Paul Sanchez
AAA offers home insurance to protect your house and belongings against damage, theft, and claims from lawsuits for injuries that occurred on your property. While the law does not require you to buy homeowners insurance, your mortgage lender might. AAA home insurance covers your house, condo, or apartment and offers optional add-ons for big-ticket items, earthquakes, and more. The cost of home insurance depends on your unique situation, but the average in the US is $1,200 per year, or about $35 per month for every $100,000 of your home's value.
| Characteristics | Values |
|---|---|
| Home insurance cost | $1,200 per year on average in the US |
| Home insurance cost calculation | $35 per month for every $100,000 of a home's value |
| Home insurance provider | CSAA Insurance Group |
| Home insurance add-ons | Covering big-ticket items, earthquakes, and more |
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What You'll Learn
Mortgage lenders and home insurance
While home insurance is not a legal requirement, most mortgage lenders do require borrowers to have a home insurance policy in place before they approve a home loan application. This is because a mortgage is secured by the value of the property. If the building is damaged or destroyed, and the borrower defaults on their loan, the lender will struggle to recover their money by selling the property. A home insurance policy ensures that the property can be repaired or rebuilt, thus maintaining its value.
Lenders mortgage insurance (LMI) is typically required for mortgages with a deposit of less than 20% of the property's value. This type of insurance reduces the risk of loss to the lender if the borrower stops making loan repayments. The lender will normally pay the LMI premium to the insurer at the settlement of the home purchase, and this cost is often passed on to the borrower.
When closing on a home, a lender will usually want to see proof of homeowners insurance and will expect this to be maintained for the life of the loan. Some lenders may arrange for an escrow account, through which the borrower pays their mortgage, insurance, and property taxes in a single monthly payment. If you do not use an escrow account, you will have to manage these payments yourself.
Home insurance can cover the costs of repairing or rebuilding your home if it is damaged or destroyed, as well as providing temporary accommodation costs if your home is uninhabitable. Contents insurance is not required for a home loan, as it only covers possessions and not the building itself. However, owner-occupiers may be able to apply for a combined home and contents insurance policy, which may be more cost-effective.
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Discounts for AAA members
AAA members can benefit from a range of discounts and perks, including savings on home insurance.
Firstly, AAA members can save up to 5% on their home insurance policy when they bundle it with car insurance. AAA home insurance covers your home, personal property, liability, and more. It also covers replacement costs for personal goods and living expenses if your home becomes uninhabitable. There are also optional add-ons that cover big-ticket items and earthquakes, for example.
Secondly, AAA members can save on their home insurance policy when they keep their new home safe with AAA Smart Home. This is a connected security system with self-installation, 24/7 monitoring, and remote control via a mobile app.
Thirdly, AAA members can save on auto, home, and life insurance, as well as benefit from free credit monitoring.
Additionally, AAA members can save on a range of other products and services, including:
- Gas, car care products, car batteries, parts, and repair labor
- Shipping, moving services, electronics, and home warranties
- Pet insurance, estate planning, and athletic apparel
- Hotel stays, car rentals, airport parking, passport photos, and vacation packages
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Home insurance requirements by state
While home insurance is not a legal requirement, your mortgage lender might require you to have it. Most mortgage lenders require home insurance coverage up to the rebuilding cost of your home. The cost of home insurance varies depending on several factors, including the location and building materials of your home, as well as your insurance score.
In 2025, Oklahoma was the most expensive state for home insurance, with an average cost of $5,858, while Hawaii was the cheapest at $631. The average cost of home insurance across the US was $2,601.
Some states, like Florida, have seen significant increases in home insurance rates due to the risk of hurricanes. In states like California, where wildfires are a concern, insurers can use climate data in the rating process, which may impact rates.
Additionally, it's important to note that standard home insurance policies typically do not cover flood damage. If your home is located in a flood-prone area, you may need to purchase additional flood insurance. Similarly, if you live in an area prone to earthquakes, you may need to buy separate earthquake insurance or add it to your existing policy.
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Customising your homeowner's insurance policy
Homeowners insurance is a necessity, protecting your home and possessions against damage or theft. While it is not a legal requirement, your mortgage lender might ask for it. Most mortgage companies require borrowers to have insurance coverage for the replacement cost of a property, which is the cost to rebuild it if it is completely destroyed.
Customising your homeowners insurance policy is a good way to ensure you have the right protection for your unique circumstances. You can choose from a range of standard coverages, as well as optional add-ons, to build a policy that suits your needs and budget.
Standard coverages
Standard home insurance policies typically cover the following:
- Destruction or damage to a residence's interior and exterior
- Loss or theft of possessions
- Personal liability for harm to others
- Unattached structures, such as detached garages, sheds, fences and pools
- Replacement or repair of items such as clothing, jewellery, appliances, furniture and electronics
Customisations
Customisations to a standard policy can include:
- Flood insurance
- Earthquake insurance
- Extra liability coverage
- Coverage for detached structures
- Increased coverage for valuable items such as jewellery
- Coverage for small businesses
- Protection for a loved one's belongings in an assisted living facility
- Discounts for loyal customers, or those who have recently renovated their homes
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Escrow accounts and home insurance
An escrow account is a bank account into which money is deposited to cover specific bills for your home, such as homeowners insurance, private mortgage insurance, and real estate taxes. When you close on your home, your lender will often set up an escrow account to deposit part of your monthly loan payment to cover these costs. This ensures that your insurance premiums and real estate taxes are paid on time.
The lender will deposit the escrow amount each month and then pay your insurance bill, real estate taxes, and, if necessary, your private mortgage insurance bill when they are due. Your monthly payments are typically divided into three parts: principal, interest, and escrow. The escrow account can include funds for expenses like property taxes, mortgage insurance, homeowners insurance, HOA fees, and flood insurance.
Escrow accounts are commonplace and may be required if, for example, your down payment is less than 20 percent. In this case, your lender will likely require you to pay your homeowners insurance through an escrow account. This protects their investment in your home and ensures your insurance premium is paid on time every month without lapses in coverage. If you do not use an escrow account, you will pay your mortgage, taxes, and home insurance yourself—to different entities.
You will typically receive an annual escrow disclosure statement showing past and future payments and potential or actual escrow shortages or surpluses. When selecting your mortgage company, verify if the type of loan you are applying for requires an escrow account. If so, carefully review all documents and ask your real estate attorney or loan officer to clarify any terms of concern.
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Frequently asked questions
Homeowners insurance is not required by law, but your mortgage lender might require it. They will likely want to see proof of insurance when you close on your home and may expect you to maintain insurance for the duration of your loan.
Homeowners insurance protects your home and belongings against damage, theft, and claims from lawsuits for injuries that occurred on your property. It can also cover living expenses if your home becomes uninhabitable.
The average cost of home insurance in the US is $1,200 per year, or approximately $35 per month for every $100,000 of your home's value. The exact cost will depend on your unique situation.
You can contact a AAA agent to discuss your insurance needs and find the right policy for you. AAA also offers additional discounts if you bundle your policy with car insurance or if you are a AAA member.
