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Understanding the cost of homeowners insurance can be complicated. With many different insurance companies and coverages, the options are plentiful - even overwhelming. In addition, your specific home and location play a significant role in determining the cost.
The process of understanding the average home insurance cost compared to what you should pay for your specific home isn't insurmountable, though. The best approach is to make sure you have a solid understanding of how home insurance is calculated and what the average cost is throughout the country and in the state you live in.
Once you know the numbers in-depth, you can assess your own specific needs and choose the right insurance policy and provider for your particular situation. Here, we will cover all these variables related to the average price of homeowners insurance so you can get the right coverage from the right company and for the right price.
National Average Home Insurance Cost
According to the National Association of Insurance Commissioners (NAIC), the average cost of homeowners insurance is $104.08 per month or $1,249 per year. Keep in mind, though, that this is just the national average. The price of your specific home insurance will vary significantly based on a myriad of factors like the value of your home, the types of coverages you need, and where your home is.
Home insurance coverage is different for everyone, just like everybody's home is unique. Understanding average home insurance costs is an excellent place to start your education on homeowners insurance policies, but it’s not the finish line.
Homeowners Insurance Cost By State
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One of the most important factors to consider when thinking about the cost of homeowners insurance is where you live. For example, some states have more frequent occurrences of earthquakes and flooding. For that reason, covering these natural disasters is more expensive for homeowners insurance companies, so they pass those extra costs along to their customers.
If you live in an area with a low crime rate, the instances of burglary and break-ins will be less frequent than in other areas. This means it costs less for homeowners insurance companies to cover that possible loss, and they often pass along the savings to you.
The way geography affects the price of homeowners insurance is very narrow in scope. Your city, neighborhood, and even the block you live on can affect your rates. From a broader perspective, knowing the average cost of homeowners insurance for your specific state is an excellent place to start.
Using a $250,000 policy with dwelling coverage for comparison purposes, here is a look at the average homeowners insurance rates by state according to statistics from Quadrant Information Services.State | Average annual premium | Average monthly premium | Percent of median household income spent |
Alabama | $1,624 | $135 | 2.89% |
Alaska | $1,040 | $87 | 1.33% |
Arizona | $1,189 | $99 | 1.68% |
Arkansas | $2,142 | $179 | 3.93% |
California | $1,014 | $85 | 1.30% |
Colorado | $1,659 | $138 | 2.29% |
Connecticut | $1,184 | $99 | 1.36% |
Delaware | $680 | $57 | 0.92% |
Florida | $1,353 | $113 | 2.32% |
Georgia | $1,376 | $115 | 2.43% |
Hawaii | $376 | $31 | 0.43% |
Idaho | $835 | $70 | 1.27% |
Illinois | $1,322 | $110 | 1.78% |
Indiana | $1,150 | $96 | 1.72% |
Iowa | $1,289 | $107 | 1.95% |
Kansas | $2,694 | $255 | 3.68% |
Kentucky | $1,839 | $153 | 3.30% |
Louisiana | $1,813 | $151 | 3.51% |
Maine | $956 | $80 | 1.44% |
Maryland | $1,124 | $94 | 1.18% |
Massachusetts | $1,307 | $109 | 1.49% |
Michigan | $1,120 | $93 | 1.75% |
Minnesota | $1,785 | $149 | 2.19% |
Mississippi | $1,773 | $148 | 3.96% |
Missouri | $1,558 | $130 | 2.57% |
Montana | $1,826 | $152 | 3.03% |
Nebraska | $2,816 | $235 | 3.85% |
Nevada | $822 | $69 | 1.16% |
New Hampshire | $724 | $60 | 0.83% |
New Jersey | $751 | $63 | 0.86% |
New Mexico | $2,024 | $169 | 3.81% |
New York | $987 | $82 | 1.37% |
North Carolina | $1,295 | $108 | 2.12% |
North Dakota | $1,841 | $153 | 2.63% |
Ohio | $1,111 | $93 | 1.72% |
Oklahoma | $3,519 | $293 | 5.92% |
Oregon | $712 | $59 | 0.96% |
Pennsylvania | $730 | $61 | 1.03% |
Rhode Island | $1,193 | $99 | 1.70% |
South Carolina | $1,142 | $95 | 1.84% |
South Dakota | $1,917 | $160 | 2.98% |
Tennessee | $1,625 | $135 | 2.87% |
Texas | $1,863 | $155 | 2.76% |
Utah | $647 | $54 | 0.77% |
Vermont | $686 | $57 | 0.92% |
Virginia | $1,013 | $84 | 1.25% |
Washington | $863 | $72 | 1.05% |
Washington, D.C. | $902 | $75 | 1.06% |
West Virginia | $1,124 | $94 | 2.09% |
Wisconsin | $986 | $82 | 1.46% |
Wyoming | $805 | $67 | 1.24% |
As you can see, the states with the most expensive average annual home insurance premiums are Arkansas, Nebraska, Oklahoma, New Mexico, and Kansas. The prevalence of natural disasters is a big reason for this. States at risk for massive hurricanes or tornadoes are more expensive to insure due to the potential for devastating damage.
