Whether you’re already a homeowner or are shopping for your 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. However, finding the right coverage takes time and effort. Most people start off by asking, “How much is homeowners insurance?”
When it comes to buying insurance on a house, 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
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 cost by state
The current average cost of home insurance in the United States is $1,211, according to data from the National Association of Insurance Commissioners (NAIC). But homeowners insurance rates vary greatly by state due to regional risks like hurricanes and fires. Here’s a look at home insurance premiums in every state, based on data sourced from NAIC.
*The typical homeowner’s insurance policy is for 12 months of coverage. There is limited data available on 6-months of coverage. Thus, the averages for 6-month premiums are calculated using 50 percent of the annual premium, plus an averaged installment fee of $6.50/mo (fractions rounded up).
Most expensive states
- Louisiana: $1,968
- Florida: $1,951
- Texas: $1,893
- Oklahoma: $1,885
- Kansas: $1,584
- Wisconsin: $779
- Nevada: $755
- Idaho: $730
- Utah: $692
- Oregon: $677
Least expensive states
What determines the cost of homeowners insurance?
The cost of an individual homeowners insurance policy is determined by a wide range of factors. Some of those factors are within your control, and some of them are not. Generally speaking, the main external factors that contribute to the cost of an homeowner’s insurance premium are the location of the home, the age and state of the home and your credit history.
Homes in areas with high rates of flooding or fires means that the cost of covering that home will be more than homes located in places where natural disasters are uncommon. Newer homes will also cost less to insure than older dwellings— especially those in need of repairs. The insurer will also probably look into your personal credit history before covering your home, so people with good credit histories could receive a lower premium than those with poor credit histories. Aside from these factors, the cost of an individual policy will also be determined by which features you chose to include in your coverage.
The features you chose in your homeowners insurance plan will play an important role in how much the monthly premium will be. A few of the options that affect the cost are:
- Deductible amount
- Extra coverage add-ons
- Bundled insurance policies
Types of coverage
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.
- Dwelling coverage is insurance that covers any damages to the home itself.
- Personal property coverage pertains to the cost of replacing possessions in your home, such as jewelry and furniture.
- Personal liability coverage protects against lawsuits for property damage or injury.
If your home needs to be replaced, there are three different coverage options commonly provided by home insurance companies. Each option affects your premium differently.
- Actual cash value (ACV) is based on the current market value, or how much your home and personal property is worth, with depreciation factored in.
- Replacement cost value (RCV) works in the same way as ACV, but without depreciation factored in.
- Guaranteed replacement cost (GRC) is also referred to as extended replacement cost (ERC), and this option covers the complete cost of rebuilding the home, even if that cost exceeds the policy limit.
How much insurance do you need?
The amount of insurance you should buy for your house will greatly depend on the home. As a general rule, you should start by considering the cost of rebuilding the home if it’s completely destroyed—which may be more or less than the home’s current market price.
If the home is older, it might not be compliant with newer building codes, and that means you could have to shell out more money to rebuild. Consider local construction costs and the value of the personal items within the home.
Before selecting a policy, conduct a home inventory to determine how much your personal possessions are worth. This will help to determine how much insurance you will need, and it will also provide a record of your possessions if your home gets 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:
- 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.
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.
