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A home is one of the most expensive purchases you’ll ever make. And part of that expense, especially if you’re using financing, is the cost of home insurance. As you’re working over the figures to calculate how much house you can afford, it’s worth considering how much the cost of home insurance will add to your mortgage payment.
The price of a homeowners insurance policy can vary significantly depending on where you live in the U.S., the kind of insurance coverage you need, your coverage limits, and even personal factors like your claims history or credit score.
Let’s take a closer look at the average cost of a home insurance policy, factors that determine the cost of home insurance, and how to lower your home insurance premiums no matter where you live.
Read more: How much house can I afford?
The average cost of homeowners insurance
The average cost of homeowners insurance varies significantly from state to state and can be hard to pin down. Progressive puts the average premium for a 12-month homeowners insurance policy in their network at anywhere from $999 to $1,655 per year.
A study by Insurance.com assesses the average cost of home insurance nationwide at a much higher $2,601 per year, highlighting big variations in the cost between states.
For instance, Insurance.com shows high-risk areas in the Midwest, such as Nebraska, Oklahoma, and Kansas, as well as Florida and Colorado, with home insurance rates that clock in at $4,009 to $5,858 per year. Conversely, Hawaii and other New England and Mid-Atlantic states (including Washington, D.C.) pay significantly less in home insurance premiums — anywhere from $613 to $1,384 per year.
Read more: Homeowners insurance: What it covers and how much you’ll pay
7 factors that affect the cost of homeowners insurance
The following are just a few factors your insurance company uses to determine the cost of insuring your home. Understanding how these factors work together can help you estimate the cost of home insurance, but you should speak with an insurance agent for a specific quote.
1. Your home
The type of construction, age of your home, square footage, and installed safety features like security systems can all affect the cost of home insurance. Underwriting older homes can be expensive because the replacement cost might need to include custom materials and retrofitting the house to modern building codes.
2. Your location
Living in areas of the country prone to natural disasters can certainly drive up the cost of home insurance. You may pay a premium in regions with a serious risk for things like hurricanes, tornadoes, or wildfires.
But insurance providers also look at neighborhood crime rates, the closest fire station or fire hydrant, and nearby bodies of water that could present a flood risk.
3. Your coverage and coverage limits
A home insurance quote will usually include dwelling coverage up to the replacement cost of your home, coverage for your personal property, loss of use or additional living expenses coverage, and personal liability insurance coverage.
However, increasing the amount of liability coverage or adding other types of insurance, such as wildfire coverage, will also raise the cost of your home insurance.
Read more: What does homeowners insurance cover?
4. Your deductible
Just like with auto insurance, your deductible is the amount of money you’ll pay out of pocket when you submit an insurance claim. Generally, higher insurance deductibles result in lower premiums.
According to the Insurance Information Institute, the standard home insurance deductible is either $500 or $1,000, although some insurers use 1%-2% of your home’s insured value as a deductible.
5. Your claims history
Home insurance companies also consider your history of making claims when determining the cost of insuring your home.
If you’ve made frequent claims for property damage or had payouts for liability damages or medical payments on your property, it could increase your home insurance premiums.
6. Your dog
Certain dog breeds prone to biting incidents may affect not only the cost of your insurance premiums but also whether an insurance company deems your property uninsurable.
7. Your credit score
Good credit can pay off when it comes to home insurance. Because studies suggest homeowners with poor credit scores submit more claims, insurance companies may charge higher premiums for low credit scores.
However, some states, such as California and Massachusetts, prohibit home insurance companies from considering credit scores while others, like New York, require disclosure if your credit information is used to determine rates.
Read more: 10 tips to improve your credit score in 2024
Why home insurance rates are rising
If you feel like home insurance rates are through the roof, you’re not wrong. Rates have been steadily rising in recent years with increases of 20% or more last year in states like Texas and Utah. Coupled with elevated interest rates on mortgages, home insurance is one of several factors that may leave first-time homeowners feeling priced out of the market.
What’s at the heart of these higher home insurance premiums? Insurify’s 2024 report on Insuring the American Homeowner cites a confluence of factors including “severe weather, inflation and rising homebuilding costs.”
An analysis from The New York Times also points the finger for higher home insurance premiums at climate change, minimum coverage requirements in some states, and rising rates of insurance fraud.
How to lower your homeowners insurance costs
If you’d like to spend more of your hard-earned cash on beautifying your home instead of insuring it, here are a few strategies that could result in lower home insurance premiums.
Shop around
Getting quotes from several different insurance providers might surprise you. The Insurance Information Institute recommends getting at least three different quotes to compare rates and coverage. Just keep an eye on the deductible and any policy exclusions.
Raise your deductible
Speaking of deductibles, raising your the amount of the deductible you pay out-of-pocket could lower your annual premiums. Just make sure you’ve got enough cash on hand to cover your deductible amount in case of emergency.
Explore home insurance discounts
There are several ways to get discounted home insurance rates, including bundling with auto insurance, installing safety devices, making home renovations, and staying claim-free. So before you submit a claim for water damage from a burst pipe in the garage, think about what it’ll cost to repair out of pocket versus the price of paying higher premiums later.
Build your credit
Most lenders require a credit score of 500 or more to secure financing to buy a home, even with a 10% down payment. But did you know most states also use a credit-based insurance score that’s similar to your FICO score to assess risk and determine home insurance premiums? That’s why raising your credit score can be a smart way to lower your insurance rates.
Read more: The credit score needed to buy a house in 2024
Cost of homeowners insurance FAQs
1. Will my home insurance rates be higher if I have a dog?
Yes, having a dog could raise your home insurance rates and certain breeds may even disqualify you from coverage by home insurance companies. This is because if a biting incident occurs, a claim could be made for liability damages and medical payments related to the incident.
Pit bulls, Rottweilers, German Shepherds, and other large or medium-sized dog breeds can be deemed high-risk.
2. How much does where I live affect my home insurance rates?
Home insurance rates can vary significantly based on location. This is because your home insurance costs boil down to two main considerations: how likely it is that your home will be damaged and how costly it would be to fix it.
For instance, homeowners living in some regions of the midwestern United States nicknamed “Tornado Alley” could pay premiums nearly double that of other states while those living in coastal areas prone to flooding may need to pay for flood insurance in addition to standard homeowners insurance.