Your home is an integral part of your life. It’s where you make memories and gather with those close to you. It’s a pretty special place and your most valuable asset. So, when something is that valuable, you need to protect it.
Homeowners insurance is key when it comes to making sure not only the integrity of your home is protected, but your valuable belongings are, too. But before you rush into buying homeowners insurance, you’re going to want to take a good long look at the costs and what exactly determines getting the cheapest homeowners insurance quotes. This brief guide takes you through the factors insurers use to decide your rates and, on average, how much you’ll need to carve out of your budget.
But keep in mind, every homeowner is different, and every living condition is different. For these reasons, rates can drastically vary from neighbor to neighbor. It is a good idea to get a rough estimate but not get attached to any price. They can be higher or lower for you.
What Determines Homeowners Insurance Rates?
When you begin your hunt for homeowners insurance, it is a good idea to think about your situation and what exactly can impact quotes. Some factors you can change, others you can’t. What’s discussed below should give you a general idea of how your rates are impacted and whether you can do anything to strive for a better price.
Insurance Factors You Can Control
- Coverage amount - Like with pretty much all insurance, the kind of coverage you want is going to greatly affect the annual premiums. This is no different with homeowners insurance. Insurers recommend minimums (nothing required by law) along with add-ons that may be beneficial. The price is primarily determined by your dwelling coverage limit, but there are many other factors in your policy that can come into play. However much you want, be ready to pay.
- Deductibles - A deductible is how much you pay before your insurance picks up the rest. Whatever you choose for a deductible affects how much you will be paying yearly for homeowners insurance. As a general rule of thumb, a higher deductible leads to a lower premium and vice versa.
- Claims history - This one can sometimes go either way. Sometimes you cannot control when you have to make an insurance claim. Life just happens, but you can be prepared by being a smart homeowner. The less harm that comes to your property, the fewer claims you will make, meaning your policy will then not be affected.
- Credit score - Much like auto insurance, insurance companies look at your credit score when it comes to determining your rates. With a better credit score, companies may see you as more financially stable and offer you cheaper rates. By staying on top of all your payments, you can get a break on insurance prices.
- Discounts - Many companies, as will be later explored in this piece, offer discounts for homeowners insurance. One of the most notable ones is bundling. If you pair your auto insurance and home insurance with the same company, you may receive a break. There are also a variety of other discounts that may be available depending on your choice of company.
- Home renovations - This is another circumstance wherein a tragedy that was not your call but, generally speaking, any renovations to your home can affect your insurance premiums. But changes do not always increase your rates. Some particular updates to your home actually decrease premiums.
Insurance Factors You Can’t Control
- Home location - Well, you could take the drastic step of moving across the country to get lower rates, but that seems pretty unlikely. That being said, where your home is located greatly affects your rates. This will be explored later on, but homes in parts of the country that see extreme weather tend to have higher rates for insurance. You do not have complete control over this. You cannot change extreme climates but do keep it in mind when you are getting quotes.
- Age of home - Even if you buy your house brand new, it is going to age; that’s just the natural passage of time. But with aging may come the increased cost of insurance. Likewise, if you purchase an older house, be prepared to put out some extra for rates. As homes age, they become less stable, leading to the potential for more problems.
- Attractive nuisances - Pools, trampolines, treehouses, hot tubs, etc., are what insurance companies label as “attractive nuisances.” They are nice to have but can be a liability nightmare. The presence of these on your property is bound to increase your insurance cost. Sometimes you can’t control this, and you certainly may not be able to control how much rates actually go up.
- Materials of home - Some people build their home, but most likely, you bought yours already built. This means you had no say in how your home was actually constructed and the materials used. This can be a bit of a bummer as the types of materials for home building effect rates.
What Kind of Homeowners Insurance do You Need?
Before you can get into looking at the cost, it is helpful to actually understand what goes into homeowners insurance. Add-ons will be discussed in a bit, but to cover the basics, there are generally four categories that makeup home insurance:
- Dwelling coverage - Covers the cost of repairs or possible replacement of the structure of your home when damaged. This also includes other buildings on your property, such as garages and sheds. Some repairs it pays for include roofing, floors, and walls.
- Personal property coverage - Protects the items inside your home. This includes clothing, art, jewelry.
- Liability coverage - Liability coverage assists you in case of legal trouble. If, for example, your dog bites someone and you are sued. Liability coverage can help.
- Additional living expenses - Also referred to as “loss of use coverage,” this covers your expenses should you have to live away from your home while it is being repaired. Additional living expenses coverage could reimburse you for something like the cost of a hotel room and meals.
