What Is the Average Cost of Homeowners Insurance?
Across the United States, Americans wonder if they're getting a fair shake on their homeowners insurance rates or if they really need a policy.
According to the Insurance Information Institute, 5.1 percent of insured homes filed a claim in 2019, with property damage and theft accounting for 97.2 percent of these claim.
It's important to have homeowners insurance coverage. In this article, we'll break down the average cost of homeowners insurance across the country and how you can lower your rate.
What Is the Average Yearly Cost of Homeowners Insurance?
Americans pay $1,015 on average for homeowners insurance annually, according to the latest data from S&P Global. That amounts to an average monthly premium of $84.61.
Rates usually vary by state, so you may be charged more or less. Several factors affect premiums, such as coverage limits, credit score and your home's location.
In some states, people pay low homeowners insurance rates compared to the rest of the nation. For instance, Ohio, Missouri and South Dakota pay an average of $900 annually. Residents in Maryland, Virginia and Delaware pay the highest rates, with premium averages ranging from $2,559 to $3,000.
According to S&P Global and Business Insider, here are the average homeowners insurance rates by state.
|State||Annual Home Insurance Costs||Average Monthly Premium|
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States with the Most Expensive Homeowners Insurance Rates
Atlantic Coast residents pay the highest homeowners insurance rates in the nation, according to S&P Global. These include residents of Maryland, Virginia and Delaware.
Homeowners also pay higher premiums in areas that have increased rates of natural and weather-related disasters. For example, Texas and Oklahoma residents pay higher rates because they have more hail, tornadoes and severe windstorms than other states.
Additionally, Alabama, Florida, Louisiana and other coastal states have higher rates because of the increased frequency of hurricanes.
These are the states that pay the highest homeowners insurance premiums:
|State||Annual Average Home Insurance Cost||Average Monthly Premium|
States with the Least Expensive Rates
Insurers charge the lowest premiums to homeowners who live in states who less likely to experience natural disasters, earthquakes, hurricanes or windstorms. On average, Ohio, Missouri and South Dakota residents pay lower rates than homeowners in other areas. According to S&P Global, here are the homeowners who have the lowest average premiums:
|State||Average Annual Premium||Average Monthly Premium|
Higher Rates of Homeowners Insurance in California
California residents pay an average cost of $966 for homeowners insurance, according to S&P Global Market Intelligence. The highest number of disasters in the state were fire-related. Since 1953, the Golden State has had 254 wildfire natural disasters.
Crime is another factor that impacts home insurance rates in the Golden State. According to FBI Uniform Crime Reporting statistics, property crime rates are 2,331.2 per 100,000 people, slightly higher than the national property crime rate of 2,109.9 offenses per 100,000 inhabitants. Other top crimes in the state included burglary and larceny-theft.
Lowest Rates for Homeowners Insurance in Ohio
On average, Ohio residents pay the lowest homeowners insurance rates in the nation, according to S&P Global.
Ohio is a state prone to storms. Since 1953, the Buckeye State has had more than 24 federally declared disasters related to severe storms. Other federal disasters include floods, tornadoes, snow and biological disasters.
Ohio's lower crime rates also impacted home insurance premiums within the state. The crime rate is 2,055.7 per 100,000 inhabitants based on the FBI Uniform Crime Reporting and is lower than the national average of 2,109.9 property crime offenses per 100,000 inhabitants.
High Homeowners Insurance Rates in Florida
According to S&P Global, the average cost for homeowners insurance in the Sunshine State is $1,117. Fires were Florida's number-one natural disaster. The area recorded 65 counts of fire-related incidents since 1953. Hurricanes held steady at the number-two spot with 45 counts of federally declared disasters. Severe thunderstorms, flooding and freezing rounded out the list.
Fire, lightning and windstorms are three disasters covered by a standard HO-3 policy. Florida residents may have to pay a separate deductible for hurricane and hail damage.
According to the FBI Uniform Crime Reporting, the average property crime rates in the state were 2,145.7 per 100,000 residents, slightly higher than the national average of 2,109.9 offenses per 100,000 inhabitants.
What Coverages Do Insurers Use To Calculate Your Home Insurance Premium?
How do insurance companies calculate your rates? Insurers consider six coverages when determining homeowners insurance rates. They include the following:
- Dwelling coverage is Coverage A in your home insurance policy. It covers perils listed in your policy that damage or destroy your home's roof, walls, floors, foundation and built-in appliances. Common hazards include fire, explosions, windstorms and lightning. Dwelling coverage doesn't protect against floods, earthquakes or routine wear and tear. Up to 10% of this coverage protects detached structures.
- Personal property coverage protects your belongings if they are damaged, stolen or destroyed in a covered incident. It covers 50 to 70 percent of your home's dwelling limits to protect your furniture, electronics, clothing and jewelry, but only up to limits. Riders and endorsements can cover more valuable items.
- Other structures coverage accounts for 10 percent of the coverage amount on your home's structure or dwelling coverage. It insures facilities not connected to your main home, such as sheds, gazebos, fences and detached garages.
- Loss of use insurance covers your additional living expenses (ALE) when you must live elsewhere because of a covered incident. For instance, your policy may pay for meals and hotel costs if your home is undergoing repairs. This insurance only covers up to the policy's coverage limits.
- Personal liability coverage protects your legal liability when someone suffers bodily injuries or property damage at your home. For instance, it may pay if your pet bites someone visiting your home. This coverage will also pay if one of your trees falls and damages your neighbor's house. It will also protect you against litigation.
