How Much Does Homeowners Insurance Cost?

As your home is possibly the largest asset that you will ever own, adequate insurance coverage is necessary.


Published on December 7, 2020

The average home insurance policy costs $1,631/year in the United States. However, insurance rates vary based on different factors such as the location of you home, its age and condition and its estimated value.

Homeowners insurance is generally cheaper than car insurance if paid for by the year, rather than every six months. Some people like to pay monthly or through their mortgage lender for convenience. Either way, you can be sure your money is going toward protecting your investment in your home.

Type of Coverage

There two main types of coverage: cash value coverage and replacement cost coverage.

Cash value coverage

With cash value coverage, your insurance company will pay what the current value of your property (minus depreciation), not what it costs to actually rebuild your home and replace your belongings. Cash value coverage is typically the most affordable.

Replacement cost coverage

Replacement cost coverage offers better protection: your insurer will pay what it would cost to repair or rebuild your home today. Replacement cost coverage is usually more expensive, but it may be worth it to protect yourself against the costs of depreciation.

Property Value

The main component of home insurance costs is the dwelling itself, which is calculated by estimating the replacement cost. This is the cost to rebuild your home in the event of a total loss.

Location plays a factor in how substantial the estimated replacement cost of your home will be. Estimated replacement cost also considers the size and age of the house. If you have an older home, your premiums could be higher. This is because it will be more costly to fix or replace parts due to manufacturer cancellations or slows.

Policy Deductible

Another factor to consider is the deductible you choose for your policy. If you are comfortable paying more out of pocket in the event of a loss, you could save your monthly or yearly premiums.

If you only want a lower deductible, you need to prepare for higher premiums to offset the insurance company’s cost of insuring you when your deductible is lower.

Credit Score

One often-overlooked factor of rate determination is your credit score.

Credit refers to your credit report, which you can find online. These generally produce a credit score that is a determinant of your credit worthiness or how safe a risk you are for a company. It is essential to know where you are on the credit scale, because it can help you get better insurance rates or have you be potentially denied in the worst-case scenario.

Claim History

Claim history, on the other hand, shows how you have utilized your homeowner’s policy but mainly focuses on reported claims under your name.

While you should definitely make claims when necessary to preserve your home’s value and protect your future, too many claims can be a red flag for an insurance company. High levels of claims within a short time frame can indicate fraud or negligence, which makes you a less-than-ideal candidate for insurance.

Don’t worry, though; it is relatively rare for people to be denied insurance on just one of these factors. It is essential to maintain a healthy balance of credit and claim history to ensure you receive the best rate.

How to save on homeowners insurance costs

If you are concerned about cost, there are some easy ways to cut down on your rate. Ensuring you have appropriate safety measures can qualify you for discounts, and even claim-free history or longevity discounts exist in some companies.

Small upgrades like up-to-date smoke detectors, burglar alarms, and regularly servicing your home can all help you save!

Most importantly, though, it is imperative not to cut too many costs to make sure that you are appropriately protected alongside your family. 

Talk to Your Agent

If you have more questions about how to buy homeowners insurance, reach out to your agent for more information.