Every person searching for insurance asks the same first question: how much does homeowners’ insurance cost?
Homes are expensive. From mortgage payments to repairs, your home can be the most expensive part of your life (unless you’re buying diapers… those seem to cost more than a home). On top of all of those expenses, you have to pay for homeowners’ insurance to protect the house that you’re funneling money into.
Because of “house-finance-stress,” a lot of people start to skimp on their homeowners’ insurance as a way to lower their monthly house expenses. But this is one of the biggest, most costly mistakes you could make. Underinsuring could push you into a financial hole if something were to happen to your house. As an example, fire-related claims alone average around $39,791 (according to III, as of 2014).
The more prepared you are, the more you can control the uncontrollable.
So how much should you expect to pay for your homeowners’ insurance? How much money do you need in order to fully protect yourself from incidents, acts of God, and other cosmic forces of the universe?
Unfortunately, the answer isn’t so clear-cut. The national average for homeowners’ premiums is $1,095 per year, according to the National Association of Insurance Commissioners. However, what you pay could vary drastically from the national average. There are numerous factors that can influence the cost of your homeowners’ insurance. This guide will help you better understand where your insurance costs are coming from, so you can thoroughly protect your home from potential disasters.
1. Where do you live?
Homeowners’ insurance differs by state and city, largely due to that area’s susceptibility to natural disasters. The likelihood of a natural disaster is considered the highest “risk” in your homeowners’ premium.
Florida and Texas are the two most expensive states for homeowners’ insurance, coming in at 90% and 80% respectively above the national mean. This is because they are most susceptible to natural disasters like tornadoes and tropical storms. Florida, in fact, averages nearly $2,094 annually. Other expensive states include: Louisiana, Oklahoma, Mississippi, Kansas, Rhode Island, Alabama, Connecticut, and Massachusetts.
The states with the lowest average homeowners’ insurance premium tend to also have the lowest incidents of “acts of God.” These states are Idaho, Oregon, Utah, Wisconsin, Washington, Nevada, Delaware, Arizona, Ohio, and Maine. Idaho is the lowest, coming in at an average of $561 annually.
Check out the NY Times map “Where To Live To Avoid A Natural Disaster” to visualize the different risks and rates by city.
2. How much would it cost to rebuild?
Insurance companies will value your house not on the price you paid but on the square footage (size), exterior material, age, and location. If your house suffered total damage due to some disaster, you would need insurance money to cover a complete rebuild from the ground-up. Thus, your company will consider the cost of rebuilding per square foot. The nationwide average cost of construction per square foot is $95.51, but this is dependent upon location and building materials.
3. What is the value of your belongings?
Along with the value of your house, your insurance company will take into account the overall value of your home contents and belongings. The more you need to cover, the more it will cost. The inventory items that most contribute to your premium include jewelry, furniture, fine art, electronics, and other pricey assets.
4. What are your home’s risk factors?
Certain “risks” can make your homeowners’ premium more expensive. These risk factors include:
- Age of house
- Location of house within the city/town
- Owning a pool or trampoline (learn the basics of insuring a swimming pool here)
- Owning a dog (dependent upon breed)
- Housing farm animals
- Distance from emergency services, like fire departments
- Condition of plumbing and electrical systems
- Susceptibility to wind, extreme temperatures, and earthquakes
- Inspection and maintenance results
Click to learn more about the types of homes that are harder or more expensive to insure.
Installing safety features in your home can help mitigate some of these risk factors and their related costs. Talk to your agent about potential safety discounts for fire sprinklers, security systems, cameras, and more.
5. How risky are you?
That’s right—your insurance company will take you into account too. Your credit score, martial state, age, and level of education can all affect your premium. In fact, one of the major surges in homeowners’ premium costs can come from having a poor credit score.
6. What is your history of past claims?
In a similar vein, your insurance company will look at your past homeowners’ claims. This gives them a sense of how risky you are in terms of insurance. Those with fewer claims tend to pay less, while those with more claims are considered “higher risk” and have to pay in accordance with that risk.
7. How much is your deductible?
Deductibles remain fairly constant, usually ranging between $500 and $1500, with the average around $1,000. Nevertheless, choosing to raise your deductible can save you money on your monthly insurance costs. The higher the deductible, the lower the annual premium cost. People with high-value homes and large premiums tend to opt for a bigger deductible, choosing to pay less monthly and more upfront in the case of an incident.
8. What other insurance needs do you have?
Other aspects of your insurance will affect the overall cost, including your liability limit and additional umbrella policies. Bundling auto and home with the same company can also lower the homeowners’ insurance costs. It’s important to discuss all of your insurance needs with an agent to find the best overall price.
The Bottom Line
You can understand your own risks better by downloading our Homeowners’ Insurance Quote Worksheet here.
Homeowners’ insurance costs can vary greatly depending on risk factors and insurance coverage needs. Never choose a lower premium just for the cost, though. Underinsuring based on monthly cost could severely impact your financial wellbeing in the future if something were to happen to your house, belongings, or family.
You can balance these risk factors and compare quotes right now to see what your variable costs will look like.
If you’re feeling anxious about the cost, give us a call at 844-232-2700. We’re here to ease your mind and help you find the perfect coverage for your home.