What does insurance premium mean?
Short answer. The premium is the price you pay for your insurance policy, usually billed yearly or monthly, or paid through your mortgage escrow account. It is different from the deductible, which is what you pay toward each claim. For homeowners insurance, the premium depends on the home's rebuild cost, location, claims history, chosen deductibles and, increasingly, the age and condition of the roof.
Premium versus deductible versus limit
- Premium: what you pay to keep the policy in force.
- Deductible: your share of each covered loss.
- Limit: the most the insurer will pay for a type of loss.
What drives a homeowners premium
- Dwelling limit: the cost to rebuild the house.
- Location: local hail, wind and fire risk and distance to a fire station.
- Roof: age, material and shape. Newer roofs and, with some insurers, impact-rated shingles can lower the premium. Hip roofs are often viewed as more wind-resistant than gables.
- Deductibles: higher deductibles mean lower premiums.
- Claims history: prior claims on the home and by you.
- Credit-based insurance score where insurers use one.
- Discounts: bundling, security systems, claim-free years.
Paying through escrow
Most homeowners with a mortgage pay the premium through escrow. The servicer pays the insurer, which is why the mortgage company is also named on the policy and on claim checks.
Why premiums are rising
Storm losses and higher construction costs have pushed premiums up in many states, including Georgia. Roof condition has become one of the factors homeowners can most directly influence.
Read whether a roof claim raises premiums, roof age and insurance and percentage deductibles.