Are homeowners "Coverages" priced like Auto "Coverages"

Most of my experience is Auto, where you have clear base rates by coverage(BI, PD, Coll, COMP, UM, etc…) and they algorithms might be very similar between them.

Homeowners has coverage A(dwelling) and all of the other coverages for extra structures, contents, loss of use, liability, medpay(I think those are the main ones.)

For the non-dwelling coverages, are those typically also priced by other coverage, with their own base rates, and possible factors for deductible/limit, territory factors, credit score, insurance score, etc factors as well?

Or can those be priced with simple flat rates per item or have their premiums really be a function of other the dwelling premium(since limit can be a function of dwelling limit)

I’m just not familiar with the common ways these other coverages are priced. Generally speaking, how are these other coverages priced?

Till all are one,


A lot depends on just how much data you have available.

I’ve seen situations where everything covered by a policy (regardless of coverage) are just lumped together. I’ve seen situations where each coverage has a rate developed separately and then combined for the rating manual (competitive advantage since the rate manual might be public through its filing).

But the true analog to Auto’s coverage for homeowners pricing is likely to be peril (Fire, Wind/Hail, Liability (including medical payments), and All Other Coverages) and then optional coverages being priced separately.


I did homeowners as the industry was moving out of the dark ages – lots of analysis in APL and Lotus, credit scoring was being introduced and we were starting to pay attention to cat models, but before widespread predictive modeling as we know it today.

Analysis was primarily done on a by-peril basis (fire, wind, water, liability, etc.), but rolled up to a base rate for a particular form (e.g. HO-3 vs HO-4 vs HO-5 vs HO-6 vs HO-8…I think we also had HO-1 and HO-2, but they weren’t used much) and tier.

That base rate was impacted by Coverage A limit and deductible, territory, protection class, age of dwelling, type of dwelling (single-family, duplex, etc.), construction type, presence of alarm systems and/or sprinklers…and probably something else that I’m forgetting.

Selecting other-than-standard limits for Coverages B, C, D were a percentage surcharge/discount. Higher limits for Coverages E and F (liability and med pay) were expressed as flat dollar amounts that could vary by territory.

Assorted endorsements were priced either on a percentage basis or on a flat dollar basis.

I remember preparing manual pages that were a matrix of Coverage A amount by Protection Class, with different pages for different forms, different territories. Everything else was either a multiplicative factor or an additive percentage/fixed amount.

It’s presumably become more complicated since the olden days.

Agreed, I’ve seen a one-process “multiplicative algorithm” where Coverage B may cost this % of Coverage A, everything is straight-through, one base rate for everything.

Also have seen by-peril algorithms with 9 to 13 sub-algorithms by peril (Fire, Wind and Water (each possibly split by Weather incl. CATs, Non-Weather), Lightning… where each peril has a base rate. Certain coverages only apply for certain perils, some apply to all.

Endorsements are typically a flat fee or a % surcharge of another Coverage (add 2% of the Cov A charge).