Premium

The premium is what you pay for your insurance coverage over the policy period. On a homeowners policy it is quoted as a yearly amount, then paid in full, in installments, or through your mortgage escrow account. The declarations page shows the total.

Insurers build the premium from rating factors: the cost to rebuild your home, its location and the local weather and fire risk, the roof's age and material, construction type, protection from the nearest fire department, your claims history, your coverage limits and your deductible. In many states they also use an insurance score based on credit information. A higher deductible generally lowers the premium and lower limits cost less, but they also shift risk to you.

Say your annual premium is $2,400. Paid monthly, an installment fee may push the total above $200 a month, while escrow collects one-twelfth of the yearly amount with your mortgage payment and the lender pays the bill. At cancellation, the unearned part of the premium is refunded, usually pro rata if the insurer cancels.

Premiums can rise at renewal even with no claims, because rates reflect the insurer's losses and reinsurance costs. See what affects your rate for the factors, and paying home insurance monthly vs annually to compare payment plans.