Homeowners Insurance Price - What You’ll Pay and How to Cut Costs

Homeowners insurance is likely one of your largest monthly bills after your mortgage. The cost averages $1,500-$2,000 annually but what you really pay is based on hundreds of variables. Let’s discuss what impacts homeowners insurance prices and how you can lower your premium without cutting back on coverage.

What Determines Your Homeowners Insurance Cost

Insurance firms employ sophisticated algorithms to determine your premium but fundamentally it is a matter of risk. The greater the chances of your making a claim, the higher your premium will be.

Your Home’s Replacement Cost is the largest contributor. This is what it would take to fully rebuild your home from the ground up. Larger, high-end finished homes are more expensive to insure than smaller modest homes. And replacement cost does not equal market value - in certain areas replacement costs are even greater than what you can sell the home for.

Location Location Location - where your home is located dramatically affects your insurance costs. Homes in areas prone to hurricanes, tornadoes, wildfires or floods pay more. Urban areas with higher crime rates and more claims cost more than rural areas. Even your specific neighborhood matters.

Age and Condition of your house affect premiums. Older homes with old electrical, plumbing or roof systems cost more to insure since they’re likely to be problematic. Houses that haven’t been renovated in decades may even be hard to insure period.

Claims History follows you. If you’ve had several claims in recent years you’ll be charged more for premiums. Insurance providers exchange claim information through databases such as CLUE (Comprehensive Loss Underwriting Exchange) so even claims with former insurers influence your current premiums.

Credit Score is applied in all but a few states to predict risk. Improved credit typically results in reduced insurance prices. Increasing your credit score can save you several hundred dollars annually on home insurance.

Coverage Amount and Deductible clearly impact cost. Greater coverage amounts equal greater premiums. Higher deductibles lower premiums but increase your out-of-pocket expense if you make a claim.

Building Materials count. Brick or stone houses tend to be lower-cost to insure than wood-frame houses due to their higher fire and wind resistance. Roof type counts, too - impact-resistant roofs qualify for discounts.

Average Homeowners Insurance Prices by State

Prices vary tremendously state by state. Here’s a rough estimate of average annual prices:

Most Expensive States:

• Florida: $3,000-$4,000+ (hurricanes, floods)
• Texas: $2,500-$3,500 (hail, wind, tornadoes)
• Oklahoma: $2,500-$3,000 (hail, tornadoes)
• Louisiana: $2,500-$3,000 (hurricanes)
• Kansas: $2,300-$2,800 (tornadoes, hail)

Least Expensive States:

• Hawaii: $500-$700
• Vermont: $800-$1,000
• Oregon: $800-$1,000
• Utah: $900-$1,100
• Idaho: $900-$1,100

These are only averages. Your actual costs depend on all the things we just covered plus your individual situation.

Breaking Down Your Homeowners Insurance Premium

Knowing what you’re paying for helps you make smart decisions about coverage.

Dwelling Coverage is your biggest premium component. This insures your house and usually accounts for 60-80% of your overall premium.

Other Structures Coverage on detached garages sheds and fences is generally around 10% of dwelling coverage and is a small percentage of your premium.

Personal Property Coverage insures your personal items and adds 10-15% to your premium based on coverage limits.

Liability Coverage shields you from legal actions and tacks on another 5-10% to your premium. The higher your liability limits, the greater this expense.

Additional Living Expenses is standard in most policies and accounts for a minute percentage of your premium.

Optional Endorsements such as water backup coverage, equipment breakdown or scheduled personal property augment your starting premium.

How to Save Money on Your Homeowners Insurance Cost

There are genuine means by which you can reduce your premium without compromising essential protection.

Raise Your Deductible from $500 to $1,000 or $2,500. This will lower your premium by 10-25%. Just be certain you save money to pay the increased deductible in case you have to make a claim.

Group Policies together by purchasing home and automobile insurance from the same agency. The great majority of insurers give discounts of 15-25% for combined policies.

Enhance Home Security through the installation of burglar alarms, smoke detectors, deadbolts and security cameras. These can qualify for discounts of 5-20% based on the system.

Renovate Your Home through new roofing electrical or plumbing systems. New systems are less likely to fail and may lower your premiums. A new roof alone may save you 10-20%.

Add Impact-Resistant Features such as hurricane shutters, impact-resistant roofing or reinforced garage doors if you are in areas prone to storms. These can qualify for substantial discounts.

Have Good Credit since credit-based insurance scores influence your premiums. Pay bills in time pay down debt and check your credit report for mistakes.

Stay Claims-Free since filing claims raises your rates. If you have a minor claim that’s barely over your deductible, pay it out of pocket to prevent a rate hike.

