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The average sale price of a new single-family home in the United States in 2020 was $391,900, according to the US Census Bureau. For most homeowners, your home is your biggest investment. The best way to protect this investment against disasters like fires and tornadoes is to purchase home insurance.
What is a home insurance premium?
A home insurance premium is the amount you pay to keep your home insurance policy active. You can usually pay your home insurance bill monthly, quarterly or annually.
If you have a mortgage, your lender may require you to purchase home insurance and include your home insurance premium in your mortgage payment.
What does home insurance cover?
A standard home insurance policy (called HO-3) covers your home for any type of damage that is not specifically excluded. Damage caused by fire, smoke, wind and the like is covered. It also covers attached and unattached structures on your property.
A standard home insurance policy covers your belongings against specific “risks”. Tornadoes, explosions, fires, thefts and vandalism are just a few of the issues covered by home insurance.
You will also be covered for other types of issues, such as:
- Liability insurance for property damage and injury you cause to others
- Medical payments for small injury claims made by others
- Additional living expenses if you cannot live in your home due to a problem such as a fire
Home insurance does not cover all problems. For example, common exclusions found in an HO-3 include earthquakes, flood water damage, sewer backups, sinkholes, and wear and tear.
How much does home insurance cost?
Nationally, the average annual premium for homeowners insurance with $300,000 of homeowners coverage is $1,729, according to a Forbes Advisor analysis of homeowners insurance rates. Your costs will depend on several factors, including the cost of rebuilding the home, the age of the home, your location, and other factors, such as your claims history and the amount of coverage you choose.
Average Home Insurance Premiums by State
How are home insurance premiums determined?
Here are the factors that insurance companies typically use to determine a home insurance premium.
The characteristics of your house
- The age of the house
- Building materials (like wood or stone)
- The state of the house
- Square feet
- roof construction
- How you heat the house
- Safety and security features, such as smoke detectors and burglar alarms
The location of your home
Your place of residence is another important factor in premiums, including:
- Severe weather and natural disasters
- Criminal rate
- The proximity of your home to a fire hydrant and fire station
- Claims history in your area
The amount of coverage you choose will play a major role in determining your home insurance premium. Generally, home insurance can be broken down into these main types of coverage:
- Lodging: The amount of your home insurance is based on the cost of rebuilding your home if it is destroyed by a loss such as a fire or a tornado. This includes attached structures such as a deck or garage.
- Other books: This covers unattached structures like a fence or shed.
Personal Property: This pays to repair or replace your personal belongings such as clothing, furniture, carpets, appliances, jewelry, and other items.
- Responsibility: This pays for property damage and injuries you cause to others when you are legally liable, such as your dog biting someone. Homeowners liability insurance pays for court judgments, settlements and the cost of a legal defense.
- Medical payments to others: This covers small medical claims, regardless of who is responsible for the accident. For example, if a friend sneaks into your kitchen, medical insurance can cover small bills like a trip to emergency care.
- Additional living expenses: If you cannot live in your home due to a problem such as a fire, additional living expenses coverage pays for additional expenses such as hotel bills, take-out meals and other services, such as pet boarding and laundry.
You can also choose additional types of coverage to fill gaps in coverage that a standard home insurance policy doesn’t cover, such as:
- Increase in housing coverage: If a disaster strikes your area, an increase in labor and material costs could exceed your home’s coverage limits. Coverage such as Extended or Guaranteed Replacement Cost helps cover additional costs.
- Increased coverage for high value items: If you have expensive possessions like heirlooms or jewelry, you may want to consider setting aside personal property for high-value items.
- Other types of coverage: You may want to fill coverage gaps with add-ons such as water relief coverage or purchasing higher limits for expensive landscaping.
Related: How much home insurance do you need?
You will choose an insurance deductible when you purchase a policy. The deductible is the amount taken from your insurance check if you make certain claims, such as a theft claim. Common deductible amounts are $500 and $1,000, but may be higher.
Generally, the higher your deductible, the less home insurance premium you will pay. This is because your insurance company will pay less money if you file a claim.
Other Factors in Home Insurance Premiums
Here are some other cost factors commonly used to set home insurance premiums:
- Your claims history. Homeowners with a history of insurance claims might end up paying more for coverage.
- Dogs. Having a dog is often considered a higher risk for dog bites and insurance claims, which can lead to higher rates. Home insurance prohibits certain breeds of dogs.
- Your credit. Some insurance companies use a credit-based insurance score as a rating factor. California, Maryland and Massachusetts do not allow insurers to use credit as a factor in home insurance premiums.
How can I pay my home insurance premium?
You can generally pay home insurance premiums in two ways:
- Directly to the insurance company. Common payment options are monthly, quarterly, semi-annually or annually.
- Through an escrow account. If your home insurance payment is made through your mortgage company, it is usually paid through an escrow account. This is a separate account where your mortgage lender collects money for your home insurance and makes payments on your behalf.
How to take out home insurance?
The best way to buy home insurance is to compare quotes from several companies. This is because prices can vary widely for the same type of coverage from company to company.
You can get free home insurance quotes:
- In line. You can usually get free quotes from an insurance company’s website. Or you can use a home insurance comparison site to compile multiple quotes at once.
- By phone, email or in person. You can contact an insurance company directly to get a quote, or you can contact an independent insurance agent who can collect quotes from multiple insurance companies.
Don’t forget to ask for discounts. You can often find savings for home security devices, loyalty discounts, buying a new home, paying in full, and bundling your auto and home insurance.
Related: 10 ways to get cheap home insurance
Cheap home insurance by company
Here are the average annual premiums of major insurance companies. Keep in mind that your costs will vary depending on several factors, such as the cost of rebuilding your home and where you live.
Find the best home insurance companies of 2022
Home Insurance Premium FAQs
Do I need home insurance?
If you have a mortgage, your lender will most likely require you to purchase home insurance.
But even if you’ve already paid for your house, home insurance is a good idea. Without it, you’ll be forced to pay out of pocket to repair or rebuild your home if something like a fire damages it.
Related: New Home Buyers Guide to Home Insurance
Who has the cheapest home insurance premiums?
Nationally, we found that Progressive has the lowest home insurance premiums at $1,236 per year for $300,000 of home coverage. But your rates will vary depending on the cost of rebuilding your home, where you live, the level of coverage you choose, and other factors.
The best way to find cheap home insurance where you live is to compare home insurance quotes from multiple insurers.