Replacement Cost

• One factor that's used to calculate the cost or premium amount for homeowners insurance is a home's replacement cost. The replacement cost is the amount it would cost an insurer to completely rebuild the house after a loss. The amount is in no way a reflection of a home's appraised value. It's important to understand the difference between the two when applying for homeowners insurance.
  
  

Protection Class

• Insurers refer to the protection class as the distance from a fire station or hydrant or other available water source. Many insurers use a numbering system of one through 10 to assign a specific protection class rating. A rating of 10 usually means there's no fire protection of any kind nearby and water has to be supplied by fire trucks. An insured within five miles of a fire station or within 1,000 feet of a fire hydrant will have a protection class of one to three. When assessing the protection class, insurers also need to know where the responding fire department is located.
  
  

Coverages

• A variety of coverages are contained in a homeowners insurance policy that are used to calculate the premium for a policy. One such coverage is for the contents of a home or dwelling. The contents can include electronic equipment, appliances and furniture. Determining the proper amount of contents coverage for a homeowners policy requires the insured to have an approximate value, if not an exact value, of items that are in the home. Some items are not covered by the contents coverage of a policy and need to be separately scheduled. These usually include jewelry, golf clubs and coin collections.
  
  

Building Material

• The building material used in a home can vary. Most homes are built with a frame construction, but some are built from masonry, such as brick or stone. The less flammable the material, the lower the premium calculation. The construction material of a house is used by many insurers as a significant factor in the calculation of the insurance premium.
  
  

Utilities

• The utilities in a home can be original or updated. An insurer usually wants to know if any utilities have been updated within the past 10 years. Utilities that are original to a home and have not been updated are considered a greater risk. These can include the wiring in a house as well as the plumbing. Older pipes are at risk for freezing during the winter months.
  
  

Deductibles

• When homeowners insurance is calculated, insurers apply various discounts to the policy if an insured qualifies for any of them. A discount changes the calculation of the premium, which results in a lower policy cost to the insured.