How Much Does Home Insurance Cost? An In-Depth Guide

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By Clever Real Estate Updated April 26, 2023


How much does homeowners insurance cost? Before you decide on a company, find out what you need to know to make the best decision for your home. Compare coverage. Review companies. Look for cost-saving opportunities. And then you can move forward!

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When you buy a home, there are several costs that a new homeowner forgets to consider. You’ve got your down payment and monthly mortgage payments figured out. But there are other costs to consider as well. It's these costs that can make a home far more expensive than you had thought.

One of these is homeowners insurance. We will take a look at what it is, how it works, how much it usually costs. We will also look at how you can determine the amount and type of coverage you need.

What is Homeowners Insurance and How Does it Work?

Homeowners insurance protects you in the event of a loss. The could be from fire, storms, burglary or other natural disasters. Generally, your personal property is also protected and covered by your insurance policy.

Homeowners insurance covers the home and other structures on the property. Other structures include items such as pools, sheds or fences. It will also cover your personal property. Personal property includes your possessions such as clothing, electronics, bikes and appliances.

Your homeowners' insurance usually includes coverage for other items as well. Not only does it cover your home and property, it can also cover hotels if you can't stay in your home due to damages. Most policies have coverage called personal liability coverage that protects you. Personal liability coverage covers you if someone gets injured while on your property.

One other coverage that is usually included in homeowners insurance is medical coverage. Medical coverage provides payments for anyone that gets hurt on your property.

Homeowners insurance is usually required by your lender. It's one of the requirements of being able to get a loan. Your lender is likely to ask you to get your insurance before the mortgage company approves the loan. (Here are common misconceptions about homeowners insurance that you may not know)

How Are Insurance Policies Determined?

Your insurance company calculates your insurance based on the following factors:

  • Home value
  • Land value
  • Level of home finishings
  • Age of structures and all finishings
  • Other structures on the property

The insurance company will quote you "your premium." Your premium is the amount that the insurance company will charge you for the insurance. The quote will be for annual, semi-annual, or quarterly payments. Included in the quote will be the deductible as well as the terms of the insurance.

Much like your auto insurance, you can choose the level of deductible that is best for you. Most insurance companies offer a range of deductibles. A $1,000 deductible is the most popular deductible option. Keep in mind that making a claim on your homeowners insurance could cause an increase in rates next year.

In the event of damage to your property or to someone on your property, you would make what's called "a claim." Your claim will be made via phone or by completing a form with the company. In the claim, you state the damages or issues. Your insurance company may ask for supporting photos that show the damages. Some claims will need to have an insurance adjuster inspect the property as part of the process. The adjuster documents the damages and takes photos to provide for the claim review.

Once the insurance company has reviewed your claim, they will pay the amount due based on your policy. You'll likely be on the hook for any and all costs until you've paid your deductible in full — then your insurance kicks in and covers the remaining balance.

Key Factors That Determine Homeowners Insurance Costs

There are several factors that impact what you will pay for your insurance. Some of them you can control, others you can't.

If you live in a metropolitan area, you might have higher rates than someone that lives in a less populated area. This can be because of factors like higher home values, crime rates, etc.

States with more natural disasters, such as California, usually have higher insurance premiums.

There are several other factors that can influence insurance premiums. The age of your home can have an impact. Older homes may need more work or not be up to current code. How up to date is your plumbing and electrical wiring? What is the cost to rebuild your home? Older homes can be more expensive to repair than newer construction and that factors into the cost.

Many of these items are beyond your control unless you choose to move. And for many of us that's not an option.

Average Cost of Homeowners Insurance By State

As discussed, where you live has a major impact on the cost of your homeowners insurance. As of 2019, annual homeowners insurance averaged $1,083 nationwide.

But your state's average might be very different! For example, in Oregon, the average annual homeowners insurance was $574 per year. The state with the highest average insurance premium was Louisiana. Insurance in Louisiana averaged $1,847 per year in 2019.

How to Lower Homeowners Insurance Premiums

Some factors are beyond your control when it comes to homeowners insurance. Even so, there are several steps you can take to make sure you get the coverage you want at the best rates.

First, check and see what areas your home and property is not up to current code. Which of those items on the list can you do something about? All those that you can get fixed, you should do.

One easy tip is adding preventative items such as smoke detectors or smoke alarms. Or investigate security systems if your neighborhood has a higher crime rate. Let your insurance company know anything you to do secure and protect your home. It could save you money!

Finally, look at your deductibles. Can you increase it and pay for the difference if needed? The savings can be significant.

If you’re thinking of buying a new home and want to learn more about homeowners insurance, an experienced real estate agent can be an invaluable resource. Your agent can discuss what type of coverage you'll need and help you understand the costs, and may be able to point you in the direction of a good insurance carrier or trustworthy local agent or agency.

If you'd like to be connected with a top-rated buyer's agent near you for a no-obligation consultation, we can help! Give Clever a call at 1-833-2-CLEVER (9am to 5pm CST) or simply fill out our online form.

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