How Much Does Homeowners Insurance Cost?

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When you own your own home, some expenses are unavoidable. On top of making payments toward your mortgage, property taxes and possibly mortgage insurance, chances are you'll also have to pay for homeowners insurance. Forgoing it isn't illegal, but most mortgage lenders require it—and it's a wise way to protect yourself and your investment.

The question then comes down to cost. How much you pay for homeowners insurance depends on a variety of factors: where you live, how much coverage you need and something called your credit-based insurance score can all impact your premium. Whether you're a first-time homebuyer or an existing homeowner looking for ways to save, understanding the ins and outs of homeowners insurance could pay off in the long run.

How Does Homeowners Insurance Work?

Homeowners insurance is designed to protect you if an insured event damages your home or belongings. This could include anything from a fire to a tropical storm to a burglary. In many cases, your homeowners insurance policy will also cover medical fees and legal costs if someone injures themselves on your property. It's worth noting, however, that floods and earthquakes are generally excluded from standard policies. (More on this in a bit.) Reading over your policy prior to signing on the dotted line will clarify what's covered.

Whether a hailstorm damages a window or a friend slips and falls during a dinner party, the first step after ensuring everyone's safety is to file a claim with your insurance company. If the incident is indeed covered, you'll be expected to meet your deductible before your plan will cover any portion of the loss. In most cases, you'll have to satisfy that deductible every time you file a new claim. The Insurance Information Institute points to Florida hurricanes as an exception. Instead of a deductible applying to each storm, it's good for the whole season.

What Influences Your Homeowners Insurance Premiums?

How much you'll pay for homeowners insurance depends on a number of factors. Premiums can vary significantly from state to state, which makes sense—insurance companies may charge you more if, say, you live in a high-risk area for brush fires. The replacement cost of your home influences the cost of premium too. The same can be said for your home's age. Having a historic home with a storm-sensitive roof and outdated electrical system will likely mean paying more for homeowners insurance.

Your credit-based insurance score can be another driving force when determining your premium. Where it's allowed, your credit can be part of the overall risk assessment an insurer conducts before approving or denying you coverage and when deciding your rates. It focuses on things like payment history, credit utilization ratio and delinquent accounts. If there are red flags here, you could end up paying more for homeowners insurance.

One other detail that can affect your premium is your deductible. Generally speaking, a higher deductible translates to a lower premium, and vice versa. The majority of insurers offer a minimum deductible of $500 or $1,000, but raising it above the $1,000 mark can bring down the cost of the policy, according to the Insurance Information Institute. Of course, doing so doesn't come without risk. In the event that you need to file a claim, you may need to come up with a higher deductible.

Average Homeowners Insurance Cost by State

Homeowners insurance premiums vary, but the average cost for the most common type of policy was $1,211 in 2017, according to a study published last year by the National Association of Insurance Commissioners. The state you live in plays an important role in determining how much you'll pay. Here's a state-by-state breakdown of the average premiums for homeowners insurance.

Average Premiums for Homeowners Insurance By State, 2017
StateAverage premium
District of Columbia$1,235
New Hampshire$972
New Jersey$1,192
New Mexico$1,017
New York$1,309
North Carolina$1,086
North Dakota$1,253
Rhode Island$1,551
South Carolina$1,269
South Dakota$1,202
West Virginia$940

Source: Insurance Information Institute

How Much Does Earthquake Insurance Cost?

While earthquake coverage isn't included in standard homeowners insurance policies, most policies do cover losses related to fires that happen after an earthquake. To be covered for damage directly related to an earthquake, you'll have to purchase additional coverage. These types of policies typically cover home repairs, the replacement of personal belongings and interim living expenses following a quake.

How much you'll pay for earthquake insurance depends on your area's risk level, along with your home's structure and age. Premiums also tend to be comparatively higher for brick buildings as opposed to wood structures. Not surprisingly, earthquake insurance costs more if you live along the West Coast, where earthquakes are more common. Earthquake insurance premiums in California can range from hundreds of dollars a year in less quake-prone areas to thousands of dollars annually if you live near a fault line.

Deductibles for earthquake insurance also skew higher and typically range from 5% to 15% of the policy limit, according to the Insurance Information Institute.

How Much Does Flood Insurance Cost?

Floods are the most common and costly natural disaster in the United States, according to FEMA. And they don't just happen during major hurricanes. Any storm that brings in heavy rain could threaten your home, especially if you live in an area that's at risk for storm surge damage. States including Florida, Louisiana and Texas top the list.

Since flooding isn't covered by standard insurance policies, homeowners who want coverage have to purchase an additional policy. In 2018, the average annual premium for $257,000 worth of coverage was $642. To put things in perspective, the Insurance Information Institute reports that the average flood claim in 2017—the year of hurricanes Harvey, Maria and Irma—was close to $92,000.

One important note: If your home is flooded due to an internal problem, like a pipe unexpectedly bursting, most standard homeowners insurance policies will cover you. Flooding caused by heavy rain or an overflowing nearby river, on the other hand, is not. Be sure to read the fine print of your homeowners insurance policy for clarification.

How to Save on Homeowners Insurance

Consumers do have some control over their homeowners insurance premium. Here are some potential money-saving strategies to consider:

  • Raise your deductible. As previously mentioned, opting for a higher deductible is one way to reduce how much you'll pay for coverage. Just keep in mind that doing so means you'll have higher out-of-pocket costs should you need to file a claim, so it's a trade-off.
  • Shop around. Another way to unlock potential savings is to compare quotes. Shopping around and gathering estimates from several different insurers gives you choices and allows you to see who has the best rates. One thing to be mindful of, however, is sacrificing quality for price. If disaster strikes, the last thing you want is to be underinsured, which could end up costing you more when all is said and done. The Consumer Financial Protection Bureau also recommends sharing quotes with your mortgage loan officer to make sure the coverage you're considering meets their lending requirements.
  • Turn to your existing insurers. If you've been with the same auto insurance company for a number of years, they may offer you a discount for bundling your home coverage. The Insurance Information Institute reports that some companies may shave off 5% to 15% if you buy multiple policies. You may also be rewarded for your loyalty if you stay with the same insurer for the long haul. Look for other discounts too, such as those given to military service members or older Americans, for example, as a way to find additional savings.
  • Focus on improving your credit. Remember, insurers in most states may check a version of your credit score when assessing your risk and determining your rate. Improving your credit score could translate to lower premiums, but its benefits can pay off in other ways as well, such as lower interest rates on loans and credit cards. Paying your bills on time, maintaining low balances on your revolving accounts, and disputing any inaccuracies on your credit report can go far in boosting your score.

The Bottom Line

Homeowners insurance is usually a non-negotiable requirement when you have a mortgage loan. How much you'll pay depends on factors like where you live, the type of home you have and the level of coverage you need. Like anything else, shopping around and comparing quotes could serve you well. Improving your credit score with a product like Experian Boost®ø is another way to find more potential savings. The most important thing to remember is that when it comes to homeowners insurance, you have options.