Jane Dotson
The cost of homeowners insurance is influenced by a variety of factors, including location, the size and age of the house, and the coverage amount and deductible selected. On average, homeowners insurance costs $2,110 per year, but rates vary significantly across states, with Oklahoma, Texas, and Nebraska being the most expensive, and Hawaii, Vermont, and Delaware offering the lowest rates. The cost of rebuilding a home, safety features, and the likelihood of extreme weather events in an area also impact insurance rates. Older homes tend to be more expensive to insure, and certain features like swimming pools or specific dog breeds can increase liability risks, leading to higher premiums.
| Characteristics | Values |
|---|---|
| Average annual cost | $2,110 |
| Average monthly cost | $198 |
| Cheapest state | Hawaii |
| Most expensive state | Oklahoma |
| Least expensive states | Vermont, Delaware, Alaska, Maine |
| Factors influencing cost | location, claims history, coverage limits, home characteristics, dwelling coverage, construction materials, coverage selections, prior claims, deductible, home size, age of home, liability concerns |
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What You'll Learn
Homeowner insurance deductibles
The cost of homeowners insurance varies depending on several factors, including location, the size of the house, and the coverage selected. On average, homeowners insurance costs around $2,110 per year, but rates can differ significantly from state to state. For instance, Oklahoma has one of the highest average annual rates at $6,210, while Hawaii has one of the lowest at $610.
When it comes to homeowner insurance deductibles, this is the portion of costs that you'll need to pay upfront before your insurance company covers the rest. Most homeowner insurance deductibles range from $100 to $5,000, with an average of $1,000. It's important to choose a deductible that fits within your budget, as you'll need to pay this amount out-of-pocket before your insurance coverage kicks in.
There are two main types of homeowner insurance deductibles: standard and percentage. A standard deductible is a fixed dollar amount that you select when purchasing your insurance policy, typically ranging from $100 to $5,000. This amount stays the same regardless of the cost of damages to your home. On the other hand, a percentage deductible is based on a percentage of your home's insured value and usually applies to specific types of claims, such as wind, hail, or hurricane damage. These deductibles typically fall between 1% and 10% of your home's listed value in the policy.
When deciding on a deductible, consider both your short-term and long-term financial situation. If you opt for a higher deductible, you'll usually benefit from a lower insurance premium. However, this also means you'll have higher out-of-pocket expenses when filing a claim. Conversely, choosing a lower deductible results in higher insurance premiums but lowers the amount you'll need to pay upfront when making a claim.
It's recommended to get multiple quotes with different deductible options to compare rates and choose the one that best suits your financial situation and risk tolerance. Remember, your deductible should be an amount you can comfortably afford to pay in the event of a claim.
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Home characteristics
The cost of homeowners insurance is determined by a variety of factors related to the characteristics of the home itself. These factors include:
The age of the home
Older homes are more likely to be built with harder-to-source materials, which can make repairs more expensive. Additionally, older homes may have older roofs that are more susceptible to windstorms and hail damage, leading to higher insurance costs.
Location
The location of the home plays a significant role in determining insurance costs. Homes in coastal regions, for example, may be riskier to insure due to the increased risk of natural disasters. Crime rates in the area can also impact insurance rates, as higher crime areas may result in more theft claims. Living near woods and brush can increase the risk of wildfire and tree damage, while proximity to a fire hydrant and fire department can lower insurance costs.
Construction materials
The type of materials used to build the home can impact the overall value of the property and the cost of insurance. For example, concrete block homes may be cheaper to insure than wood frame houses as they are less susceptible to fires and strong winds. The roofing material is also important, with asphalt shingles being less flammable and potentially resulting in lower insurance costs compared to cedar or wood-shake roofs.
Home features and unique characteristics
The features and unique characteristics of the home can impact its value and insurance costs. This includes the siding type, flooring materials, heating system, number of bedrooms and bathrooms, and any architectural details such as dormers.
Safety and security devices
Homes equipped with fire alarms, deadbolts, security cameras, and other protective devices may qualify for discounted insurance rates. Some insurance companies also offer discounts for certain smart home devices.
Credit history
Homeowners with poor credit histories may pay more for insurance as they are considered to be more likely to file claims. Improving credit scores over time can help reduce insurance costs.
Claims history
Insurance companies take into consideration the number and frequency of claims made by the homeowner. A history of filing insurance claims may indicate a higher risk of future claims and can impact insurance rates.
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Location
The location of your home is one of the greatest factors impacting the cost of homeowners insurance. The average cost of homeowners insurance in the US is $2,110 a year, or $2,601 annually for $300,000 in dwelling coverage, but rates vary depending on where you live. For example, Hawaii has the lowest rate at $613 for $300,000 in dwelling coverage, while Oklahoma has the highest rate at $5,858 for the same coverage.
