The Common Price of Dwelling Insurance coverage

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We’ll get straight to the point: The cost of home insurance varies widely, but the average American homeowner pays $1,249 a year in premiums, according to the Insurance Information Institute’s 2018 figures, the most recent available.

 

(This is based on the HO-3 homeowner package policy for owner-occupied dwellings, 1 to 4 family units. It provides all risks coverage (except those specifically excluded in the policy) on buildings and broad named-peril coverage on personal property, and is the most common package written.)

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Home insurance premiums can vary widely in part because of:

  • Your location
  • Your history of claims
  • Your credit score
  • The age and condition of your home

However, there are ways that homeowners can save money on their insurance costs, which we’ll get into. We’ll also walk through which areas in the U.S. are the cheapest and most expensive, typical coverages and more.

[ Read: Home Insurance Quotes, Explained ]

How much does home insurance cost by state?

As you can see below, the average home insurance premium varies widely by state. As you might expect, weather events figure big in the average annual premium by state, although there are other factors, of course, such as your credit score and the age of the home. The figures in this table come from 2018 data provided by the Insurance Information Institute.

State Rank Average annual premium State Rank Average annual premium State Rank Average annual premium
Ala. 13 $1,409 Ky. 26 $1,152 N.D. 18 $1,293
Alaska 36 $984  La. 1 $1,987 Ohio 44 $874
Ariz. 46 $843 Maine 42 $905 Okla. 4 $1,944
Ark. 12 $1,419 Md. 32 $1,071 Ore. 51 $706
Calif. 31 $1,073 Mass. 10 $1,543 Pa. 40 $943
Colo. 7 $1,616 Mich. 38 $981 R.I. 5 $1,630
Conn. 11 $1,494 Minn. 14 $1,400 S.C. 19 $1,284
Del. 45 $873 Miss. 8 $1,578 S.D. 20 $1,280
D.C. 21 $1,264 Mo. 15 $1,383 Tenn. 23 $1,232
Fla. 2 $1,960 Mont. 22 $1,237 Texas 3 $1,955
Ga. 17 $1,313 Neb. 9 $1,569 Utah 50 $730
Hawaii 27 $1,140 Nev. 48 $776 Vt. 41 $935
Idaho 49 $772 N.H. 36 $984 Va. 34 $1,026
Ill. 28 $1,103 N.J. 24 $1,209 Wash. 43 $881
Ind. 33 $1,030 N.M. 30 $1,075 W.Va. 39 $970
Iowa 35 $987 N.Y. 16 $1,321 Wis. 47 $814
Kansas 6 $1,617 N.C. 28 $1,103 Wy. 25 $1,187

Based on the HO-3 homeowner package policy for owner-occupied dwellings, 1 to 4 family units. Provides all risks coverage (except those specifically excluded in the policy) on buildings and broad named-peril coverage on personal property, and is the most common package written.

Most expensive states in home insurance premiums

Below are the most expensive average home insurance premiums by state, according to the Insurance Information Institute’s figures from 2018. Premiums can vary widely within the state, and of course, there are more factors in your premium than the location of your home.

  • Louisiana: $1,987
  • Florida: $1,960
  • Texas: $1,955
  • Oklahoma: $1,944
  • Rhode Island: $1,630

Cheapest states in home insurance premiums

Below are the cheapest average home insurance premiums by state, according to the Insurance Information Institute’s figures from 2018. Premiums can vary widely within each state, and of course, there are more factors in your premium than the location of your home.

  • Wisconsin: $814
  • Nevada: $776
  • Idaho: $772
  • Utah: $730
  • Oregon: $706

What determines the cost of homeowners insurance?

The cost of an individual homeowners insurance policy is determined by a wide range of factors. Some of those factors are within your control, and some of them are not. 

