Housing Counselor Certification (HUD) Practice Exam

Which factor does NOT typically affect a homeowner's insurance premium?

1. Condition of the property

2. Location of the property

3. Household income

4. Size of the home

The correct answer is: Household income

The factor that generally does not affect a homeowner's insurance premium is household income. Insurance premiums are primarily determined by factors that relate directly to the risk associated with insuring the property and potential claims. The condition of the property impacts premiums since well-maintained homes are considered lower risk for insurers compared to those with significant maintenance issues, which may lead to more claims. The location of the property also plays a critical role; homes in areas prone to natural disasters or high crime rates may face higher premiums due to the increased likelihood of potential damage or loss. Additionally, the size of the home influences premiums based on the replacement cost of the property and the value of the assets it contains; larger homes typically require higher coverage amounts. In contrast, household income does not have a direct correlation to the risk profile of the property being insured. While income may influence an individual's ability to pay premiums, it does not affect the calculation of risk that insurers consider when determining the cost of homeowner’s insurance. Thus, household income stands out as the factor that does not typically impact premiums.