The cost of homeowners insurance has steadily increased over the last several years. While there are many factors that impact how much you can expect to pay, there are also ways that you can save on your premium.
If you’re wondering how much homeowners insurance costs on average, what factors influence the cost, or how you can save money on your policy, keep reading. In this article, I’ll cover:
- Average Cost of Homeowners Insurance by State
- Factors That Influence Homeowners Insurance Rates
- Ways To Save on Homeowners Insurance Rates
This article was updated in May 2023 and I review it every two months. Detailed notes on all updates can be found here.
Average Cost of Homeowners Insurance by State
For a standard HO-3 homeowners insurance policy, here are average annual rates by state and total amount of insurance.
Total Insurance | Total Insurance | Total Insurance | Total Insurance |
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|---|---|---|---|---|
The rates above are from the Homeowners Insurance Report, which was published by the National Association of Insurance Commissioners (NAIC) in 2023, using data from 2020.
These average rates can be a starting point for understanding how much homeowners insurance costs. But if you’re wondering whether a particular rate is a good deal or not, looking at average rates won’t give you the full picture. Let’s look at factors that drive rates. They can help explain why your rate might be above or below the average in your state.
Factors That Influence Homeowners Insurance Rates
The rate you pay can be very different from someone living a few ZIP codes away. The home insurance market is impacted by many factors, and each homeowner’s unique needs and situation determine how each factor will impact premiums.
Here are the four main factors that influence rates.
Location
Where your home is located can make a big difference in how much you pay for homeowners insurance. If you live in a region that experiences hurricanes, brush and forest fires, tornadoes, or any other natural disasters, the cost of insurance for your home will likely be higher than if your home were in a region less prone to these kinds of things, which are known as “perils” in the insurance industry. You may even be required to purchase additional policies if the perils are not covered by a standard homeowners insurance policy. You can take a look at what’s covered by standard homeowners insurance policies here.
Population density, or the number of people living in and around your city, is another factor that will impact your rate. Areas that are more heavily populated usually have higher real estate values and construction costs. Both of these things mean that you’ll need more coverage for your home, which leads to higher rates.
In addition, heavily populated areas are statistically more likely to have higher crime rates. Insurance companies use data to determine the likelihood of you filing a claim for any reason. If you live in an area with a higher crime rate, your homeowners insurance will probably be higher because you’re more likely to file a personal property claim because of theft.
Another location-based factor considered by insurance companies is response times for emergency services. Residents of urban areas are likely to have faster response times for emergency services than those living in rural areas. Proximity to a fire station can decrease the damages caused by fire, and the lowered risk can result in a lower premium.
Looking at location-based factors alone shows why it can be hard to pinpoint homeowners insurance rates. The same factor that drives an increase of your premium can also drive a reduction. Theoretical case in point: living in a rural area that has a low crime rate but is also far away from a fire station.
While there are many standard factors that insurers consider in every state when setting prices, there are other factors that are unique to the homeowners insurance market in individual states. A great example is the Florida homeowners insurance market.
Property Value
Your property value will determine how much coverage you need to protect your belongings. The more your property is worth, the more coverage you will need and the higher your premium will be.
Like location, there are many factors that influence your property value. When it comes to your dwelling, the size of your home is one example. Larger homes will require more construction materials and labor to rebuild or repair. Home upgrades are another factor that can increase your property value and insurance rate.
Your property’s value isn’t limited to your dwelling, though. If you have high value personal items, you might need more personal property coverage or specialty coverage in the form of endorsements, which will increase your rate. Or you might choose to protect your assets by increasing your liability coverage, which will also increase your rate. You can read more about how much insurance you need to protect your assets here.
Home Features
When it comes to how the features of your property impact your homeowners insurance rate, there are three questions I like to consider:
- How does a home feature impact the cost to repair, replace, or rebuild your property? The more expensive it will be to rebuild, repair or replace any part of your property, the more likely it is for your insurance premium to increase. If, for example, your home has features made from specialty materials that are difficult to find, this will be factored into your rate, and you can expect your rate to increase.
- How does a home feature increase the safety or security of your property or decrease the risk of damages against perils? If your home includes safety or security features that can lower the risks to your property, then you can expect your rate to decrease. Fire detection devices and home security systems are examples of features that can decrease your rate.
- How does a home feature increase your risk of damages, loss, or liability? There are some features that may cause your homeowners insurance rate to increase simply because they increase the risk of damages, loss or the likelihood of your making a claim. Wood-burning fireplaces, swimming pools, and wooden decks are examples of features that increase your risk of damages, loss or liability claims and can lead to higher rates.
Claims History and Credit
If you have previously filed a homeowners insurance claim, your homeowners insurance premium will most likely increase. One reason is that many companies operate on the idea that, for some types of claims, someone who has filed a claim in the past is more likely to file a related claim in the future. This means that your perceived risk factor can increase with each claim you file, and companies may raise your rate to protect against future losses.