While what is listed above is the standard, there are instances, whether it be weather or legal issues, where this coverage may not help as much as you want it. Many times, extreme weather conditions are left out of your policy, especially if you live somewhere prone to natural disasters. For example, if you live in California, you may not have wildfire coverage because such disasters are frequent. You would then have to try to expand coverage to include such events, which can be a worthwhile decision in the long run. Regarding personal property, some plans may not cover certain perilous events meaning you will then have to also expand coverage there, too.
Sometimes your home may also have other issues on the inside. You may have to include coverage for the natural wear and tear of your home. This could be the case if, for example, you notice something wrong with your sewer backup and want extra protection for that.
If you also find yourself with a large number of assets or just would like more coverage, you may want to look into an umbrella policy. An umbrella policy covers you if there is a serious issue that your homeowners insurance just cannot cover. This policy can come in handy if you have a lot to lose.
National Average Homeowners Insurance Rates
When you begin your homeowners insurance shopping, it may be helpful to get an idea of what the national average is. This can come in handy when comparing rates by states, companies, coverage, etc. It works as a decent baseline when hunting for insurance. According to the National Association of Insurance Commissioners (NAIC), the national average homeowners insurance premium is $1,249 per year.
Homeowners Insurance Cost by Coverage
To look at cost, we must analyze what kind of dwelling level you would like for coverage. This is a major part of how your rates are set. Of course, other parts of your coverage may come into play, like deductibles and liability, but for now, we will be looking at average annual rates based on dwelling coverage. But remember, different factors go into your quoted premiums. This is just to be used as an example to get a very rough estimate.
For these rates, let’s assume you have a $1,000 deductible. If you fall around the area of $200,000 in dwelling coverage, according to various estimations, your average annual rate could be in the field of $1,400-$1,800 per year, or $117-$150 a month. Those who end up with higher rates around $400,000 in dwelling limits may be paying somewhere around $2,460-$2,700 per year, around $205-$225 a month. As you can imagine, average rates escalate from there, hitting around the area of $3,000 per year and beyond.
Remember, where you fall on this is dependent on your home and several surrounding factors of where you live. Every situation is different, meaning every homeowners insurance policy varies in coverage amounts. But, hopefully, this helps to show you where you may stand on the grand scale of things.
Average Homeowners Insurance Cost by State
As touched upon briefly in a previous section, the state you live in affects your homeowners insurance pretty significantly. The general idea is that if there are more natural disasters in your state, your rates are going to be greater. But other factors such as crime rates in your zip code are also taken into account by companies. While this section only looks at average annual rates for states, keep in mind that your quotes are determined by so many other factors.
Least Expensive State For Insurance
With less of a risk for weather damage comes cheaper home insurance premiums. Delaware has been found to have some of the cheapest insurance for a state, with an average rate of about $600 per year. It is a state that resides in an area of the country not too frequented by intense weather. Other states of this variety include Utah, Vermont, and Pennsylvania.
Most Expensive State For Insurance
Average homeowners insurance premiums have been found to be more expensive in states that experience extreme weather routinely. According to Insurance.com, Oklahoma has the most expensive insurance for any state, with an average premium rate of around $4,445 per year. This is due to the fact that Oklahoma sees lots of tornadoes. Coming in as the second most expensive state for homeowners insurance is Kansas which also resides in tornado alley. Some other states with high home insurance costs include Florida, Texas, and Louisiana.
Average Home Insurance Cost And Your Home
The features and makeup of your house have great potential when it comes to your homeowners insurance costs. What your house is made of and what you then proceed to do to it can both increase and decrease your annual premiums.
Two key aspects of your home that can affect premiums are its age and materials. Even if you bought your home new, you have to deal with it naturally wearing down over time, assuming you live there long enough. Insurance.com has found that, on average, a 30-year-old home can see a 1% increase in annual coverage rates. A 35-year-old home sees a 2% increase, a 45-year-old home increases by 3%, and so forth. The reasoning for this is that old homes just, well, get old, and they begin to have more issues. It can also be related to the fact that homes are built with different materials nowadays than they were decades ago. This leads us to the issue of materials and how they increase your rates. Little bits and pieces of your home factor into the price. For example, if you have an asphalt roof, you may have higher insurance premiums than someone with a metal roof. Your rates could also increase if you have weak window panes or aluminum wiring.
But there is a flip side. Renovations could actually help then lower the cost of your premiums. If you have a less-than-favorable roof and update it, let your insurance company know. Their average coverage could possibly be adjusted and help you save hundreds of dollars. Installation of security systems also helps as you are seen as less of a risk. Safewise reports that these home features could reduce your homeowners insurance up to 20%. Companies will not have to worry about claims for thefts with security systems installed. Updating anything outdated, like the aforementioned wiring, can also help with costs.