The states with the least expensive home insurance are Vermont, Oregon, Delaware, Hawaii, and Utah. A lower cost of living and risk for natural disasters makes these states more affordable when insuring your home.
Homeowners Insurance Cost By Insurance Company
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Now that you have a sense of how the state you live in affects the average homeowners insurance cost, let's look at how the insurance company you choose affects the price.
When comparing home insurance companies, it's essential to make sure you compare coverages that are alike. Suppose you compare a quote from Company A that covers the structure of your home (dwelling coverage) and has additional flood insurance to a quote from Company B that has no flood insurance. In that case, Company A will seem more expensive. To get an accurate comparison, you need to get a quote from Company B that has dwelling coverage and flood insurance.
In addition, if you compare an insurance quote from Company A that covers both your home and auto insurance with a quote from Company B that only covers your home insurance, the comparison wouldn't be fair. Combining your auto insurance with your homeowners insurance results in a discount on both, so Company A would likely have the better price, but actually may not be the best deal.
Keeping in mind that additional coverage and discounts will affect price, here is a look at the average cost of dwelling insurance for a $250,000 home from several well-known insurance companies.
Home insurance company | Average annual premium for $250K dwelling coverage | Average monthly premium |
Allstate | $1,458 | $122 |
American Family | $1,295 | $108 |
Amica | $2,644 | $220 |
Auto-Owners | $1,165 | $97 |
Chubb | $1,630 | $136 |
Erie | $897 | $75 |
Farmers | $1,980 | $165 |
The Hartford | $1,609 | $134 |
Nationwide | $1,042 | $87 |
Progressive | $1,026 | $86 |
State Farm | $1,503 | $125 |
Travelers | $1,269 | $106 |
USAA | $992 | $83 |
Why Do Different Home Insurance Companies Have Different Prices?
As you look at the list above, you may wonder why the prices are so different, given that the coverage is the same. One reason is that insurance companies set their rates based on their own individual rating systems, not a standard one. Another reason is that each company offers a different set of services that accompany their regular rate for dwelling coverage.
Chubb, for example, caters to luxury homes and affluent customers. They offer personalized risk consulting as one example of the benefits they provide to appeal to high-end homeowners. This is something they bake into the cost of their standard insurance.
On the other hand, Erie offers very few extra services with its standard insurance package. Their philosophy is to give customers just the basic coverages they need and allow them to add on any extras for a higher price. As a result, their dwelling coverage is one of the least expensive in terms of average costs.Homeowners Insurance Coverage Components
Standard home insurance is usually broken down into four different categories: Dwelling coverage, other structures coverage, personal property coverage, and liability coverage. While these are the four core coverages, there are many more types of additional coverage most insurance companies offer, like medical coverage, flood coverage, identity theft coverage, and pet coverage, just to name a few. Here is a breakdown of the 4 main categories of coverage and what they mean for you.