Shop Around Regularly since insurance rates fluctuate. Compare quotes from several companies every 2-3 years. Changing insurers alone can save you hundreds of dollars.

Ask About Discounts since insurers have many that you may not be aware of:

• Discount for loyalty to remaining with the same business
• New home discount for newly constructed homes
• Gated community discount
• Non-smoker discount
• Retiree discount (you’re home more to avoid problems)
• Professional association discount

Review Coverage Every Year and make adjustments if necessary. If you’ve paid off your mortgage or the value of your home has fallen you may be able to lower coverage. Just be sure you have sufficient to rebuild.

Affordable Homeowners Insurance Blunders That Cost Money

Being Underinsured in an effort to save on premiums is pound-foolish and penny-wise. If your coverage is inadequate so rebuilding costs would be more than what you have, you’ll need to pay the difference out of pocket. Inflation and increasing construction prices mean many are underinsured unwittingly.

Selecting Too Low a Deductible because you fear you won’t be able to pay a claim. If you have an emergency fund higher deductibles save money each year. The savings can pay for your emergency fund in the long run.

Failing to Shop Around because you think your current carrier offers the best rate. Loyalty does not reward in insurance. Rates are changed regularly by companies and a competitor may have better prices.

Paying Small Claims that only slightly exceed your deductible. The increased rate due to a claim usually costs you more in the long run than paying the repair yourself. Reserve insurance for substantial losses.

Allowing Coverage Lapse even temporarily can cause greater rates when you reapply for coverage. Insurers consider gaps in coverage as added risk.

Failing to Update Your Policy following home renovations. If you’ve remodeled or expanded your coverage limits may be insufficient. Let your insurer know about significant changes.

Not Maintaining such as roof leaks or clogged drains. Little issues that become large ones may not be covered if the insurer decides the damage was caused by neglect.

When Cheap Homeowners Insurance Is Too Cheap

The cheapest premium is not always the best value. Here’s what to avoid:

Low Limits of Coverage that won’t give you full protection. Ensure dwelling coverage is enough to fully rebuild your home at current construction prices.

Unaffordable High Deductibles that may save you money each month but render you unable to make a claim when you absolutely need to.

Poor Customer Service and claims handling can be nightmarish. An insurer that denies legitimate claims or takes forever to pay isn’t worth the savings.

Financial Instability of the insurance company is a real concern. If the company goes bankrupt your claim might not get paid. Check financial strength ratings from AM Best, Moody’s or Standard & Poor’s.

Exclusions and Limitations that strip your coverage aren’t worth the reduced premium. Read the policy closely to see what’s included and what’s not.

One rule of thumb is to obtain quotes from reputable firms with solid financial ratings and decent customer feedback. If a single quote is significantly lower than all the rest there’s likely to be a reason.

Special Situations That Influence Cost

High-Value Homes worth over $750,000-$1,000,000 tend to require specialized luxury or high-value home insurance. Regular policies may not offer sufficient coverage limits for high-value homes.

Older Homes particularly those over 50 years old may require specialty insurance or renovations before cover is offered. Insurers are concerned about out-of-date systems and materials.

Swimming Pool Homes or trampolines are a higher liability risk and are more expensive to insure. A few insurers will not insure homes with specific features at all.

Home Businesses are generally not included under regular homeowners policies. You may require a business policy endorsement or stand-alone business insurance.

Short-Term Rentals, such as Airbnb, demand special coverage beyond a regular homeowners policy. Ensure your insurer is aware if you’re renting your home.

Empty Houses cost a lot to insure since they’re vulnerable to vandalism and burglary. If your house is going to be unoccupied for long periods inform your insurer.

How Frequently Should You Review Your Homeowners Insurance

Check your policy at least once a year ideally a month or two before renewal so you have time to compare if necessary.

Also check when:

• You’ve made home improvements or renovations
• You purchase expensive jewelry, artwork or collectibles
• Pay off your home mortgage
• Witness shifts in your community (new firehouse constructed, crime rates adjust)
• Experience shifts in household makeup

Don’t simply renew automatically without looking. Your needs evolve, your house evolves and insurance choices evolve. Spending an hour annually checking can result in savings of hundreds or thousands of dollars.

The Bottom Line on Homeowners Insurance Costs

Homeowners insurance is costly but required. The trick is striking a balance between sufficient coverage and reasonable premiums.

Don’t become fixated on the cheapest possible choice. Instead, prioritize quality coverage from a well-financed company with good service at a competitive cost.

Take discounts take advantage of discounts enhance the safety and condition of your home and shop around on a regular basis. These methods can make a huge difference in your expenses while keeping the protection your family and home require.

Don’t forget insurance is available for when things do go wrong. Slipping on insurance to save a few dollars a month may cost you tens of thousands if something happens. Insure your most valuable asset accordingly.