How Much Does Homeowners Insurance Cost?
Every homeowner requires insurance to ensure their financial security when it comes to damages or total loss. Not only do homeowners insurance protect personal belongings, but it's also necessary to safeguard against property damage.
The estimated cost of homeowners insurance is an excellent starting point, but the amount could differ per location and other criteria. Our aim at PropertyNest is to give you all the information you require to make an informed decision about homeowners insurance, including cost, ways to save money during your application, and other facets.
That being said, we've prepared an exhaustive guide on homeowners insurance costs. Our guide includes valuable information about the cost of insurance in the US and in key states, discounts, factors that determine the cost, and much more.
What is the Average Cost of Homeowners Insurance?
Let’s start with the average cost of homeowners insurance in the United States, keeping in mind that costs vary greatly from state to state.
The average annual cost of homeowners insurance in the United States is $2,300 per year, which works out to $190 per month.
Of course, there are some locations where homeowners insurance is considerably more expensive, as well as those where insurance costs less than the national average.
Compare Homeowners Insurance Rates
What Are the Most Expensive States for Homeowners Insurance?
You might expect to pay the most for homeowners insurance in states where the cost of living is high, but that’s not always the case.
In fact, the five most expensive states for homeowners insurance include several that rank toward the bottom in cost of living.
- Oklahoma: $4,445
- Kansas: $3,930
- Florida: $3,645
- Arkansas: $3,440
- Texas: $3,430
You’ll note that the cost in Oklahoma is nearly twice as much as the national average, which is surprising given that Oklahoma has the third-lowest cost of living in the United States.
What Are the Least Expensive States for Homeowners Insurance?
The least expensive states for homeowners insurance may also come as a surprise since one of them has a cost of living that’s well above the national average.
Here are the states with the five least expensive average costs for homeowners insurance.
- Hawaii: $500
- California: $1,165
- Vermont: $1,210
- Utah: $1,380
- New Hampshire: $1,455
The surprise here is that Hawaii and California have a high cost of living, as the states with the lowest costs for homeowners insurance.
Why is Homeowners Insurance So Expensive in Some Areas?
The most common explanation for why homeowners insurance is so expensive in certain areas is that these areas are the most likely to experience severe weather that can damage homes and drive up the frequency and cost of insurance claims.
For example, the top three most expensive zip codes on our list are all in cities on the Gulf Coast, an area that has been repeatedly devastated by hurricanes in recent years, including Hurricane Katrina and Hurricane Harvey.
The other two locations in the top 5 are Oklahoma and Kansas, states where there is a high probability of tornadoes.
Any time you buy a home in an area with many homeowners insurance claims for damage caused by flooding, wind, and hail, you should expect to pay more for homeowners insurance.
Why is Homeowners Insurance So Affordable in Some Areas?
On the flip side, it’s useful to consider some of the factors that may contribute to the areas on the low end of our list, such being inexpensive places to buy homeowners insurance.
Vermont and Maryland are areas of the country that may experience occasional severe weather but not necessarily the type that drives up insurance claims and rates.
The surprise on this list is Hawaii, which has a high cost of living and is at risk of damage by Pacific hurricanes.
Rates are low there because, in Hawaii, most homeowners insurance policies don’t include coverage for damage caused by hurricanes, which is something that happened in the aftermath of Hurricane Iniki in 1992.
Other things that can contribute to low homeowners insurance premiums include low crime rates, low population density, and the presence of robust neighborhood watch groups.
How Does Insurance Coverage Affect Homeowners Insurance Premiums?
In addition to your location and the probability of homeowners insurance claims in the area, the most important factor that can impact the cost of homeowners insurance is how much coverage you need.
Remember, your homeowners insurance policy limits should be high enough to cover you in the event you need to rebuild your home from the ground up, and you may choose to buy additional coverage for extra protection.
Cost of Basic Homeowners Insurance
Here’s our overview of how much coverage you need for your basic homeowners policy.
- Dwelling coverage should cover the rebuilding of your home from the ground up.
- Other structures coverage should be about 10% of your dwelling coverage.
- Personal property coverage should be between 50% and 70% of your dwelling coverage.
- Personal liability coverage should be between $100,000 and $500,000.
- Medical payments coverage should be between $1,000 and $5,000 per guest.
- Additional living expenses coverage should be about 20% of your dwelling coverage.
All told, every homeowner should have enough homeowners insurance coverage to total about twice the replacement value of their home, not counting guest medical and personal liability coverage.
In terms of cost, the biggest driving factor is the dwelling coverage since that’s what’s used to calculate other coverages.
If you live in an area with a high cost of living or own a luxury home, then your total coverage limit will be high, and you should expect your costs to be higher than the national average.
Add-On Coverages to Consider
In addition to the standard coverage outlined in the previous section, many homeowners choose to add additional coverages to their policies to increase their protection.
- Replacement value coverage pays to replace your personal belongings with new ones if they’re stolen or destroyed; the alternative is actual cash value, which pays based on the value of items when they are destroyed, which may not be enough to buy a replacement.
- Water and sewer backup coverage protect you if your home’s plumbing system fails and your home and belongings sustain water damage or if the local sewer system backs up and damages your home. (Note: this is not the same as flood insurance.)
