the base rate. In the first phase, the following factors determine the premium:

• The territory i.e. where the house/property is located.
• The construction of the building; whether the building is masonry or framed.
• The Sum Insured or the amount to be covered.
• The availability and quality of the fire department and water supply i.e. the public protection class.
• The policy required i.e. HO-2(named peril coverage), HO-3(special form coverage for dwelling and other structures and named peril coverage for personal property) , HO-4( content coverage for tenant in an apartment building or a house) , HO-5(The broadest and comprehensive coverage), HO-6( A unit owners form in the event the insured might own and occupy a condominium unit)or HO-8( a modified coverage for old and obsolete homes where the replacement cost value far exceeds its market value).
• The type of construction or superior construction
• The deductibles required or opted for
• The endorsements attached to the policy.

In the second phase, the rating is finally determined by

• The presence of unusual construction factors, 
• Increased deductibles applicable or opted for and 
• Other endorsements that increase or decrease the sum insured to be insured.  

The calculation of premium for different individual householders policies are bounded by these factors. Therefore, an underwriter should be familiar with these features to facilitate fair and accurate calculation of  premium.