If you’re a homeowner, you never want to think about something bad happening to your house or your belongings. But emergencies happen and they’re almost inevitable. Whether your home is hit by a storm or a thief makes off with your valuables, owning a house comes with some risk.
Homeowners insurance is an essential safeguard against worst-case scenarios, providing you with protection in the case of damage, theft, or destruction.
In 2017, 6 percent of insured homes filed a claim and the average amount paid per claim was around $15,000. Homeowners insurance is a worthwhile investment for you and your family.
Find out what insurance companies consider when setting your homeowners insurance rates and what you can do to reduce your monthly premiums.
What homeowners insurance costs across the country
You may be surprised to learn that homeowners insurance is comparable in cost to car insurance. The average homeowners insurance premium is around $1,083.
Your home likely costs significantly more than your vehicle, so homeowners insurance is a pretty good deal. And, it protects you from major issues like storm damage, theft, and even structural issues.
Homeowners insurance is also a necessity. When you buy a home, most mortgage lenders will require you to provide proof of insurance, so it’s not something you can skimp on.
Why is the cost of homeowners insurance different across states?
In recent years, there have been a number of hurricanes and natural disasters impacting homeowners. In states where there was significant damage, homeowners insurance premiums skyrocketed. Below are the three most expensive states for homeowners insurance:
- Louisiana: $1,967
- Texas: $1,937
- Florida: $1,918
Wind and flood exposure causes rates to increase. After Hurricane Katrina — which decimated parts of Louisiana — homeowners saw their premiums go up. Now, Louisiana leads the country in terms of average premium cost.
Texas and Florida are also at significant risk from hurricanes, too. it’s estimated that more than 500,000 Texas homes are at risk of damage from storm surges in the event of a category 5 storm.
And as recent years have shown, Florida is a frequent victim of hurricanes, which destroyed homes along the coastline and even caused storm damage inland.
Note that homeowners insurance policies don’t typically cover damage done by flooding. You’ll need to purchase flood insurance to get additional coverage for floods and flood-related damage.
Where you live has a significant impact on your premium cost. States that aren’t at risk of natural disasters like hurricanes and tornadoes have the lowest rates in the country. Here are the three cheapest states when it comes to homeowners insurance.
- Nevada: $742
- Idaho: $703
- Utah: $664
What goes into calculating your homeowners insurance
There’s no one-size fits all homeowners insurance policy; it’s tailored to fit your home and your family’s needs. The following factors all affect your homeowners insurance cost:
As we’ve seen, the state you live in can cause your premiums to go up; high-risk areas for natural disasters tend to be more expensive.
Your zip code also has an effect on your premiums. Insurers will look at how many other claims they’ve received in your area. If you live in an area where crime is abundant, you’re going to pay more for a policy.
Age of your home
It’s easy to assume that the insurance premiums for an older home would be lower. But it’s actually the opposite. Older homes are more expensive to insure because there’s usually more upkeep and maintenance.
For example, the house might increasingly have electrical wiring issues or problems with the foundation and roof.
Materials of your home
If your home is built with a wooden frame that’s considered more of a risk for insurers. It’s more susceptible to fire, termites, and rotting as opposed to a home made of brick.
Your premium is also dependent on your area’s fire protection rating: how far you are from a water source and a responding fire department.
The liability coverage from your homeowners policy will usually cover dog bites. If your dog has a history of behavior issues, this will increase your premium.
Your personal claims history
The more claims you file, the higher your premiums. You might think that filing a few small claims won’t affect your insurance, but it will. In fact, filing multiple small claims could result in the insurance company in canceling your policy.
Generally, you should use your insurance on big things that are beyond your control. For smaller things, consider paying out of pocket to avoid paying more in premiums in the long run.
Your premium cost is dependent on the coverage limits you choose. The higher the limits you choose for dwelling, personal liability, and contents coverage the higher your premium.
If you add a floater policy for your jewelry, that will increase your monthly premium too.
5 ways to lower your premium
While homeowners insurance is a good investment, it can be an expensive addition to your budget. To save money on your insurance, try these five tips.
1. Increase your deductible
If you have a safety net in place, it may make sense to increase your deductible. You’ll pay more out of pocket if you do file a claim, but raising your deductible can reduce your monthly premiums.
2. Boost your credit score
When determining your premiums, insurance companies look at your credit history. The better your credit score, the lower your monthly premium. Increase your score by paying down debt and paying all of your bills on time.
3. Install a security system
Some insurance companies offer premium reductions if you install security systems and equipment, such as surveillance cameras.
4. Bundle your insurance policies
If you bundle your homeowners insurance with your car insurance, you could qualify for additional discounts. With a home and auto insurance bundle, you could get the multi-policy discount.
5. Shop around
It’s a good idea to compare quotes from several different insurance companies to ensure you’re getting the best price. Cover allows you to get quotes from multiple insurance companies, helping you find the best deal.
Homeowners insurance is a necessity for any homeowner. It provides you with peace of mind, allowing you to rebuild after a disaster and recoup some of your investment.
If you’re struggling to afford your premiums, use the above tips to reduce your monthly bill and get quotes from other insurance companies to see if you can lower your rate.