Paul Sanchez
Homeowners insurance rates have been rising dramatically, increasing by 24% from 2021 to 2024, more than twice as fast as the rate of inflation. The cost of insurance is determined by a multitude of factors, including the location of the home, the size of the home, the age of the home, the condition of the home, the coverage required, the deductible, and the history of claims. The location of the home is one of the most significant factors, with states prone to severe weather issues like hurricanes, flooding, and wildfires tending to have higher insurance rates. The national average cost of homeowners insurance is $2,466 per year, but rates vary widely across states, with Oklahoma, Texas, Nebraska, Louisiana, and Florida being the most expensive, and Vermont, Alaska, Delaware, New Hampshire, and West Virginia being the least expensive.
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What You'll Learn
Homeowners insurance rates vary by state
Homeowners insurance rates vary widely by state, and even by ZIP code. The national average cost of homeowners insurance is $2,466 per year for $300,000 in dwelling coverage, but this cost will likely differ depending on which state you live in. The average cost of homeowners insurance in the U.S. is $2,601 a year for a policy with $300,000 in dwelling coverage, though some sources put the average at $2,110.
The state you live in will influence your insurance rates because different parts of the country have different levels of risk. For example, homes in the Midwest tend to have higher premiums because of the increased risk of tornadoes and windstorms. Areas with lower construction costs often enjoy more favourable insurance rates.
The threat of natural disasters plays a significant role in determining your home insurance cost. States prone to severe weather issues like tornadoes, hurricanes, and hail will have higher insurance rates. Coastal properties are sometimes riskier to insure than inland properties due to a greater chance of natural disasters. Crime rates in your ZIP code can also affect your insurance rates, as insurers use this information to determine how likely you are to file a theft claim.
The features of your home can also influence your insurance rates. For example, insurance companies consider trampolines and swimming pools to be "attractive nuisances", which may raise the cost of your homeowners insurance. Gable roofs are typically more affordable to install, but they are more likely to sustain wind damage than hip roofs, which are more resistant to wind and may help lower your insurance cost.
The cost of homeowners insurance varies across the United States. Oklahoma is the most expensive state for home insurance, with average rates of $5,858 or $6,210 per year, while Hawaii is the cheapest, with average rates of $613 or $631 per year. Other expensive states include Texas, Nebraska, Louisiana, Florida, and Kansas, where average insurance premiums exceed $4,000 per year. Vermont, Alaska, Delaware, New Hampshire, and West Virginia are among the states with the least expensive insurance premiums.
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The size of your home impacts rates
The size of your home is one of the factors that influence the cost of homeowners insurance. Larger homes tend to have higher insurance rates compared to smaller homes. This is because a bigger house means more "surface area" that can be damaged or destroyed during a covered event, resulting in higher repair and rebuilding costs.
The cost of rebuilding your home is a significant factor in determining insurance rates. If your home is large or has high-end features, the rebuilding cost will be higher, and you'll need more dwelling coverage. Dwelling coverage is the part of your insurance policy that pays for the reconstruction of your home if it's damaged or destroyed.
The age of your home also plays a role in insurance rates. Older homes are generally more expensive to insure than newer ones. As a house gets older, the materials degrade, increasing the likelihood of significant damage occurring during a covered event. Additionally, older homes may not meet modern safety standards, particularly concerning plumbing and electrical systems.
Location is another critical factor in determining insurance rates. Homes located in areas prone to extreme weather, flooding, wildfires, or crime tend to have higher insurance rates due to the increased risk of damage or loss. Coastal properties, for instance, are often riskier to insure than inland homes because of the higher probability of natural disasters. Crime rates in your ZIP code can also impact your insurance rates, as insurers consider the likelihood of theft claims.
Other factors that can influence your homeowners insurance rates include the condition and age of your roof, the presence of a swimming pool or hot tub, and proximity to a body of water and a fire station. Taking steps to lower the risk of a claim, such as improving your home's storm resistance or installing security equipment, can help reduce your insurance rates.
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The age and condition of your home
The age of your home is a significant factor in determining your insurance rates. Older homes tend to have ageing components that are more likely to break down and are generally more expensive to repair or replace. As such, insurance companies may charge higher rates for older homes as there is a higher risk of claims being filed. Newly constructed homes often receive an average discount of 36% compared to other homes.
