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The median sales price of a new single-family home in the US in 2020 was $391,900, according to the US Census Bureau. For most homeowners, their home is their largest investment. The best way to protect that investment from disasters like fires and tornadoes is with homeowners insurance.
What is a homeowners insurance premium?
A homeowners insurance premium is the amount of money you pay to keep your homeowners insurance policy active. Typically, you can pay your home insurance bill monthly, quarterly, or annually.
If you have a mortgage, your lender may require you to have home insurance and include your home insurance premium in your mortgage payments.
What does home insurance cover?
A standard home insurance policy (called HO-3) covers your home for any type of damage that is not specifically excluded. Fire, smoke, wind damage and more are covered. It also covers attached and unattached structures on your property.
A standard home insurance policy covers your personal belongings for specific “perils.” Tornadoes, explosions, fires, theft, and vandalism are just some of the issues home insurance covers.
You will also have coverage for other types of problems, such as:
- Liability insurance for property damage and injuries caused to others
- Medical payments for minor injury claims made by others
- Additional living expenses if you cannot live in your home due to a problem like a fire
Home insurance does not cover all problems. For example, common exclusions found on an HO-3 include earthquakes, water damage from flooding, sewer backups, sinkholes, and wear and tear.
How much does homeowners insurance cost?
Nationwide, the average annual homeowners insurance premium with $300,000 in home coverage is $1,729, according to a Forbes Advisor analysis of home insurance rates. Your costs will depend on several factors, including the cost to rebuild the house, the age of the house, its location, and other factors, such as your claims history and how much coverage you choose.
Average Homeowners Insurance Premiums by State
How are homeowners insurance premiums determined?
These are the factors that insurance companies typically use to determine a home insurance premium.
The characteristics of your house
- the age of the household
- Building materials (such as wood or stone)
- the state of the house
- Square feet
- roof construction
- how do you heat the house
- Safety and security features such as smoke detectors and burglar alarms
The location of your house
Where you live is another important factor in premiums, including:
- Severe weather and natural disasters
- the crime rate
- The proximity of your home to a fire hydrant and fire station
- Claim history in your area
The amount of coverage you choose will play a large role in determining your homeowners insurance premium. In general, home insurance can be divided into these main types of coverage:
- Living place: The amount of your home insurance is based on the cost to rebuild your home if it is destroyed by a disaster like a fire or tornado. This includes attached structures, such as a deck or garage.
- Other structures: This covers freestanding structures like a fence or shed.
Personal Property – This pays to repair or replace your personal belongings, such as clothing, furniture, rugs, appliances, jewelry, and other items.
- Responsibility: This pays for property damage and injuries you cause to others when you are legally responsible, such as your dog biting someone. Homeowners liability insurance pays for court judgments, settlements, and the cost of a legal defense.
- Medical payments to others: This covers minor medical claims, no matter who is at fault for the accident. For example, if a friend slips into her kitchen, medical payments insurance may cover smaller bills, like a trip to urgent care.
- Additional living expenses: If you can’t live in your home because of a problem like a fire, additional living expenses coverage pays for extra costs like hotel bills, packed lunches, and other services like pet boarding and laundry.
You can also choose additional types of coverage to fill in coverage gaps that a standard home insurance policy doesn’t cover, such as:
- Greater housing coverage: If a disaster occurs in your area, an increase in labor and material costs could exceed the limits of your homeowners coverage. Coverage such as guaranteed or extended replacement cost helps cover additional costs.
- Greater coverage for high-value items: If you own expensive possessions, such as family heirlooms or jewelry, you may want to consider personal property scheduling for high-value items.
- Other types of coverage: You may want to fill in coverage gaps with add-ons like water backup coverage or purchasing higher limits for expensive landscaping.
Related: How much home insurance do you need?
You will choose an insurance deductible when you purchase a policy. The deductible is the amount that is deducted from your insurance check if you make certain claims, such as a theft claim. Common deductible amounts are $500 and $1,000, but can be more.
In general, the higher your deductible, the less you’ll pay in your home insurance premium. That’s because your insurance company will pay less money if you file a claim.
Other factors in home insurance premiums
Here are some other common cost factors used to set homeowners insurance premiums:
- Your claim history. Homeowners with a history of insurance claims could end up paying more for coverage.
- Dogs. Owning a dog is often considered a higher risk of dog bites and insurance claims, which can lead to higher rates. Home insurance companies prohibit some breeds of dogs.
- your credit Some insurance companies use a credit-based insurance score as a pricing factor. California, Maryland and Massachusetts do not allow insurers to use credit as a factor in home insurance premiums.
How do I pay my homeowners insurance premium?
You can generally pay your home insurance premiums in one of two ways:
- Directly to the insurance company. Common payment options are monthly, quarterly, semi-annually, or annually.
- Through an escrow account. If your homeowners insurance payment is made through your mortgage company, it is usually paid through an escrow account. This is a separate account where your mortgage lender collects money for your homeowners insurance and makes payments on your behalf.
How do I buy homeowners insurance?
The best way to shop for home insurance is to compare quotes from multiple companies. That’s because prices can vary drastically for the same type of coverage from one company to another.
You can get free home insurance quotes:
- Online. You can usually get free quotes on an insurance company’s website. Or you can use a home insurance comparison site to compile multiple quotes at once.
- By phone, email or in person. You can contact an insurance company directly to get a quote, or you can contact an independent insurance agent who can collect quotes from multiple insurance companies.
Don’t forget to ask about discounts. You can often find savings for home security features, loyalty discounts, getting a new home, paying in full, and by combining your auto and home insurance.
Related: 10 ways to get cheap home insurance
Cheap Home Insurance by Company
Here are the average annual premiums from the big insurance companies. Keep in mind that your costs will vary based on a number of factors, such as the cost to rebuild your home and where you live.
Find the best homeowners insurance companies of 2022
Homeowners Insurance Premium FAQs
Do I need home insurance?
If you have a mortgage, your lender will most likely require you to carry homeowners insurance.
But even if you’ve already paid off your house, home insurance is a good idea. Without it, you’ll have to pay out of pocket to repair or rebuild your home if a problem like a fire damages it.
Related: new homebuyers guide to home insurance
Who has the cheapest home insurance premiums?
Nationwide, we found that Progressive has the cheapest homeowners insurance premiums at $1,236 per year for $300,000 in homeowners coverage. But your rates will vary based on the cost to rebuild your home, where you live, the coverage you choose, and other factors.
The best way to find cheap home insurance where you live is to compare home insurance quotes from multiple insurers.