Whether you’re a longtime homeowner, or are shopping for your very first home, selecting home insurance is one of the most important decisions you’ll make. For many people, their home is their most valuable investment, and it needs to be protected from damage, theft and other threats to yourself and your family.
When it comes to homeowners insurance cost, there are several factors that determine how much you’ll pay. Some of these conditions include:
- The state you live in
- The age of your home
- The value of the land
- And your credit score
- Dwelling: Dwelling coverage is insurance that covers any damages to the home itself. This type of insurance covers the cost of rebuilding or repairing your home if damage occurs from certain qualifying events, such as a fire or severe wind.
- Personal propertyPersonal property coverage pertains to the cost of replacing possessions in your home, such as jewelry and furniture, should they get damaged or destroyed by a qualifying event.
- Personal liabilityPersonal liability coverage protects against lawsuits for property damage or injury. An example would be if a delivery man slipped on your front stairs, or if a tree in your backyard fell on a neighbor’s home and injured someone.
- Actual cash value ACV:The ACV of your home is based on the current market value, or how much your home and personal property is worth, with depreciation factored in. This type of coverage is the most popular and the least expensive, because depreciation is considered and claim payments are usually lower.
- Replacement cost value RCV: Should your home get damaged or destroyed, the RCV is the amount of money needed to repair or replace the home comparable to similar homes on the market. This type of coverage is often recommended by insurance providers, because homeowners can essentially rebuild their homes as it was before
- Guaranteed replacement cost (GRC):Also referred to as extended replacement cost (ERC), this type of coverage offers the most protection out of the three options. However, it’s also the most expensive. GRC/ERC pays to rebuild your home exactly as it was before the damage occurred.
- Ask about available discounts: Some companies offer discounted policy rates if you’re over a certain age, if your home is in a gated community, if you bundle with your car insurance or if you’re part of a homeowner’s association.
- Bundle your insurance policies: Often times, companies that sell home, auto and life coverage will deduct up to 15% off your premium if you buy two or more policies from them.
- Make your home safer: Some providers offer a discount if you install fixtures that make your home safer, such as smoke alarms or a security system, that reduce the likelihood that damage or theft will occur in the first place.
However, there are ways that homeowners can save money on their insurance costs. Let’s look at the different types of home insurance options available and discuss how homeowners can calculate their estimated insurance cost.
Average home insurance premiums in each state
The current average cost of home insurance in the United States is $1,192, according to data from the National Association of Insurance Commisioners (NAIC). But the cost of home insurance varies greatly by state, due to regional weather risks, like hurricanes and fires. Here’s a look at home insurance premiums in every state, based on data from NAIC’s 2016 Homeowners Insurance Report
| Rank |
State |
Average Premium | Rank |
State |
Average Premium |
|---|---|---|---|---|---|
| 1 |
Louisiana |
$1,967 |
27 |
Kentucky |
$1,085 |
| 2 |
Texas |
$1,937 |
28 |
Illinois |
$1,042 |
| 3 |
Florida |
$1,918 |
29 |
Hawaii |
$1,026 |
| 4 |
Oklahoma |
$1,875 |
30 |
Maryland |
$1,022 |
| 5 |
Kansas |
$1,548 |
31 |
Indiana |
$1,003 |
| 6 |
Mississippi |
$1,525 |
32 |
California |
$1,000 |
| 7 |
Rhode Island |
$1,496 |
33 |
New Mexico |
$996 |
| 8 |
Connecticut |
$1,455 |
34 |
Alaska |
$974 |
| 9 |
Massachusetts |
$1,451 |
35 |
Virginia |
$966 |
| 10 |
Colorado |
$1,446 |
36 |
New Hampshire |
$965 |
| 11 |
Nebraska |
$1,402 |
37 |
Michigan |
$952 |
| 12 |
Alabama |
$1,386 |
38 |
Iowa |
$945 |
| 13 |
Arkansas |
$1,348 |
39 |
Pennsylvania |
$927 |
| 14 |
Minnesota |
$1,340 |
40 |
West Virginia |
$917 |
| 15 |
New York |
$1,309 |
41 |
Vermont |
$898 |
| 16 |
South Carolina |
$1,285 |
42 |
Maine |
$866 |
| 17 |
Missouri |
$1,280 |
43 |
Ohio |
$850 |
| 18 |
North Dakota |
$1,239 |
44 |
Washington |
$822 |
| 19 |
D.C. |
$1,225 |
45 |
Delaware |
$816 |
| 20 |
Georgia |
$1,200 |
46 |
Arizona |
$803 |
| 21 |
Tennessee |
$1,185 |
47 |
Wisconsin |
$762 |
| 21 |
New Jersey |
$1,174 |
48 |
Nevada |
$742 |
| 23 |
Montana |
$1,130 |
49 |
Idaho |
$703 |
| 24 |
South Dakota |
$1,125 |
50 |
Utah |
$664 |
| 25 |
Wyoming |
$1,120 |
51 |
Oregon |
$659 |
| 26 |
North Carolina |
$1,098 |
U.S. average |
$1,192 |
The different types of home insurance policies
Homeowners insurance is broken down into three main categories. Most standard insurance policies include coverage in all three categories, but homeowners ultimately determine how much coverage they want in each area.
Understanding replacement cost options
There are three coverage options that home insurance companies provide. Each option affects your premium differently, so it’s important to understand each one and determine which option is appropriate for you.
Before selcting a policy conduct a home inventory to determine how much your personal possessions are worth, should your home get damaged or destroyed.
Discounts and ways to save on home insurance
Homeowners insurance can be costly, so before selecting a plan, shop around to find the best deal based on your needs. It can be helpful to consult an insurance agent, read consumer reviews and check online insurance quotes to find companies with the lowest rates. Here are some other ways to save money on home insurance:
Frequently asked questions
Is home insurance required by law?
No, states do not require homeowners to get insurance when they purchase a home. However, if you choose to get a mortgage loan, most lenders will require you to have some insurance.
How can I estimate my home insurance cost?
Start by finding the value of your home, keeping in mind that the amount will be lower than the price you purchased the home for. Consult with a realtor, building contractor or appraisal consultant to get an accurate estimate. Next, conduct a home inventory to determine the worth of your personal possessions. Before choosing a policy, decide if you want to insure your home and possessions for replacement value (which doesn’t consider depreciation) or cash value (which considers depreciation).
How much coverage do I need?
To determine how much coverage you should purchase, refer back to your home inventory. Based on the estimated value of the possessions inside your home, you can determine how much coverage you need. Also factor in the location of your home, and evaluate risks based on weather, fires and other events that could potentially damage or destroy your home. You can always choose to increase your coverage after purchasing a plan.