- Scheduled items coverage allows you to list high-cost items such as electronics, jewelry, and artwork and comes at an additional cost since these items are not covered by your personal property coverage.
- Earthquake coverage protects your home from earthquake-related damage and is a must if you live in an area that’s prone to earthquakes.
- Home-based business-coverage protects you if you run a business out of your house and includes coverage for lost business equipment.
To get a homeowners insurance quote, you’ll need to decide how much coverage you need and which add-on coverage you want.
It’s essential to compare identical coverages to understand which insurance company offers you the best deal.
How Does Dwelling Coverage Impact the Cost of Homeowners Insurance?
We think it’s helpful to review the cost of homeowners insurance as it relates to dwelling coverage since the cost to rebuild your home is the biggest factor in determining the cost of homeowners insurance.
This chart compares the national average cost of homeowners insurance based on dwelling coverage using $100,000 of personal liability as a benchmark.
- $200,000 of dwelling coverage: $1,805 annual premium
- $300,000 of dwelling coverage: $2,285 annual premium
- $400,000 of dwelling coverage: $2,695 annual premium
- $500,000 of dwelling coverage: $3,045 annual premium
- $600,000 of dwelling coverage: $3,354 annual premium
What you can see from this chart is that the cost of dwelling coverage does not increase in exact proportion to the value of the home is insured, but it does make a significant difference in how much you’ll pay to protect your home.
Keep in mind that these costs relate only to dwelling coverage and personal liability; if you choose to schedule high-value items or add additional coverages, your costs may be higher than the ones we’ve listed here.
How Insurers Calculate Homeowners Insurance Rates
Whether you’re a first-time homeowner or someone who has owned a home for years, you should know what your homeowners insurance rates are based on.
There are many factors that can impact the cost of homeowners insurance, but here are some of the most important.
- Your home’s location. A variety of location factors can impact your homeowners insurance premium, including crime rates, the average cost of homes in the area, and your home’s proximity to water.
- Your home’s value. When we talk about value in this context, we’re referring to the cost of your home and not to the market value.
- Your home’s age. In many cases, an older home will have risk factors, such as outdated plumbing and wiring, that a newer home wouldn’t have.
- Cost to rebuild your home. Rebuilding costs and value are not necessarily the same.
- Local construction costs. The price and availability of building materials and labor, as well as local building regulations, play a role.
- Fire protection. Your insurance carrier will consider your neighborhood fire protection rating and its proximity to a fire station, as well as your in-home fire risks such as the presence of a fireplace or wood stove.
- Risk exposure. Risk is a broad term, but your insurance company will take any additional risk factors on your property, including the presence of a swimming pool, a guest house, an aggressive dog breed, or even athletic equipment such as a trampoline or a tree house.
- Claims history. The history of homeowners claims in your neighborhood, the previous homeowner’s claim history, and your claim history if you’ve had homeowner’s coverage before will all be taken into consideration.
- Your insurance score and credit score. Only three states don’t use personal credit to determine your insurance score for homeowners insurance: California, Hawaii, and Massachusetts.
It’s important to remember that these factors can lead to significant differences in homeowners insurance rates between states, cities, and even neighborhoods in the same area.
Tips to Help You Reduce Your Homeowners Insurance Cost
While it’s not always possible to mitigate the factors that impact the cost of homeowners insurance, there are several things you can do to keep your costs low.
Use these tips to lower your costs and save money on homeowners insurance.
Improve Your Credit Score
Since most states use personal credit scores to determine insurance scores for underwriting, paying down debt and improving your credit score can help you save money on your homeowners insurance.
Remove Obvious Risks from Your Home
If your home has obvious risks such as a trampoline, removing these items (or repairing them if the risk is related to disrepair) can help you save money.
Get Three Quotes for Comparison
We always suggest obtaining a minimum of three quotes from different insurance carriers, making sure that all quotes include the same coverage limits and riders, to ensure that you choose the most affordable homeowners insurance.
Choose a High Deductible
Since many homeowners insurance claims are small, it makes sense that choosing a high deductible would result in lower homeowners insurance costs than choosing a low deductible; just choosing a high deductible can save you hundreds of dollars a year.
Take Advantage of All Available Discounts
All homeowners insurance companies offer discounts to help policyholders save money, including discounts for building materials, new homes, installed alarms, or installing a backup generator.
Some companies offer special discounts if you are in a special category, such as being an active duty military member or a first responder.
Bundle Coverage for Additional Savings
We’re giving a special mention to bundling discounts because, in many cases, they involve larger savings than other discounts; on average, bundling your homeowners insurance with auto insurance can save you up to 19% on your premium.
Best Homeowners Insurance Companies in the United States
We’ve done the work to identify the best homeowners insurance companies in the United States, so you don’t have to.
Here are our top choices for homeowners insurance.
We should note that the best homeowners insurance in your state may not be a company on this list, so we encourage you to check out our state-by-state reviews.
At PropertyNest, we believe in arming our readers with reviews and data to make sure they make an informed decision about homeowners insurance.
We suggest obtaining multiple quotes from at least three carriers and looking at different deductible levels and coverage limits, as well.
While saving money is important, keep in mind that it’s more important to have enough coverage to protect you and your family in the event that your home is damaged or destroyed.