The full explanation
Each company decides whether to sell you a policy and how much to charge. For home insurance it usually looks at the cost to rebuild the home, building materials, location, nearness to a fire station, your past claims and, at some companies, your credit score. Discounts can lower it. If you stop paying the premium, the company can cancel your policy.
An example
When she buys her home, Alicia compares premiums from several insurance companies. One offers a discount for a monitored fire alarm, and her premium goes down. She knows that if she stops paying it, she can lose the coverage.
You will see it in…
- Your policy's declarations page
- The Loan Estimate and Closing Disclosure, in the insurance section
- Your escrow statement, if the insurance is paid through your mortgage