For instance, home insurance can be more expensive in areas with a high risk of flooding or fires than in places where natural disasters are uncommon. Newer homes often cost less to insure than older dwellings — especially those in need of repairs. Insurance companies also look at your personal credit history before covering your home, so people with good credit histories could receive a lower premium than those with poor credit histories.

Every insurance company calculates rates differently. Some carriers place a higher value on credit score and claims history, while others look more closely at the condition and age of the home. Below is a more comprehensive list of the considerations that might determine your homeowners insurance premium.

[ Read: The Best Homeowners Insurance Companies ]

  • State, city and neighborhood: Some states are more prone to wildfires, earthquakes, and hurricanes than others.
  • Location of home: This information is pulled for crime and claim statistics in your home’s area.
  • Construction of the home: Is the home made out of wood, brick, or vinyl siding?
  • Heating system: Is the home heated with an HVAC or wood stove?
  • Security system: Homes with security systems might be less likely to be broken into.
  • Previous claims on the home: If the home has a history of water and electrical issues, then the homeowner may be more likely to file a future claim.
  • Homeowner’s previous claims: If the homeowner has a history with other insurance companies, he or she may be more likely file a claim again in the not-so-distant future.
  • Credit score: People with low credit scores may be more likely to file a claim.
  • Nearest fire station: The distance between your home and the nearest fire station can be a factor.
  • Marital status: Married couples are statistically less likely to file claims with insurance companies.
  • Replacement cost: The cost to replace an older home and bring it up to code can be more expensive than replacing a new home.
  • Pets: Certain animals might be considered a greater risk for liability claims.
  • Outside structures: Things like pools, sheds or greenhouses can also affect your policy rate.

Aside from these factors, the cost of an individual policy can also be determined by which features you chose to include in your coverage. A few of the options that can affect the cost are:

  • Deductible amount
  • Extra coverage add-ons
  • Bundled insurance policies
  • Discounts

[ More: Complete Guide to Home Insurance ]

Types of coverage

There are many different types of homeowners insurance coverage. Some coverages, like dwelling and liability coverage, can come standard with most policies. But insurance companies also often sell add-on policies that offer protection in certain areas. Here are some of the most common home insurance coverages you might find:

  • Dwelling coverage is insurance that covers qualified damages to the home itself. If the siding of your home tore off in a major storm, dwelling insurance might cover the cost of repairs. Insurance companies might sell add-ons for roof damage, water back/sump pump overflow, flood insurance and earthquake insurance.
  • Personal property coverage pertains to the cost of replacing possessions in your home, such as furniture. If someone broke into your home and stole personal items, personal property coverage might reimburse you. If you need to protect valuables, your agent might recommend you purchase a scheduled personal property endorsement for higher coverage limits.
  • Personal liability coverage protects against lawsuits for property damage or injury. If a delivery driver slipped and fell on your icy driveway, liability coverage might pay for their medical expenses and court costs if they sued you. Some insurance companies offer add-on policies that extend your liability coverage limits.
  • Loss of use coverage might cover additional living expenses you have after your home has been damaged. This might include hotel stays, groceries and gas while your home is being repaired. If your house is under construction after a covered claim, loss of use coverage might pay for your temporary hotel and food expenses up to your policy’s limit.

Generally speaking, your agent may recommend that your home insurance coverages be based on your lifestyle, where you live and the value of your assets.

Keep in mind that your agent may recommend you add coverage as time goes on. If you adopt a puppy six months after you purchase your home insurance policy, your agent may recommend you add pet coverage when the time comes. Or, if you take on a remote job, you can contact your insurance company and see if you should add home business coverage for a small fee.

Every home insurance coverage has a policy limit. A policy limit is the highest amount of money your insurance company will give you after a covered loss. For example, if your dwelling coverage limit is $400,000, that may limit how much is paid out if your home is damaged or destroyed by a covered peril to no more than $400,000, although factors like your deductible may come into play.

