According to the latest data, the average cost of homeowners insurance in the United States is $1,393 per year. That said, insurance premiums can vary widely by geography depending on how prone your area is to storms, wildfires, or other natural disasters, as well as factors like the crime rate.
If you’re buying a home, it’s a good idea to buy homeowners insurance coverage to ensure that you and your assets are covered in the event of a worst-case situation. They do happen! Many financial advisors suggest that anywhere from 25% to 40% of your net worth could be tied up in your home, and for some, that proportion can reach as high as 70%.
Let’s pause for a minute and think about what this could mean. Taking an uninsured or underinsured loss on 25% to 70% of your net worth is a hit that few Americans can afford. So protect yourself, and shop for the right homeowners insurance policy. It’s easier than ever with online tools. Here’s a look at how much you can expect to pay in your area, and why.
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Average Cost of Homeowners Insurance by State
Here’s an alphabetical list of the average cost of home insurance premiums by state, plus the District of Columbia.
It will give you a good ballpark of what you might pay for your annual homeowners insurance premium.
|State||Annual premium||Monthly premium|
|District of Columbia||$893.00||$74|
|United States Average||$1,393||$116|
You may notice that geography and climate play a role in rates. The states in what is known as Tornado Alley, where storms are more likely, have higher rates. You’ll see that Nebraska, Arkansas, and Kansas, for instance, have higher priced premiums, reflecting the elevated risk of damage to a home there. Those with homes in coastal areas can also expect higher premiums.
Conversely, those who live in states and towns with low risk of punishing storms will enjoy lower rates for their homeowners insurance.
Average Cost of Homeowners Insurance by City
Those who choose to live in the city may find their rates differ from those of their suburban or rural neighbors. Take a look at the average rates for homeowners insurance policies for 20 major U.S. cities. Here’s how the average premiums stack up:
|City||Average annual premium||Average monthly premium|
As you see, there is a wide variation in prices, with Washington, D.C., coming in at $966 at the low end, and Dallas at $3,505 at the high end. Various factors, from weather patterns to crime rate, impact these figures.
What Factors Influence Cost of Homeowners Insurance?
The price of a homeowners insurance policy isn’t just a matter of “location, location, location,” as they say in the real estate business. There are a variety of other factors that influence your home insurance costs. These include features of the property and residence itself, and your insurance history and choices when it comes to coverage. We break down the most commonly cited factors below.
Location: Yes, this is one of the biggest influencers on the price of your policy. Actuaries, the insurance company employees who calculate rates, use complex tables that factor in a variety of risks, including crime, fire, and weather records for a given zip code.
Age and condition of home: The age of your property and its construction quality play big roles in determining what it might cost to repair or replace your home in the event of a covered loss.
Roof condition: An insurance company will likely want to be prepared for repair or replacement costs if, say, a tree branch goes flying during a storm and damages your roof. These repairs can get fairly expensive for certain roof types, such as slate or shale. As a result, your insurance company will take special interest in the type, age, and condition of your existing roof when pricing your policy.
Added features: Adding a swimming pool, trampoline, or the like can certainly make a home more fun, but it can also increase the possibility of personal liability claims. Consequently, these “attractive nuisances” as they are known in the legal field may increase the cost of your premiums.
Coverage limits: When buying a policy, you will have choices that impact the policy price. The more you insure the contents of your home for, the more expensive the price is likely to be. Also, you will decide whether to base your coverage on replacement cost or what’s called actual cash value. The former will pay the cost of “making you whole” with a payment for a new and comparable feature that was damaged or lost. It is more expensive. With the actual cash value option, though, the policy will deduct depreciation when calculating cash payouts. If you paid $1,000 for your oven a number of years ago, and it’s destroyed in a kitchen fire that’s a covered claim, actual cash value might only pay you back its current value of, say, $250, leaving you without adequate funding to replace it.
Deductible: Your deductible is the amount you must pay out of pocket before insurance will pay out in the event of a covered claim. The amount you choose determines how much risk you’re willing to share with your insurer. A higher deductible generally means a lower-cost home insurance price.