Homeowners insurance rates are known to fluctuate frequently, but they typically differ depending on the state, city, and region. For instance, within the same state, rates can differ because risks differ. Even within a state, rates can vary by region and even by ZIP code.
Your home's proximity to certain locations can also affect your insurance rates. Being closer to a fire station can lower your premiums, while living in a neighbourhood with higher crime rates may increase them. If you live in an area that is vulnerable to natural disasters, such as wildfires, hurricanes, tornadoes, or flooding, your home insurance may be more expensive. For example, Florida is a tough market for homeowners insurance due to its risk of hurricane damage, wind damage, flooding, and sinkholes. The western part of Iowa is historically known as "Tornado Alley", so wind damage is common, and there is also a high risk of flooding.
Additionally, the cost of living in an area can impact insurance rates. States with a cheaper cost of living may have more affordable insurance rates because it is less expensive to rebuild after a claim. Areas with lower construction costs often have more favourable homeowners' insurance rates.
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Credit history
The cost of homeowners insurance is influenced by a variety of factors, including location, the size and characteristics of the house, and the coverage amount and type. The average annual cost of homeowners insurance is $2,110, but rates vary widely across states. For instance, Oklahoma has the highest average annual rate at $6,210, while Hawaii has the lowest at $610.
While shopping for homeowners insurance, insurance companies typically perform a "`soft` inquiry", which does not impact your credit score. This allows them to review your credit information without affecting your score. Comparing quotes and researching discounts is essential for finding the most cost-effective insurer, especially for those with poor credit histories. Some companies, such as CSE, Brethren Mutual, and PEMCO, offer more affordable rates for homeowners with bad credit.
Additionally, credit-based insurance scores are not the same as traditional credit scores. Insurance companies use these scores to predict the risk of insuring an individual. They consider factors such as debt, payment history, and other credit report details. A low credit-based insurance score may indicate a higher risk of filing claims, which can make it challenging to find insurers willing to offer a policy. In such cases, individuals may need to seek insurance through their state's Fair Access to Insurance Requirements (FAIR) plan, which provides coverage for high-risk individuals who cannot obtain standard insurance.
To improve your credit-based insurance score, it is essential to maintain a good credit history. This includes making timely payments, keeping credit card balances low, and ensuring your credit report is accurate. By improving your credit history, you may be able to secure more favourable homeowners insurance rates.
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Business use
If you run a business from your home, your homeowners insurance may not provide enough coverage. A typical homeowners policy usually covers only $2,500 of business equipment while at home and $250 to $500 when off the premises. Most homeowners policies specifically exclude business liabilities, so if someone comes to your home for a business purpose and gets injured, your homeowners policy will probably not cover the damages.
You can get better home-based business insurance by purchasing a standalone small business insurance policy or adding an endorsement to your homeowners insurance policy. An endorsement to your homeowners policy can add additional property coverage and some limited liability coverage for as little as $25. For less than $20 a year, you may be able to double your standard policy limits for business equipment from $2,500 to $5,000. However, this option is usually limited to businesses with less than a set amount of annual receipts, typically around $5,000.
Standalone business insurance policies are better if you have a lot of business property to insure or have many business visitors coming and going. They provide higher limits and more comprehensive coverage. A business owners policy (BOP) is a good option for small- to mid-size businesses and includes general liability insurance, commercial property insurance, and business interruption insurance. The cost of a BOP will depend on the risks associated with your business and the types of coverages you purchase. For some low-risk businesses, a general liability policy can cost as little as $11 per month, while businesses that need more coverage could pay hundreds of dollars per month.
Some insurers offer specific in-home business insurance policies with some of the same features as larger commercial policies but with lower policy limits and premiums. With this coverage, generally at a price of less than $300 a year, you can insure your business property for $10,000. The policy includes general liability coverage with the limit you choose, between $300,000 and $1 million. It also provides coverage for lost income and ongoing expenses if you have to shut down your business due to damage to your house.
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Frequently asked questions
The cost of homeowners insurance depends on a variety of factors, including location, size of the house, and the coverage you need. The average cost of homeowners insurance is $2,110 per year.
Location is one of the biggest factors in determining the cost of homeowners insurance. Homes located in areas that are prone to extreme weather, flooding, wildfires, or crime will be more expensive to insure. The size of your home also matters, as larger homes have higher insurance rates due to the increased surface area that can be damaged.
Location can significantly impact the cost of homeowners insurance. For example, in the US, Oklahoma has an average annual cost of $6,210, while Hawaii has an average annual cost of $610.
Coverage refers to the amount of protection provided by your insurance policy. The amount of dwelling coverage is the main factor that determines the cost of homeowners insurance. Dwelling coverage pays to rebuild the structure of your home if it is damaged or destroyed.
To reduce the cost, you can adjust the coverage amount to match your needs and avoid paying for more coverage than necessary. Additionally, consider the size of your deductible, which is the amount you pay out of pocket before the insurance policy takes effect. A higher deductible typically results in lower premiums.