- Medical payments coverage pays the medical expenses of anyone injured on your premises, no matter who's at fault.
Other Factors that Impact Your Homeowners Insurance Premiums
The Insurance Information Institute says carriers consider other factors when calculating homeowners insurance rates. They include your property's features, neighborhood and home's rebuilding costs. The insurance industry also considers other variables like your zip code, state laws, credit score, deductible and coverage limits. These include the following metrics:
- Home's age – Your insurer will consider your home's age when calculating your premium rates. Older homes are more expensive to insure than newer ones because it costs more money to repair them.
- Roof condition – Another factor that insurance companies consider when calculating your rates is your home's condition. If you have an older roof, it may not withstand a severe windstorm or hail. Your insurer also considers the roof's materials, which may be expensive to replace. Some materials are also less likely to be damaged.
- Updated features – Attractive nuisances can raise the rates of your homeowners insurance. They include trampolines, swimming pools and other features that have an increased chance of causing injuries to someone on your property.
- Coverage limits – You'll pay more for insurance if you have a higher liability, property and dwelling coverage limit.
- Deductible – You can lower your home insurance rates if you pay a higher deductible. If you must meet a higher amount for covered claims, make sure you have cash on hand to pay it.
- Claims history – You'll pay a higher premium if you file several homeowners insurance claims.
- Credit score – Insurance companies reward homeowners that have good credit with lower premiums. They charge people with poor credit with higher rates.
- Pets – If you have a dangerous animal breed, you could pay higher insurance rates. Some insurers will even deny you coverage. These include aggressive dog breeds and dangerous exotic pets.
- Zip code – Your location is another factor that impacts your home insurance rates. Homeowners typically pay higher insurance rates when they live if they live in an unsafe area. Carriers also estimate how far your home is located from a fire or police department. They also consider whether your neighborhood has high rates of storms, earthquakes or wildfires.
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How To Lower Your Homeowners Insurance Costs
1. Bundle your insurance policies with one carrier
Insurance companies define bundling as purchasing two or more insurance policies from the same company at a discount. Cost savings can range from five to 25 percent. According to Forbes Magazine, the average savings for bundling home and auto insurance is 14 percent. Some insurers such as Allstate, Farmers and Nationwide, offer discounts that exceed 15 percent.
2. Add safety features
Your insurance company will reward you with homeowners insurance discounts totaling five to 15 percent when you install recommended safety features at your house. These include the following devices:
- Smoke detectors
- Deadbolt locks
- Fire extinguishers
- Storm shutters
- Security systems
- Sprinkler systems
- New or reinforced roof
Before purchasing a system, contact your insurance company to see which safety systems qualify for a discount. Your insurance agent will recommend brands and tell you how much of a price cut you'll receive.
3. Select the appropriate coverage type for your home
Review your policy every year to see if you're carrying any coverages that you no longer need for your home. For instance, if you have high-end computers that are no longer worth $8,000, it may be time to reduce your policy limits or eliminate an add-on endorsement.
Before eliminating coverage, make sure you have enough insurance to protect your home, other structures and personal belongings.
4. Increase the amount of your home insurance deductible
Deductibles are shared costs you must pay toward a covered loss before your insurance kicks in to pay a claim under your policy's term. You can save money on premiums if you set a higher deductible, but make sure you can afford to pay it if something goes wrong.
Your insurance company will require a separate deductible if you live in an area with frequent windstorms, wildfires, hail, earthquakes, hurricanes and other disasters.
5. Improve your credit score
Insurance companies are using credit information as a factor to set rates for their customers. You can lower your cost of home insurance premiums with a good credit score.
To clean up your credit, reduce your debt-to-income ratio. Pay your bills on time, and don't get more credit than you can afford. Additionally, keep your credit balances low. Check your credit record regularly to correct any errors and ensure your credit history is as accurate as possible.
6. Consider the Cost of Insurance when Buying a Home
Selecting the right home in your area could decrease your home insurance premiums by 5 to 15 percent.
The III says East coast homeowners should select brick homes because they are more resistant to coastal wind damage. In earthquake-prone areas, like California, they recommend wooden frame houses because they are more likely to survive these disasters.
Additionally, insurers may give you a price break based on your distance from first responders or if you live close to a fire hydrant. You can also receive a premium cut when your area has a professional fire department instead of a volunteer one.
You'll also receive reduced homeowners rates if you own a home whose electrical, heating or plumbing system are less than 10 years old.
7. Make Your House Disaster Proof
Contact your insurance company to learn what steps you can make to make your home resistant to windstorms and other natural disasters. You may save on premiums if you add storm shutters or better roofing materials. You can also retrofit older homes with safety features.
8. Find Homeowners Insurance Discounts
Your insurance company may offer home insurance discounts, including discounts to retired people because they have more time to maintain their homes.
9. Exclude Land Value
Speak with your insurance agent to find out if your insurance covers your land value. If so, you should consider lowering your coverage. You only need coverage to rebuild you home and to cover belongings and other structure. If you include the land, you'll pay a higher premium than necessary.
An Affordable Homeowners Insurance Policy Can Cover All Your Needs
The average homeowners insurance rate in the U.S. may be over $1,000 a year, but you can lower your premiums by bundling your homeowners insurance policies, buying a less risky home and searching for discounts. Additionally, you can make improvements to your home to make it less disaster prone and raise your credit score.
Shopping around for new coverage can also save you money on your homeowners insurance coverage. Compare rates from the top homeowners insurance companies using SmartFinancial, to find the most affordable home insurance policy in your area. To receive a free quote, answer a few questions after entering your zip code below.
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