When you purchase a home insurance policy, you may be able to set your own policy limits. As a rule of thumb, you may be recommended to have enough dwelling coverage to rebuild your home in its current state, enough personal property coverage to cover the full value of your personal items and enough liability coverage to protect your personal assets.  

[ Read: What is Dwelling Insurance? ]

Reimbursement coverage types

There are three different coverage options commonly provided by home insurance companies. Each option affects your premium differently.

  • Actual cash value (ACV) is based on the current market value, or how much your home and personal property is worth, with depreciation factored in. Most home insurance policies offer ACV reimbursement by default. It can be the lowest option.  
  • Replacement cost value (RCV) works in the same way as ACV, but without depreciation factored in. That means you might get a higher payout after a covered claim. RCV home insurance policies can be more expensive than ACV policies, and you may need to purchase an endorsement to get it. Your agent may recommend this if you own valuables or have an expensive home.
  • Guaranteed replacement cost (GRC) is also referred to as extended replacement cost (ERC), and this option can cover the complete cost of rebuilding the home, even if that cost exceeds the policy limit. GRC can be the most expensive replacement cost type, and not all insurance companies offer it. Your agent may recommend this if you live in areas with extreme weather, wildfires, earthquakes or any place where home destruction is more likely. 

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Discounts and ways to save on home insurance

Homeowners insurance can be costly, so before selecting a plan, shop around to find the best deal based on your needs. It can be helpful to consult an insurance agent, read consumer reviews and check online insurance quotes to find companies with the lowest rates. Here are some other ways to save money on home insurance:

  1. Ask about available discounts: Some companies offer discounted policy rates if your home is in a gated community, if you bundle with your car insurance or if you’re part of a homeowner’s association.
  2. Bundle your insurance policies: Oftentimes, companies that sell home, auto and life coverage may deduct up to 15% off your premium if you buy two or more policies from them.
  3. Make your home safer: Some providers may offer a discount if you install fixtures that make your home safer, such as smoke alarms or a security system, that reduce the likelihood that damage or theft will occur in the first place.

How do past claims impact home insurance cost?

It depends on the nature of the claim. Just how much a claim raises your premium varies in part on the provider and the nature of the claim.

There are also further complications when you make the same type of claim twice. Not only can this increase what you pay each month, but, depending on you and your home’s history, it’s possible the provider may even decide to drop you.

Though your premium may increase if you are found at fault, it’s also possible for your monthly bill to increase even if you’re not found to be liable. Your home may be considered riskier to insure than other homes.

Home insurance cost FAQs

Is home insurance required by law?

No, states do not require homeowners to get insurance when they purchase a home. However, if you choose to get a mortgage loan, most lenders will require you to have some insurance.

How much coverage do I need?

To determine how much coverage you should purchase, talk to your agent about your home inventory, your overall worth, and of course, comfort level. Also discuss factoring in the location of your home, and evaluate risks based on weather, fires and other events that could potentially damage or destroy your home.

What home insurance discounts are there?

There are a few ways to potentially get home insurance discounts. Discount options include things like:

  • Bundling your home insurance policy with another policy (such as auto).
  • Going claims free for extended periods of time.
  • Making certain home improvements.
  • Living in a gated community.
  • Installing a security system.

What are the most common losses?

In 2018, 34.4% of home insurance losses were wind and hail related, 32.7% were fire or lightning related and 23.8% were water damage or freezing claims. Only 1% of claims were related to theft, and less than 2% of losses were liability claims. These figures are according to the Insurance Information Institute.

In Florida the most common claims may be related to hurricanes, wind damage, water damage and flooding. In California, earthquake, flood and wildfire claims may be more common. When you purchase insurance, talk to an agent about the specific risks in your area and ask about separate insurance policies you might need, like flood or earthquake coverage.

Too long, didn’t read?

The cost of your insurance can vary widely because of such factors as location, your credit score and your home’s age. There are discounts your insurance carrier may offer, such as policy bundling and security systems.

 

 

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