Have you been paying more in home insurance premiums than you need to?
Have you ever stopped to wonder why your home insurance is so expensive? As the cost of homeownership increases across the country, does the cost of insuring those homes. Understanding how insurance companies determine rates, what goes into the cost of a homeowners policy, and what factors will influence your costs now and in the future will save you thousands over your time as a homeowner.
A few national trends to consider:
- Across the country, fraudulent contractors looking to charge insurance companies more than a fair price are raising insurance rates for homeowners. Your state may be trying to pass legislation to deal with this issue.
- Climate change exacerbates natural disasters like annual flooding, storms, and wildfires. The area you live in may be more or less susceptible to worsening weather. If you’re trying to estimate the future cost of homeowners insurance, be sure to consider how climate change may affect your area.
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At a Glance: How Much Does Homeowners Insurance Cost?
According to the Insurance Information Institute (III), the national average for a homeowners insurance policy is around $1,200.
However, there are two main factors influencing the cost of your insurance:
- Where you live. In areas with higher home values, claim rates, or crime rates, premiums will be higher. The weather where you live will also affect your premiums, especially where instances of hail, tornadoes, or hurricanes are high. Other natural disasters, like earthquakes, floods, and wildfires, can also affect your costs.
- The condition of your home. Certain structural advantages can lower your rate, a new roof or new pipes, for example. The replacement value also affects cost, as the more expensive the replacement cost, the more expensive the insurance premium. Lastly, older homes are typically more expensive to insure due to the higher likelihood of structural issues.
These factors will influence the types of optional insurance, or insurance riders, homeowners should add to their policy. The more optional insurance needed to cover loss, the more expensive the policy. More on this later.
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Average Home Insurance Cost by Region
Location is the biggest factor that determines how much you’ll pay for insurance. Every region of the United States faces different risks—like flooding, hurricanes, fire, and earthquakes. And locations within each region, down to the ZIP code and street number, will face different exposure to each risk.
Thinking about relocating? Knowing the cost of home insurance in addition to the average cost of a home will more accurately calculate your potential costs of living. To get an up-close look at your home insurance cost, check out Insurify.
Here is an overview of home insurance cost for each region of the U.S., as exemplified by some states with notable or unique insurance landscapes:
Southeast: Average Insurance Cost for Homeowners in Florida
Floridians pay some of the highest premiums for home insurance in the country—almost a $2,000 annual premium according to research at the Insurance Information Institute (III). In addition to risks due to hurricanes and flooding, Floridians also face threats due to sinkhole damage.
Keeping costs low will depend on a number of factors, not the least of which includes reviewing discounts carefully. Comparison shopping for your best rate on a regular basis could also save you hundreds from year to year.
Southwest: Average Insurance Cost for Homeowners in Texas
Everything seems bigger in the Lone Star State, and home insurance premiums are no exception. Why is home insurance so expensive in Texas? There are a few factors:
- Risks due to hurricanes, whether through water or wind damage, are high across the state and especially along the Gulf Coast
- While North Texas avoids most hurricane risk, hail damage is extremely common
- Hill Country experiences wildfires across the brushland
Northeast: Average Insurance Cost for Homeowners in New Jersey
Homeowners in densely populated New Jersey certainly feel the pressure of rising home insurance costs. Property owners face risks due to snow, hail, wind, and rain. But there are several easy ways these homeowners can protect their property:
- Install storm shutters or other protections for your windows
- Keep up with roof maintenance
- Remove snow from your roof to reduce the weight it bears
- Keep your gutters clean
- Maintain the trees on your property to lower risk of branches coming down during a storm
Your insurance company will likely offer you a discount for taking many of the above precautions, so be sure to ask for discounts when you take great care of your property.
Midwest: Average Insurance Cost for Homeowners in Ohio
Ohioans know about spring storms with the occasional tornado, freezing winters with ice and snowstorms, and, for those who live near rivers, annual flooding. While Ohioans due often pay less than the national average, in areas more prone to natural disasters, premiums cost more.
Keeping home insurance rates low works the same way for all Ohio homeowners, as the same recipe can be copied no matter what region they call home. Here it is:
- Prepare your home for natural disasters
- Look for discounts
- Choose a higher deductible to lower monthly costs
- Comparison shop for your best rate on a regular basis
West: Average Insurance Cost for Homeowners in California
Earthquakes, floods, sinkholes…Californians across the state face a wide variety of risks associated with their property. But over the last few years, climate change has led to an increased frequency in wildfires, and premiums have increased in turn.
The insurance market and the homeowning industries are struggling to cope with this quickly changing landscape, but there are still many ways to lower costs and lower your risk for damages:
- Fireproofing your home
- Working with your “fire-wise” community to address wildfire prevention and protection
And don’t forget about comparison shopping and doing other things to protect your property specific to the risks in your area: preparing for earthquakes, floods, and mold, for example.
How Much Does Home Insurance Cost if I’m Renting My Home?
If you’re renting out your property as a rental unit, you will need to purchase insurance as a landlord. Like standard home insurance, landlord insurance covers the building and other structures on your property,
However, it differs from standard home insurance in a few ways:
- It does not cover personal belongings unless those belongings are used to service the home, a ladder for example. For this reason, we recommend requiring or encouraging tenants to purchase their own renter’s insurance policy.
- It has three coverage options, DP-1, DP-2, and DP-3. Depending on the option you choose, you may not be covered for common perils.
- It is typically more expensive than standard home insurance, anywhere from 10 to 25 percent more.
If you are planning to rent out a single room in your home, your regular home insurance policy may cover you. Be sure to speak with your insurance company to understand your risk.
How Much Does Condo Insurance Cost?
Condo insurance, also known as HO-6 insurance, is typically much less expensive than a standard home insurance policy. This is because condo insurance covers your unit and your unit only. Coverage for the shared parts of the structure are shared by all owners and paid for by HOA dues.
Choosing a Home Insurance Company
The company you use to provide you insurance can also have a big effect on what you pay. But choosing the right company for you will depend on more than the price. Be sure to consider other factors, such as:
Customer service: Does the company have good reviews? You can read reviews of several major home insurance carriers right here at Insurify.
Availability and accessibility: You may want to be able to use an app, an online portal, or you may want to work with an agent in-person. Choose a company that offers the access you desire.
Claims process: Be sure you understand how the insurance claims process works before you purchase your policy. Some companies use a separate company to underwrite policies. In the event of a claim, customers have to work with the underwriter. This can cause a ton of confusion during an already stressful time. Know before you buy.
What Goes Into a Home Insurance Premium?
A home insurance policy typically consists of these components:
- Dwelling coverage
- Personal property coverage
- Personal liability coverage
- Medical payments/medical expenses
There are several coverage options that do not typically appear in a home insurance policy. Depending on your risk, you may want to add these common riders to your policy:
Knowing how much insurance you need will take thoughtful consideration. But taking that extra time saves you thousands or more in the event of a claim.
Conclusion: The best way to lower your homeowners insurance rates
No matter who you are or where in the U.S. you call home, there is one simple and easy way to lower the cost of home insurance: comparison shopping.
Knowing the range of options available to you helps you choose the best insurance coverage for the best price.