Dwelling Coverage
This refers to the structure of your home, sometimes referred to as the “bones” of the house. It includes the foundation, walls, and roof. It can also include other structures on your property, but only if attached to the house. The dwelling coverage limit (the amount your insurance company will pay you to repair or replace your house) is primarily a function of how valuable your home is.
Other Structures Coverage
You will need other structures protection for structures that aren't attached to your house - like a detached garage, fence, or pool. If you don't have it, you will have to pay out of pocket to fix these parts of your property. This is true even if they are damaged in an event that your dwelling coverage would cover if it happened to the structure of your house. The price of this protection is higher or lower depending on how many other structures you have on your property and what they are worth.
Personal Property Coverage
This coverage protects the personal belongings in your home in case they are damaged or stolen. You can also add coverage for specific items, like expensive jewelry or artwork. The cost of personal property coverage is a function of how many valuables you have in your home and what the replacement costs for them are. There is a coverage limit though, so if you have more than $100,000 worth of belongings in your home, you may want to consider adding on some more coverage.
Liability Coverage
If someone gets injured, or their personal belongings get damaged in your home, liability coverage is what protects you from having to pay for it. For example, if a friend comes over to your house and injures their foot on the stairs, liability coverage would help pay for their medical bills.
Home Insurance Coverage Levels
Not all insurance coverages are the same, and how comprehensive they are depends on their cost. The three main levels of protection are actual cash value, replacement cost, and guaranteed replacement cost. Here is a look at all three.
Actual Cash Value
The most affordable level of protection is actual cash value coverage. As you may expect, it also pays you the least amount of money when a covered event occurs. Actual cash value protection means your insurer will pay you the value of your home or belongings minus the amount they have depreciated. As you may expect, it also pays you the least amount of money when a covered event occurs. For example, if your water heater from 2001 needed to be replaced and covered by your insurance, they would reimburse you for the value of a 20-year-old water heater. As you might expect, this leaves a lot of costs for the homeowner to cover. After all, you aren't going to be able to find a 20-year-old water heater for sale, nor would you want to put that in your home.
Replacement Cost
A more expensive option than actual cash value is replacement cost. This coverage means that your insurer will pay the cash value of your home or personal possessions, including the depreciated value. So, in the case of that water heater, they would give you the funds to purchase a new one instead of a 20 year old one. This can still leave homeowners footing a considerably large bill, though. If the cost to repair your home is higher than usual - like if lumber prices or labor prices have spiked due to high demand - you will have to pay the difference.
Guaranteed Replacement Cost
More expensive and comprehensive than both replacement cost and actual cash value coverage, guaranteed replacement cost is the highest level of protection you can get. Your insurance company will repair or replace your home or possessions even if the cost exceeds the limits of your policy. For example, if construction costs skyrocket in a particular area of the country due to a hurricane, guaranteed replacement cost coverage would still pay the entire bill to rebuild your home.
Variables That Affect Homeowners Insurance Cost
Beyond choosing the right kind of coverage for your specific needs, there are many other factors that can affect the price of your policy. Some are events and behaviors you can control, like your credit score. Others are events, like living in a state that has a high instance of hurricanes, that are beyond your control.
Home Insurance Variables You Can Control
Let’s have a look at the variables that are within your control.
Claims History
With almost every insurer, your rates go up when you make a claim. There’s no more significant indicator of whether you will make a claim in the future than your history of making claims. If your insurance provider thinks you are likely to make a claim, that’s more risk for them, so the price to insure you goes up. Some insurers offer some leeway on this though. Allstate, for example, has “claims forgiveness” insurance products, where if you go a long period of time without a claim, your insurance rates won't go up when you do file one.
Credit Score
A solid credit score means you are likely to pay your debts. This means you are less of a risk for insurers, so sometimes they pass on the savings by lowering your home insurance premiums. Increasing your credit score is not the easiest task, but it’s an excellent idea for many reasons, including reducing your homeowners insurance costs. By the way, this is true for car insurance and renters insurance as well.
