Homeowner's insurance is a great thing to have. It is based on paying back some or all of the damage or theft has done to a home, its associated structures like sheds, and the property within those structures.
It is important to note two things right away:
1. Homeowner's insurance does not cover some expenses like maintenance and certain types of natural disasters like floods.
2. Location matters in influencing risk and therefore insurance cost.
With that in mind, we can more clearly outline how a high-risk location from an insurer's perspective can dampen overall home expenses and affordability.
Scope of Coverage
Homeowners insurance covers:
1. Primary residence
2. Supporting structures such as a shed, fence, etc...
3. Theft or damaged property in the home
4. Legal defense and protection from liability in specific legal issues that relate to your home.
To some extent, location can influence all of these covered items. Here the focus will be on repair cost and "human factors" risk such as local crime.
In some cases, when earthquakes, floods and poor maintenance cause damage, you will have to buy two separate policies. It is all dependent on your insurance provider.
If your home is damaged in a fire, especially a wildfire, your homeowner's insurance may not cover all the repairs. But there are options. According to Walkup, Melodia, Kelly & Schoenberger, attorneys can help clients “maximize their insurance policy recoveries while also advising them on dealing with issues surrounding the process of rebuilding or relocating, depending upon their needs.”
So, be sure to check all of your options regarding your homeowner's insurance policy.
When repairing damage to a home, an insurer has to account for the "parts" and "labor" aspect of home repairs. Material costs do not vary wildly from place to place. However, labor costs can make a difference. For example, repairing home damage in San Francisco, California is more expensive than usual because any labor costs have to account for the overall high cost of living, and therefore, high wages, of the local professionals that will be doing the actual repairs. An identical home in rural Nebraska would cost far less to repair, therefore to insure, since labor costs are a much smaller dollar amount expense to the insurer.
Of course, crime will increase insurance costs. Therein lies a trap for would-be homeowners: a high-crime area may be judged as "worth it" since the house itself will be cheaper than elsewhere to compensate for the crime risk. However, insurance costs will be much higher than usual to account for the higher chance of theft, vandalism, and so on. Decreasing crime will increase home prices, but will depress insurance premiums.
Homeowners insurance costs are influenced by construction details of the house(s) covered, the value of property within a home, deductibles, and coverage scope. These are not location-specific variables that can be tweaked to offset high-risk location-based homeowners insurance expenses.