Average Home Insurance Costs by Insurance Company
The insurance company you choose can be a significant factor in your average annual premiums. Some companies simply charge less than others. Top-tier coverage from a company with expansive coverage just costs more than others. Companies also can have different risk tolerances meaning that if they choose not to insure high-risk homes, rates can be lower across the board. Outlined below in the following sections are some prices you if you choose one of these companies. But do not get hung up on any of these numbers -what is outlined is just average estimates with references coming from a study done by the U.S. News and World Report.
In the analysis by U.S. News and World Report, they found that a $450,000 townhouse in Illinois could see an annual homeowners insurance premium of $169 a month when insured with Allstate. That comes out to be around $2,028 per year. The report described it as being the most expensive insurer. Of course, this can fluctuate based on a variety of factors.
If seeking insurance from American Family, a $450,000 home in the suburbs of Illinois could cost you around $151.55 per month. That is somewhere in the range of $1,818 per year. According to U.S. News and World Report, this company falls in the middle of their list for pricing.
For Nationwide, the U.S. News and World Report study found insuring a $450,000 townhouse in Illinois with them will cost you around $127 a month, give or take a few cents. This is a premium of about $1,524 a year. The actual cost can vary depending on your living situation, but according to U.S. News, this was one of their cheapest homeowners insurance companies analyzed..
Liberty Mutual had one of the best price ratings for homeowners insurance, according to the U.S. News and World Report analysis. They found that a $450,000 townhouse in suburban Illinois may see an insurance rate of $112.75 a month. When calculated, that is around $1,353 per year.
Saving on Homeowners Insurance
Now that you have seen how much rates could cost, you may be wondering about discounts. Luckily, there is a variety of ways to save on homeowners insurance.
The best way to find the best price is to get multiple quotes. Consider researching as many companies as you are able to and receive quotes from them all. Try looking both locally and nationally. But do not jump on the first cheap plan you see. You have to really understand the company and coverage you are trusting your home under. Look at all the pros and cons and even find out more through third-party sites such as Consumer Reports. This can help find customer reviews that give genuine insight as opposed to just seeing what a company has to say about themselves on their website.
A big method for saving money is to bundle your car insurance and homeowners insurance with the same company. Some major insurers claim you could save up to 25% by bundling home and auto. If you need insurance on both, this may be a reasonable route to go. It helps to keep all your policies in one place and is easier to keep organized.
Increase Your Deductibles
As touched on briefly in a previous section, increasing deductibles can help save on your annual average homeowner insurance premiums. But, keep in mind, this means you are promising to cover more before your insurance steps in. The price reduction may seem tempting, but you should only raise your deductibles to an amount you know you can cover. If you aren’t able to cover damage of $2,000, don’t raise your home insurance deductibles that high just for the lower premium.
Always remember that improvements to your home can greatly lower homeowners insurance premiums. Installation of security devices may offer some reduction in rates with your insurance company as well. The addition of other safety features such as smoke detectors, deadbolts, and lightning protection can also offer you some discounts. This is actually a pretty smart thing as you not only get a break on rates, you also are more secure in your home and, thus, a lower risk to insure.
Some insurance companies may offer loyalty discounts. If you stay claim-free for a certain number of years, your insurer could offer you a discount on your annual premiums. In theory, the longer you stay without a claim, the greater of a discount you may see. But the time period to qualify for this discount may be a while. Sometimes you have to last claim-free for 10 years with one company before being eligible for loyalty discounts. It can be worth it if you manage to do this but staying completely claim-free can be challenging.
What’s The Best Policy For You?
Upon analyzing the information outlined, it is time to really sit and decide what’s the best homeowners policy for you. Take note of the features of your home, including its structure and location. Factor that into your dwelling coverage and request quotes from multiple companies. Look for anything on your home that could be tweaked or updated in order to ease average premiums. Once you have dwelling coverage and liability established, decide on the deductible best suited for you. Remember, only raise your deductibles to an amount you know for sure you can cover. After those are factored in, calculate the value of your personal belongings and decide if you need to expand coverage anywhere. Maybe you would like your personal property protection coverage to expand to events not listed initially in your plan. Consider any harsh weather you may have to prepare for, like floods or tornadoes, as you may need to obtain another policy to cover such disasters. Once you feel comfortable, don’t forget to seek out discounts available through your selected company. You want to find that comfortable middle ground where your assets are secure while you are not breaking the bank. Be prepared to do some research beyond just requesting quotes. In the long term, it is worth it.