Key takeaways
- Home insurance costs $3,548 per year nationally, but premiums vary widely by state.
- Standard homeowners insurance covers your home's structure, personal belongings, liability and temporary living expenses, but it does not cover floods, earthquakes, sewer backups, termite damage or home-based business losses.
- Your credit score, claims history, deductible choice and the home itself all affect what you pay.
When you qualify for a mortgage, your lender will require you to carry homeowners insurance to protect the value of the property.
Home insurance costs $3,548 per year on average nationally, according to an analysis of quotes across all 50 states and Washington, D.C. by MoneyGeek, a personal finance website that compares insurance policies.
Costs vary significantly by location. Florida homeowners pay an average of $10,240 per year, 189% above the national average. Hawaii remains the most affordable state at $601 per year, 83% below the national average.
What a standard policy covers
Homeowners insurance includes six coverage types: dwelling coverage for your house, other structures coverage, personal property protection, temporary living expenses, liability coverage and medical payments coverage.
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What a standard policy does not cover
Standard homeowners insurance excludes floods, earthquakes, normal wear and tear, pet damage and other situations, including sewer backups, termite damage and home-based business losses.
Here's how you can fill many of these gaps:
- Flood insurance is available through the National Flood Insurance Program or private insurers.
- Earthquake insurance can be purchased as a separate policy or endorsement if you live in a seismically active area like California or Hawaii.
- Sewer and drain backup coverage can be added as an endorsement.
- Scheduled personal property endorsements cover high-value items like jewelry and fine art beyond the standard $1,500 per-item limit.
- Umbrella policies extend liability coverage beyond the limits of your standard policy.
In some states, homeowners can buy separate coverage for hurricanes, tornadoes and other windstorms. Insurers' deductible plans for hurricane and windstorm coverage must be reviewed by each state's insurance department and may be subject to state-specific regulations.
Lenders require proof of coverage at closing, so start shopping early. Many buyers skip comparison shopping and pay more than they need to.
Ways to save
1. Maintain a good credit rating
Insurers increasingly use credit information to price homeowners insurance. If you have already been working on your credit to qualify for a better mortgage rate, that effort will likely benefit your insurance premium, too. If not, review your credit history and take steps to improve your scores before applying for coverage.
2. Shop around
Shop for service quality, not just price. What you are buying is the promise that claims will be handled well when you need it most, whether that is after a storm or a house fire.
- Ask friends and family for recommendations based on their claims experiences.
- Check AM Best, a global rating service that evaluates insurers on financial strength and service quality.
- Visit the National Association of Insurance Commissioners, or NAIC, which maintains a database of state insurance commissioners and consumer information resources to help you compare insurers.
3. Check your claims history
Insurers use a database called the Comprehensive Loss Underwriting Exchange, or CLUE, to review claims filed by the homeowner and claims filed on the property itself. Both factor into your premium.
Request a copy of your CLUE report before you apply. Correct any errors in your record or the home's record. A claims-free history will lower your rate.
4. Consider insurance costs when house hunting
Certain features of a home affect what you will pay for coverage. These include:
- Proximity to a fire station and fire hydrant
- Age of the electrical, heating and plumbing systems
- Presence of wood-burning stoves
- Safety features such as security systems, smoke detectors and storm shutters
Insurers may offer discounts for new construction, homes with no smokers and properties with advanced fire and burglar alarm systems that connect to a monitoring station.
5. Raise your deductible
Unlike health insurance, where you meet one annual deductible, home insurance deductibles apply to each individual claim. Choosing a higher deductible lowers your monthly premium and discourages filing small claims, which keeps your claims history cleaner.
Before selecting a higher deductible, make sure you have enough cash set aside to cover it in an emergency.
6. Don't over-insure or under-insure
Avoid paying for coverage you do not need, but do not cut so deep that you are exposed when something goes wrong.
A common mistake is assuming your coverage will automatically adjust as your home's value changes. What matters is replacement cost, the cost of labor and materials to rebuild, not the home's market price. Replacement cost can be significantly higher than what the home would sell for.
Ask your insurer for a customized estimate of your home's replacement cost that accounts for its construction details, age, unique features and any local building-code requirements. Review your coverage every few years.
7. Bundle home and auto
Most insurers that offer both auto and home coverage will discount the premium if you carry both policies with them. Bundling makes sense if you are satisfied with the company's coverage and service for both.
8. Review your rate and coverage before renewing
Do not auto-renew without checking your options. Some insurers offer lower introductory rates and raise premiums in later years. Others reward long-term customers with discounts of 5% to 10%.
Before switching, verify the new insurer's coverage terms, service quality and financial stability.