Skip to main content

What is Home Insurance Underwriting?

Buying a home is a life goal for many people, and while it’s an exciting one, there are steps to take to accomplish this goal. One key step is acquiring home insurance which lenders will require you to have before they’ll finance your purchase. After all, lending large sums of money is a risk. Lenders need protection of their investment, in case your home is damaged or destroyed so the home can be repaired or replaced to its original condition.

When you reach out for a home insurance quote, your mutual insurance agent already understands the underwriting guidelines of the insurer – to know whether your home is insurable, what type of coverages you can purchase, and the associated premiums.

This article will help you understand the underwriting process, and what to keep in mind as you compare home insurance providers.

What is Home Insurance Underwriting?

businessman and home model, insurance concept

If you’ve ever applied for life insurance, then you’ve had some experience with underwriting. Of course, rather than taking a close look at your health and determining the level of risk in insuring you personally, a home insurance underwriter will review the health of your home and assess the risk of whether it may be prone to damage from natural or manmade events.

An underwriter examines numerous factors to assess risk. Some factors are fixed and cannot be changed or affected by you. However, there are other factors that you do have the power to change that may lower your premium cost. Below are some of the key underwriting considerations you need to know:

Fixed factors affecting home insurance cost:

  • Where the home is located.
    • Is the home in or near a flood plain or in an earthquake-prone area? Factors like these inform how at risk the home is for potential damage and the coverages that may or may not be available to you.
  • The home’s age and construction materials.
    • Older homes are built differently than newer ones. Underwriters may take into account construction materials and the condition of the home. Some older homes may be more structurally sound than newer builds, while others may require updates. Additionally, some older homes have undergone complete top to bottom renovations.
  • The home’s size.
    • The overall square footage and number of storeys your home has influences how much it would cost to repair or rebuild it.
  • Proximity to firefighting services.
    • How long would it take for firefighters to respond to a call? Is it a full-time or volunteer service? The longer it takes, the more potential for damage.
  • Purchase price and replacement cost – i.e. the cost to rebuild your home.
    • How much will it cost to repair or rebuild your home to its current specifications?

Changeable factors affecting home insurance cost:

  • The amount and type of coverage you choose.
    • Policies differ in coverage and in cost. You can pick and choose the breadth of coverage to meet your budget.
  • Your payment history.
    • If you’ve had difficulty in making payments on prior insurance contracts, this can impact eligibility and payment options.
    • Lower premiums tend to have higher deductibles and vice versa.
  • Bundling policies.
    • Ask your insurance provider whether bundling is an option and if it can save you money. It may be beneficial to have one insurer provide both your auto insurance and home insurance in terms of obtaining the best premium and service.
  • Type of heat
    • Different heating systems, such as oil or wood, may have different eligibility requirements and may carry higher costs. It is a good idea to shop early if you have one of these heating systems, to allow sufficient time for any inspections your insurer may require.
  • Alarm systems
    • Locally monitored (e.g. siren or app-based system) or centrally monitored alarm systems can help to prevent thefts and/or fire which can lower your premiums.
  • Your personal contents.
    • The amount and type of personal possessions you own could increase the amount of insurance you need and the premium associated with it. For example, collector’s items, sporting equipment, or jewellery may require separate limits on your policy.

How Do Underwriters Differ from Agents and Brokers?

Thinking asian woman.

One changeable factor that home buyers often overlook is the choice of insurance provider. Let’s look at how this choice can affect the underwriting process and the cost of your home insurance.

Underwriters have a separate, but related, purpose to agents and brokers. They are responsible for understanding and accepting the risks which are submitted to the company by its agents and brokers. Underwriters must assess individual and portfolio risk factors as well as look at statistical data that determines coverage and premium costs. Your agent or broker will take your information and help you understand the types of insurance for which you might qualify and walk you through the insurance application process.

Needs and lifestyles evolve. For example, you may want to start a business out of your home or build an addition. When you have a long-term relationship with a trusted insurance agent, you can always get the advice you need.

The Advantage of Choosing a Mutual Insurance Company

Many home buyers aren’t aware that there are two types of home insurance providers available: mutual insurers and stock insurers. While both perform the same basic service which is to sell you a home insurance policy, there are significant differences that can affect how your premium costs are determined.

4 Ways That Mutual Insurers and Stock Insurers Differ:


  • A mutual insurer’s primary goal is to uphold the flow of capital to meet the needs of its policyholders.
  • A stock insurer’s first allegiance is to its shareholders, so the goal is to maximize profits.


  • A mutual insurer is owned by the policyholders. They have a strong voice in how the company is run because they have a vote.
  • A stock insurer may be privately held or publicly traded. The company is controlled by investors and shareholders. Policyholders do not vote.

Underwriting Protocols:

  • A mutual insurer doesn’t rely solely on numbers and algorithms. They look at the human side to determine that you are a “good risk”.
  • A stock insurer typically focuses on numbers and algorithms, so risks must fit into a “box” predefined by a set of underwriting rules.


  • A mutual insurer, like Dumfries Mutual Insurance, has local underwriters who are familiar with the local area and its unique characteristics — and they use these factors in underwriting your application.
  • A stock insurer typically has underwriters working out of a head office which may be far away from where you live. They rely on statistics, rather than firsthand knowledge.

Check out this video and see what the Dumfries Difference is all about.

As a mutual insurer, Dumfries Mutual Insurance, is here to support policyholders like you. If you need to make a claim or are looking for some assistance, we are here to help. We’re your neighbours and we share the same goal as you: to support our community and make it a great place to live and work.

If you have any questions about our underwriting process or the types of home insurance coverage we offer, contact us by phone or email. We’re here to help.


Our team strives to present accurate information at the time of publication. In the interests of time and space, complete wordings are not included. If you have specific questions about our insurance products, please contact an agent or broker. The information in this article is non-binding to the company.