Where You Live Can Determine How Much You Pay For Homeowners Insurance

June 28, 2017

Homeowners insurance protects against several causes of loss, but probably the most significant cause is fire. Once started, a fire can quickly destroy a home. A home's chances for surviving depend in large part on the quality of the fire protection services and resources available. The insurance industry has a measurement for fire protection quality - the protection classification.

The Protection Classification system was developed by the Insurance Services Office (ISO), a provider of data, analytics, and decision-support services for the property/casualty insurance industry. The system ranks a community's fire protection system on a scale of 1 (best protection) to 10 (essentially unprotected). It calculates a community's grade by evaluating three aspects:

  • Fire department
  • Emergency communications
  • Water supply

The quality of the fire department accounts for half of the grade. Evaluators consider:

  • The distribution of fire companies throughout the area
  • The amount of water needed to fight a fire
  • How frequently the department tests its pumps and inventories its equipment
  • Types and extent of training activities and the number of personnel who participate
  • Firefighters' emergency responses
  • Equipment maintenance and testing

Another 40 percent of the grade is based on the community's water supply. The system looks at how much water is available for fire suppression after allowing for the maximum amount the community uses each day for other uses. It evaluates all of the components in the water supply system (piping, hydrants, etc.), inspections of hydrants, how often the community tests water flow from hydrants, and the number of hydrants less than 1,000 feet from certain locations.

A small amount of weight is given to the state of the community's emergency communications, meaning how well the fire department receives and dispatches fire alarms. Evaluators look at the emergency reporting system; the communications center; the number of people working there; computer-assisted dispatch facilities; and how firefighters are notified of an emergency's location.

Using a mathematical formula, ISO calculates a community's protection classification. A community with a grade of 1 has a professional fire department, plentiful water supplies and excellent communications. A community with a grade of 10 may be rural with many locations more than 1,000 feet from a hydrant, a volunteer fire department, and communication by phone and an alarm audible from throughout the town.

A community's protection class significantly impacts the cost of homeowners insurance there. Insurance company statistics show that fire losses cause less damage and cost less to repair in communities with low protection class ratings. Conversely, a home in a community with a grade of 9 or 10 is more likely to be destroyed before the fire department is able to get a blaze under control. Since insurance companies base their premium rates on the risk of loss, they naturally charge higher rates for homes in communities with weaker fire protection.

Protection class is not the only factor that influences insurance rates, but it is an important one. Where you live has a lot to do with how much you will pay for homeowners insurance.


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