SoFi

According to the latest data, the average cost of homeowners insurance in the United States is $2,927. 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 30% 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 it makes sense to protect yourself and shop for the right homeowners insurance policy. Here’s a look at how much you can expect to pay in your area, and why.

Average Cost of Homeowners Insurance by State

Here’s an alphabetical list of the average cost of home insurance premiums by state, per a 2025 MarketWatch analysis of home insurance premiums. It will give you a good ballpark of what you might pay for your annual homeowners insurance premium.

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 likely 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 18 U.S. cities. Here’s how the average premiums stack up:

As you see, there is a wide variation in prices, with Portland, Ore., coming in at $1,042 at the low end, and Oklahoma City at $5,437 at the high end. Various factors, from weather patterns to crime rate, impact these figures.

Recommended: A Comprehensive Guide to Homeowners Insurance

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.

Recommended: Does Homeowners Insurance Cover Roof Leaks?

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.

Recommended: Does Homeowners Insurance Cover Water Damage?

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.

Recommended: Does Homeowners Insurance Cover Storage Units?

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.

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.

Recommended: What Does Homeowners Insurance Cover?

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.

Recommended: Is Homeowners Insurance Required to Buy a Home?

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.

The Takeaway

The average price of homeowners insurance is $2,927 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.

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

Photo credit: iStock/svetikd

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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.

SOPRO-Q425-023

Margin debt refers to the loan that qualified investors can borrow from their broker to place bigger trades, using a margin account. The money investors borrow from their brokerage is known as margin debt and is a type of leverage. As of October 2025, the amount of margin debt held by investors is at an all-time high of $1.13 trillion, according to FINRA.

Like other types of loans, margin debt comes with specific rules, governed by the Financial Industry Regulatory Authority (FINRA). A margin loan must be backed with collateral (cash and other securities), a minimum amount of cash must be maintained in the account, and the margin debt must be paid back with interest.

Margin is not available with a cash-only brokerage account, where a trader buys the securities they want using the cash in their account. Owing to the high risk of margin trading, margin accounts are available only to investors who qualify, owing to the high-risk nature of margin trading.

Margin Debt Definition

In order to understand what margin debt is and how it works when investing online or through a traditional brokerage, it helps to review the basics of margin accounts.

What Is a Margin Account?

With a cash brokerage account, an investor can only buy as many investments as they can cover with cash. If an investor has $10,000 in their account, they can buy $10,000 of stock, for example.

A margin account, however, allows qualified investors to borrow funds from the brokerage to purchase securities that are worth more than the cash they have on hand.

In this case, the cash or securities already in the investor’s account act as collateral, which is why the investor can generally borrow no more than the amount they have in cash. If they have $10,000 worth of cash and securities in their account, they can borrow up to another $10,000 (depending on brokerage rules and restrictions), and place a $20,000 trade.

Recommended: What Is Margin Trading?

Margin Debt, Explained

In other words, when engaging in margin trading to buy stocks or other securities an investor generally can only borrow up to 50% of the value of the trade they want to place, though an individual brokerage firm has license to impose stricter limits. Although the cash and securities in the account act as collateral for the loan, the broker also charges interest on the loan, which adds to the cost — and to the risk of loss.

Margin debt is high-risk debt. If an investor borrows funds to buy securities, that additional leverage enables them to place much bigger bets in the hope of seeing a profit. The risk is that if the trade moves against them they could lose all the money they borrowed, plus the cash collateral, and they would have to repay the loan to their broker with interest — on top of any brokerage fees and investment costs.

For this reason, among others, margin accounts are considered to be more appropriate for experienced investors, since trading on margin means taking on additional costs and risks. It’s also why only certain investors can open margin accounts. In addition, investors must bear in mind that some securities cannot be purchased using margin funds.

Recommended: Stock Trading Basics

How Margin Debt Works

Traders can use margin debt for both long positions and short selling stocks. The Federal Reserve Board’s Regulation T (Reg T) places limitations on the amount that a trader can borrow for margin trades. Currently the limit is 50% of the initial investment the trader makes. This is known as the initial margin.

In addition to federal regulations, brokerages also have their own rules and limitations on margin trades, which tend to be stricter than federal regulations. Brokers and governments place restrictions on margin trades to protect investors and financial institutions from steep losses.

Recommended: Regulation T (Reg T): All You Need to Know

Example of Margin Debt

An investor wants to purchase 2,000 shares of Company ABC for $100 per share. They only want to put down a portion of the $200,000 that this trade would cost. Due to federal regulations, the trader would only be allowed to borrow up to 50% of the initial investment, so $100,000.

In addition to this regulation, the broker might have additional rules. So the trader would need to deposit at least $100,000 into their account in order to enter the trade, and they would be taking on $100,000 in debt. The $100,000 in their account would act as collateral for the loan.

