Homeowners insurance covers your physical home structure and your personal belongings. It provides financial protection for loss of or damages to the home and personal items in the event of fire, storms, vandalism and other covered events. Homeowners insurance also covers liability costs if someone is injured in your home, and it pays for additional living expenses if your home is temporarily uninhabitable. If you have a mortgage, your lender probably requires you to carry homeowners insurance.
Average homeowners insurance cost
According to the National Association of Insurance Commissioners, the average cost for a typical homeowners insurance policy is $1,249 per year nationally. These costs can vary quite widely by state, ranging from $706 in Oregon to $1,987 in Louisiana.
|State||Average annual cost|
|District of Columbia||$1,264|
What determines the cost of homeowners insurance?
HO-3 policies are the
most common homeowners insurance packages.
First and foremost, the cost of homeowners insurance depends on the level of coverage you select. To make comparison easier, the insurance industry refers to the levels of homeowners insurance as HO-1 to HO-8.
The most basic and least expensive HO-1 and HO-2 plans cover only named perils, or risks, for the home, meaning that anything not specifically mentioned is not covered. An HO-3 plan has open-peril coverage for your home — only specifically named risks are not covered — and named-peril coverage for your personal possessions. Upgrade to a costlier HO-5 plan for open-peril coverage of both your home and possessions. HO-3 policies are the most common among homeowners in the U.S.
Other factors that affect the cost of home insurance include:
- The state and city where you live
- The types of coverage you buy
- The amount of coverage you purchase
- The type of home you have
- The deductible you choose
- Any riders you have on your policy
- Credit history
- Marital status
- Age of home
- Condition of roof
- Claims history for you and the home itself, even under previous owners
- Safety and security features in your home
Actual cash value vs. replacement cost
Most insurance companies allow the customer to choose between personal property coverage, which offers cash value for belongings that are lost or damaged, taking depreciation into account, or replacement value coverage, which covers the cost to purchase an item at today’s prices. A policy with replacement value coverage costs slightly more because the insurance company assumes, for example, that buying a new TV costs more than paying the policyholder cash for the depreciated value of the old TV.
Higher cost for higher-risk coverage
Homeowners who pose a higher risk to an insurance company will pay higher rates. Insurance companies consider some things more risky, such as certain dog breeds, a swimming pool or an in-home wood-burning stove, and increase rates accordingly. Certain other factors, like marital status and good credit history, indicate to an insurer that the customer poses less risk, which helps reduce the premium.
Home insurance cost FAQ
- Can you negotiate homeowners insurance?
- Start by talking to your auto or life insurance provider or agent. It's likely the company will offer a discount if you purchase multiple policies. The price of homeowners insurance could be negotiable if you do the research, get quotes from multiple companies, then mention the lowest price to your preferred provider. If that company’s price isn’t the lowest, a representative might be able to find additional discounts that lower your premium while providing the most coverage for the cost. Know the types of coverages you want and the amount of coverage so you can make fair comparisons between offers.
- What are waivers of deductible in home insurance?
- Waiver of deductible refers to a feature of an insurance policy that releases the policyholder from having to pay the deductible in certain situations. For home insurance, a popular option is the “large loss” waiver of deductible. That means if the claim is over a certain amount — typically thousands of dollars — the homeowner won’t pay the deductible. Insurance providers offer different terms for deductible waivers; there is no industry standard.
- Does homeowners insurance go up after a claim?
- Homeowners insurance is likely to go up after a claim, depending on the cost of the damage and your claims history. Losses from water damage (not flooding), fire, lightning and other extreme weather tend to have high-dollar payouts and therefore result in the largest premium increases. Policyholders with a history of one or more claims are considered by the insurer to pose a higher risk and will likely see increases in their rates, especially if the previous losses have occurred within the last three to five years.
- How do you shop for home insurance?
- Shopping for home insurance involves research and comparison. Preparation is also important — know the value of your belongings and the cost to rebuild your home (not the resale value), and determine if there are other structures on your property that need to be included in the policy. Use online tools to get multiple quotes, or contact an agent that represents multiple providers to help compare costs and features. Think about how the deductible affects the rate you pay. Could you afford to cover minor damage out of pocket in case of a loss and save money on a policy with a higher deductible?
You’re signed up
We’ll start sending you the news you need delivered straight to you. We value your privacy. Unsubscribe easily.