Some insurance companies also rely on specialty consumer reporting agencies to generate insurance scores based on your claims history and credit score. Having a lower credit score and/or history of filing insurance claims can result in a higher premium.
Ways To Save on Homeowners Insurance
No matter where you live, there are several ways that you can save money on your homeowners insurance policy. Here are four tips that are worth looking into if you want to bring your premium down.
Ask Your Insurer for Discounts
Many insurance companies offer discounts to members who buy multiple types of insurance with them. You may have heard it called “bundling.” A common example is purchasing an auto insurance policy from the same company as your homeowners insurance. Purchasing multiple types of insurance from a single company is known as bundling.
You can also ask your insurer what other discounts are available. Every company is different and may have different names, qualifying criteria and rates for their discounts. So, asking what’s available helps make sure you don’t miss out on any discounts, such as:
- Automatic payments discount
- Claims free discount
- Homeowners association (HOA) discount
- Loyalty discount
- Marriage discount
- Military discount
- New construction discount
- Non-smoker discount
- Paid in full discount
- Paperless billing discount
- Retiree discount
You should also shop around for the best deal. Shopping around will give you a better idea of the cost of homeowners insurance for your specific needs, and having quotes in hand from other companies can help ensure you get the best rate from whatever company you choose.
Add Safety and/or Security Features to Your Home
Having safety or security features in your home can decrease the risk or severity of damages. Decreasing risks to your home reduces your likelihood of filing a claim, which can lead to your insurance company reducing your premium.
Examples of safety and security features that might reduce your cost for coverage include:
- Burglar alarms
- Deadbolts
- Fire alarms
- Freeze alarms
- Generators
- Impact-resistant windows
- Reinforced garage doors
- Smart locks
- Smoke detectors
- Storm shutters
- Water flow alarms
You’ll likely receive deeper discounts for alarms that notify appropriate authorities when triggered because they usually result in a faster response time and can potentially reduce any damages or loss to your property.
If you make any upgrades that increase the safety of your home, you can ask your insurance company if you’re eligible for any rate reductions.
Avoid Filing Unnecessary Claims
Before filing a homeowners insurance claim, there are a few things to consider. First, insurance companies keep track of your claims history, including how many claims you’ve filed and how much your claims have cost. The Comprehensive Loss Underwriting Exchange (CLUE) keeps a record of your claims filed within the past seven years.
Your claims history is used to determine how likely you are to file future claims and can also be used to justify the company canceling your insurance policy or declining to provide you coverage.
Even denied claims show up on your claims history, so a second thing to consider is whether or not damages or loss to your property are the result of a covered event. In general, homeowners insurance will not cover any damages or loss that could have been prevented or result from negligence, aging or wear and tear.
You should avoid filing a claim that costs less than your deductible. Let’s say you have an unmet deductible of $500 when a windstorm causes $200 worth of damage to your fence. Your insurer won’t compensate you for this claim, but it’ll go on your claims history anyway and increases your risk to insurers. If you’re not sure how much the repair or replacement will cost, get repair quotes. Money expert Clark Howard recommends that you create a fix-it fund to handle these kinds of issues.
Finally, filing a claim can result in your premium increasing, even if only by a small amount or temporarily. Bigger claims typically have bigger impacts, but making many small claims can add up as well.
Increase Your Deductible
Your homeowners insurance deductible is how much you must pay out-of-pocket toward a claim before your insurance company will step in. A lower deductible leads to a higher premium — and a higher deductible to a lower premium. This is because you’re taking on more risk and responsibility for filed claims with a higher deductible.
The idea is that someone who has to pay more out-of-pocket for repair or replacement of their property will be less likely to file unnecessary or minor claims. So if you’re looking to lower your premium, choosing a higher deductible might be a good way to save money upfront.
That said, it’s important to understand the trade-off. While a higher deductible can save you money upfront, it can also cost you more in the long run. If you need to file a claim and your deductible is too high for you to pay, you risk not being able to afford to fully repair or replace any damaged property in a timely manner, and that could lead to more expensive problems later on.
Final Thoughts
A homeowners insurance premium can range from a few hundred dollars to several thousands of dollars per year.
Rates are determined by many factors, and your unique needs and situation will determine how each factor impacts your premium. From your location, property value, and home’s features to your claims and credit history, the same factors that might lead to an increase in your premium can drive premiums down for someone else.
While averages by state may be helpful in providing a starting point for understanding insurance rates and having a range for comparison, these averages don’t capture the full story behind the variations in cost. If you’re looking for homeowners insurance or want to be sure you’re getting a fair rate, it’s worth shopping around with several companies to understand rates in your area and how your individual needs impact your rate. You can start with our guide to the best homeowners insurance companies.
Article Updates
- May 8, 2023: Updated average premiums by amount of insurance for all states and insurance ranges to reflect most recent data released by the NAIC.