Home Renovations
Renovations that make your home safer - like a new roof or security system - can help you lower your insurance costs. However, if you add a substantial additional room to your home, drastically increasing the overall square footage, that may result in higher premiums. Talk to your insurance provider before starting a renovation to understand how it will affect your rates.
Dwelling Coverage Limit
If you select actual cash value for your dwelling coverage, you may be limited by the total amount you will get paid if a covered event destroys your home. This is why it's a good idea to strongly consider replacement cost or guaranteed replacement cost coverage. Your insurance premiums will be higher, but you will be well-protected if a tragic event occurs.
Personal Property Coverage Limit
This coverage usually has a limit of $100,000, so if you have damages or losses more significant than this, you will have to pay out of pocket to fix or replace some of your personal items. You can increase this limit, but it will result in - you guessed it - higher than average premiums.
Deductible
This refers to the amount of money you will have to pay yourself after your insurance policy pays out your claim. The higher deductible you choose, the less valuable and expensive your insurance policy becomes.
Home Insurance Variables You Can’t Control
Now that we’ve discussed the variables that are within your control, let’s look at those that aren’t.
Location
If you live in a city that experiences a specific natural disaster like a tornado or earthquake more frequently than other places, it’s going to cost more to insure your home. High crime rates and great distances from a fire station are other examples of how your location can mean higher than average premiums.
Age
Old homes are more expensive to insure than new homes. This is because the yearly wear and tear on an older home makes it more likely to have problems. Since newer homes are less likely to have issues and subsequent claims, they are less expensive to insure.
Building Materials
Not all building materials are the same when it comes to safety and durability. Wood, for example, is more vulnerable to rotting, mold, termites, fire, and other dangers than metal. The less vulnerable your home’s building materials are, the lower your rates will be. For example, if your roof is made of tile or metal instead of wood, your rates will be lower.
Pets
If your pets injure someone while they are at your home, your liability insurance kicks in to cover the medical payments the injured person incurs. However, if you have a particularly aggressive dog breed, your liability insurance premiums might be higher.
Special Features
Trampolines, pools, hot tubs, saunas, and other special features can increase your insurance rate. Insurers don't call these “special features,” but rather “attractive nuisances,” which pretty much tells you all you need to know about what they think of them. It may be fun for you and your family to have a pool, but your insurance company just sees more risk.
How To Save Money On Homeowners Insurance
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Beyond understanding the coverage you need and selecting the right insurer, there are a number of other things you can do to save money on home insurance. Once you find a licensed insurance agent, ask them about all the home insurance discounts their company offers to customers.
Discounts vary by company, but one that almost all insurers will give you is when you use them for both your homeowners insurance and your car insurance. If you want to take advantage of this, make sure they are a strong company in terms of price and value for car insurance and homeowners insurance.
Home safety is on every insurer's mind. Installing a security system will almost always result in discounted insurance rates. If you are less likely to have a break in where your home and other property are damaged or stolen, you are less of a risk to insure.
When you are shopping for a home, consider new construction. Homeowners insurance policies are more favorable for new homes compared to older ones. Older homes mean higher premiums, newer homes mean lower premiums, and there’s nothing newer than new construction.
The home insurance discounts don't stop there, though, so make sure each company you get a quote from tells you all about the discounts they offer. You may be surprised at some of the savings you can achieve. For example, The Hanover will give you a discount for being a member of specific organizations, and Travelers will give you a discount if your home is LEED-certified. This is a certification issued by the U.S. Green Building Council based on a rating system that analyzes and then designates highly energy-efficient and cost-saving buildings.Summary
Home insurance cost is a complicated calculation, but if you get informed about it, you can make sure you end up with the right coverage at the right price. Look at the average homeowners insurance cost nationally, then in your state, to get a good ballpark range of what you should pay. Next, analyze the various components and types of coverage levels are offered and determine what you need and what you don’t. Next, look at the value and cost for at least three insurance companies that provide what you need. Once you choose one, make sure they tell you about all the various discounts that are available.
Home insurance can be confusing, but it doesn't have to be. If you do your research and get informed, you will understand what’s involved and will be able to make the right decision.
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