The condition of your home is also important. If you have an older home, you may have made remodelling changes or improvements to the property. These changes can affect your insurance rates. For example, if you've installed a hip roof, which is more resistant to wind, you may be able to obtain a lower insurance rate. Conversely, if you have an older roof that is more susceptible to wind damage, your insurance rates may be higher.
The construction type of your home is another factor that influences insurance rates. Construction types differ in cost, and the risk of fire varies between construction types. For example, a brick home is less likely to catch fire than a wood home. Features of the home, such as fireplaces, crown moulding, or a jetted tub, can increase reconstruction costs and, consequently, insurance rates.
The location of your home is also a critical factor in determining insurance rates. Houses in certain areas are more likely to face damage from wildfires, wind, hail, or hurricanes. If your home is in a high-risk area, you will likely pay higher insurance premiums. Additionally, the crime rate of your zip code can affect your rates, as a higher crime rate may lead to increased theft claims.
Other factors that can influence insurance rates include the square footage of your home, the building materials used, and the presence of attractive nuisances such as swimming pools or trampolines, which can increase the risk of injury.
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Your history of claims
Home insurance claims are reported through the Comprehensive Loss Underwriting Exchange (CLUE) database. Insurance companies use this database to review your claims history and set your rates. The more claims you file, the higher your risk profile, which typically results in higher insurance premiums.
The impact of your claims history on your insurance rates depends on several factors, including the type of claim, the cost, and the number of claims filed. For example, claims for water damage or dog bite liability may result in higher insurance rates as they are likely to recur and lead to more expensive claims. Similarly, claims that are easily preventable, such as fire damage or water backup, can cause your premiums to increase. On the other hand, catastrophes that are out of your control won't cause the same increase as they are less likely to recur.
The recency of a claim also matters. The more recent a claim, the more it will affect your insurance rates. Claims typically stay on your record for five to seven years, and insurance companies generally look at your most recent history, usually the past five years. If you have multiple claims within a short period, insurers may view you as high-risk and charge you higher rates or even deny you coverage.
The impact of claims on your insurance rates also varies by insurer, as each insurance company has its own method of assessing risk and calculating rates. Some insurers may increase your rates significantly after a claim, while others may not. Therefore, it is important to review your insurance policy and understand how your claims history can affect your rates.
Additionally, your claims history can result in the loss of a claims-free discount on your insurance policy. It is worth noting that not all claims will have the same impact on your rates, and certain claims may not significantly affect your premiums, especially if they are small or your first claim.
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The amount of coverage
Dwelling coverage, for instance, is a part of your policy that pays to rebuild the structure of your home if it is damaged or destroyed. If your house is large or has high-end features, it will cost more to rebuild, and you will need more dwelling coverage. This will, in turn, increase your insurance rates.
Similarly, if you have a history of claims, it may signal to insurance carriers that you are likely to submit additional claims in the future, and your rates will increase. The type of claims you make also matters. For example, insurance companies consider swimming pools and trampolines to be "attractive nuisances" due to the potential for injury, and this may raise the cost of your homeowners insurance.
You can, however, increase your coverage by thousands of dollars, and your insurance rate might only be minimally impacted. For example, you can purchase additional coverage in the form of riders, which will generally push your premiums higher.
It is important to find a balance between having enough coverage to feel secure and not paying for more coverage than you need.
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Frequently asked questions
The average cost of homeowners insurance in the US is $2,110 a year, or about $176 a month, according to NerdWallet's analysis. However, rates vary widely depending on location, with Oklahoma being the most expensive state at $6,210 a year, and Hawaii being the cheapest at $610 a year.
Homeowners insurance rates are calculated based on several factors, including the size of the home, the location, the age and condition of the home, the coverage and deductible amount, the homeowner's credit history and claim history, and the presence of additional risks such as swimming pools or trampolines.
Homeowners insurance rates have been steadily increasing and have risen dramatically in recent years, with an average annual rate of $2,656 in 2021 to $3,303 in 2024, a 24% increase. This is due to various factors, including inflation, previous losses experienced by insurance companies, elevated construction costs, and the high likelihood of future extreme weather-related losses.