What Is Maintenance Margin?

The broker will also require that the investor keep a certain amount of cash in their account at all times for the duration of the trade: this is known as maintenance margin. Under FINRA rules, the equity in the account must not fall below 25% of the market value of the securities in the account.

If the equity drops below this level, say because the investments have fallen in value, the investor will likely get a margin call from their broker. A margin call is when an investor is required to add cash or forced to sell investments to maintain a certain level of equity in a margin account.

If the investor fails to honor the margin call, meaning they do not add cash or equity into their account, the brokerage can sell the investor’s assets without notice to cover the shortfall.

Managing Interest Payments on Margin Debt

There’s generally no time limit on a margin loan. An investor can keep margin debt and just pay off the margin interest until the stock in which they invested increases to be able to pay off the debt amount.

The brokerage typically takes the interest out of the trader’s account automatically. In order for the investor to earn a profit or break even, the interest rate has to be less than the growth rate of the stock.

Advantages and Disadvantages of Margin Debt

There are several benefits and drawbacks of using margin debt to purchase securities such as stocks, bonds, mutual funds, or exchange-traded funds (ETFs).

Advantages

•  Margin trading allows a trader to purchase more securities than they have the cash for, which can lead to bigger gains.

•  Traders can also use margin debt to short sell a stock. They can borrow the stock and sell it, and then buy it back later at a lower price.

•  Traders using margin can more easily spread out their available cash into multiple investments.

•  Rather than selling stocks, which can trigger taxable events or impact their investing strategy, traders can remain invested and borrow funds for other investments.

Disadvantages

•  Margin trading is risky and can lead to significant losses, making it less suitable for beginner investors.

•  The investor has to pay interest on the loan, in addition to any other trading fees, commissions, or other investment costs associated with the trade.

•  If a trader’s account falls below the required maintenance margin, let’s say if a stock is very volatile, that will trigger a margin call. In this case the trader will have to deposit more money into their account or sell off some of their holdings.

•  Brokers have a right to sell off a trader’s holdings without notifying the trader in order to maintain a certain balance in the trader’s account.

Is High Margin Debt a Market Indicator?

What is the impact of high margin debt on the stock market, historically? It’s unclear whether higher rates of margin use, as in the last quarter of 2025 where margin debt increased 34.4% year over year, might signal a market decline.

Looking back on market booms and busts since 1999, it does seem that margin debt tends to accompany the markets’ peaks and valleys. As such, margin debt may reflect investor confidence.

Different Perspectives on Margin Debt Levels

While some traders view margin debt as one measure of investor confidence, high margin debt can also be a sign that investors are chasing stocks, creating a cycle that can lead to greater volatility. If investors’ margin accounts decline, it can force brokers to liquidate securities in order to keep a minimum balance in these accounts.

It can be helpful for investors to look at whether total margin debt has been increasing year over year, rather than focusing on current margin debt levels. FINRA publishes total margin debt levels each month.

Jumps in margin debt do not always indicate a coming market drop, but they may be an indication to keep an eye out for additional signs of market shifts.

The Takeaway

Margin trading and the use of margin debt — i.e., borrowing funds from a broker to purchase securities — can be a useful tool for some investors, but it isn’t recommended for beginners due to the higher risk of using leverage to place trades. Margin debt does allow investors to place bigger trades than they could with cash on hand, but profits are not guaranteed, and steep losses can follow.

Thus using margin debt may not be the best strategy for investors with a low appetite for risk, who should likely look for safer investment strategies.

If you’re an experienced trader and have the risk tolerance to try out trading on margin, consider enabling a SoFi margin account. With a SoFi margin account, experienced investors can take advantage of more investment opportunities, and potentially increase returns. That said, margin trading is a high-risk endeavor, and using margin loans can amplify losses as well as gains.

FAQ

Is margin debt good or bad?

Like any kind of leverage or borrowed capital, the use of margin can be beneficial in some instances, but it comes with an inherent risk. It’s possible to have a good outcome using margin to make trades, but it’s also possible to lose money. Investors have to weigh the pros and cons of leveraged strategies.

How does margin investing work?

If you qualify for a margin account, using a margin loan can enable you to place trades using more money than you could with cash alone. Taking bigger positions can lead to bigger gains, but the risk of loss is also steep if the trade moves against you. In that case, you can lose money on the trade, and you still have to repay the margin debt you owe, plus interest and fees.

Are there different margin rules for different securities?

Yes, trading stocks comes with different margin requirements than, say, trading forex or certain derivatives. It’s important to know the terms of the margin account as well as the securities you intend to trade.

Photo credit: iStock/PeopleImages