Claims history: Insurance companies view your claims history as an indicator of your likelihood to file future claims. The more claims you’ve filed in the past, the higher your insurance premium is likely to be.
Intended use: Whether you intend to use your home as a primary residence or as an investment property can impact your homeowners insurance rate. Homeowners who choose to use their homes for a business or rent their property out as a landlord are viewed as higher risk and are charged higher home insurance premiums.
Pets: While we consider pets to be part of our families, the truth is that insurance companies charge higher rates for certain pets, particularly breeds viewed as overly aggressive. Why? The insurance company is typically providing coverage if your animal were to injure someone who was visiting. Some insurance companies may even outright reject insurance coverage for certain dogs and exotic animals. However, a number of states have banned these practices of breed discrimination. What’s more, even if you live in a state where this kind of discrimination isn’t banned, you may find that not all insurers restrict coverage or raise premiums for what are considered more aggressive pets. So it can pay to shop around.
What’s Included in a Home Insurance Policy?
If you’re wondering what exactly you get when you purchase a homeowners insurance policy, allow us to spell it out. Here are the six typical coverages offered under most homeowners insurance policies. While some of these may be optional, dwelling, personal property, and personal liability coverage are usually included under most policies.
Dwelling coverage: This pays for covered damages to your home’s structure and attached structures, such as your roof, an attached garage, or built-in appliances.
Other structures coverage: This pays for covered damages to structures on your property that are not attached to your home, such as sheds, fences, or a detached garage.
Personal liability coverage: This kind of coverage pays for injuries or damages to others’ property that you’re legally liable for, as well as legal fees incurred as a result of a covered incident.
Personal property coverage: This is the aspect of your policy that covers damages, losses, and theft of personal property due to a covered incident. This usually includes most belongings like furniture, electronics, and clothing. Worth noting: Certain items are subject to coverage caps, and additional coverage may be needed to ensure fully cover high value items like jewelry, artwork, or antiques.
Medical payments coverage: This pays for the medical bills of anyone injured on your property, regardless of fault.
Loss of use coverage: What if your home were to have fire damage that forced you to live in a hotel while repairs were made? That’s the kind of situation in which loss of use coverage swoops in. It pays for reasonable living expenses if you’re displaced from your home as a result of a covered claim.
Do You Need Homeowners Insurance?
While you’re not legally required to purchase homeowners insurance, home insurance coverage is typically mandated as part of your contract with your mortgage lender. You will generally have to purchase homeowners insurance in order to close on your home if you’re buying the property using borrowed funds.The lender wants to know that their investment in your home is well protected.
If you do not maintain adequate homeowners insurance while your mortgage remains outstanding, your lender will typically purchase homeowners insurance on your behalf (often at unfavorable rates) and charge you the premiums as part of your monthly mortgage payments. It’s therefore, in your best interest to shop for and maintain your own home insurance policy.
Even if you’re an all cash buyer, having an active homeowners insurance policy is highly recommended. Real estate is where the majority of wealth is concentrated for the vast majority of American households, and it is vital to ensuring that your assets are protected in the event of a disaster. No one wants to imagine it, but bad things do happen every day, from storm damage to home burglaries. It’s important to be prepared.
There are a lot of incentives to buy homeowners insurance, as you see. That’s because it’s a key way to make sure that your home base is well protected, even when worst case situations occur.
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The average price of homeowners insurance is $1,249 per year, but your particular cost will vary based on your location, climate patterns, crime rates, the type of home you live in, your deductible, and many other factors. What doesn’t vary is the fact that homeowners insurance is often a requirement. Even if not, it’s an excellent way to protect what is probably your biggest asset and give you peace of mind.
Homeowners Insurance Made Simple: SoFi and Lemonade
If you’re searching for a home insurance policy that’s reliable, affordable, and easy to buy online, we’ve got you covered. Through our partnership with Lemonade, we offer you great coverage at a great price. Take a peek!
Photo credit: iStock/svetikd
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Home & Renters: Lemonade Insurance Agency (LIA) is acting as the agent of Lemonade Insurance Company in selling this insurance policy, in which it receives compensation based on the premiums for the insurance policies it sells.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.