What Is A Homeowners Insurance Premium? (2024)

The average sales price of a new single-family home in the U.S. in 2020 was $391,900, according to the U.S. Census Bureau. For most homeowners, your home is your biggest investment. The best way to protect that investment from disasters like fires and tornadoes is with the best homeowners insurance.

What Is a Homeowners Insurance Premium?

A homeowners insurance premium is the amount of money you pay to keep your home insurance policy active. You can typically pay your home insurance bill monthly, quarterly or annually.

If you have a mortgage, your lender might require you to have home insurance and roll your home insurance premium into your mortgage payments.

What Does Home Insurance Cover?

A standard home insurance policy (called an HO-3) covers your house for any type of damage that’s not specifically excluded. Damage from smoke, fire, wind and more are covered. It also covers attached and unattached structures on your property.

A standard home insurance policy covers your personal belongings for specific “perils.” Tornadoes, explosions, fire, theft and vandalism are just some of the problems covered by home insurance.

You’ll also have coverage for other types of problems, such as:

• Liability insurance for property damage and injuries you cause to others
• Medical payments for small injury claims made by others
• Additional living expenses if you can’t live in your home due to a problem like a fire

Home insurance doesn’t cover every problem. For example, common exclusions found in an HO-3 include earthquakes, water damage from floods, sewer back-ups, sinkholes and wear and tear.

Related: What Is Hazard Insurance?

How Much Does Homeowners Insurance Cost?

Nationwide, the average annual homeowners insurance premium with $300,000 in dwelling coverage is $1,729, according to a Forbes Advisor analysis of home insurance rates. Your home insurance costs will depend on several factors, including the cost to rebuild the home, the age of the home, your location and other factors, like your claims history and how much coverage you choose.

Average homeowners insurance premiums by state

How Are Homeowners Insurance Premiums Determined?

Here are factors insurance companies typically use to determine a home insurance premium.

Your home’s characteristics

• The age of the home
• The building materials (such as wood or stone)
• The condition of the home
• Square footage
• Roof construction
• How you heat the home
• Safety and security features, like smoke detectors and burglar alarms

Your home’s location

Where you live is another important factor in premiums, including:

• Severe weather and natural disasters
• The crime rate
• Your home’s proximity to a fire hydrant and fire station
• The claims history in your area

Coverage selections

The amount of coverage you choose will play a major role in determining your homeowners insurance premium. Generally, home insurance can be broken down into these main coverage types:

• Dwelling: Your dwelling insurance amount is based on the cost to rebuild your home if it is destroyed by a disaster such as a fire or tornado. This includes attached structures such as a deck or garage.
• Other structures: This covers unattached structures like a fence or shed.
  Personal property: This pays to repair or replace your personal belongings such as clothes, furniture, rugs, appliances, jewelry and other items.
• Liability: This pays for property damage and injuries you cause to others when you’re 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 smaller medical claims, no matter who is at fault for the accident. For example, if a friend slips in your kitchen, medical payments insurance can cover smaller bills like a trip to urgent care.
• Additional living expenses: If you cannot live in your home due to a problem like a fire, additional living expenses coverage pays extra costs like hotel bills, takeout meals and other services, such as pet boarding and laundry.

You can also choose additional coverage types to fill any coverage gaps that a standard home insurance policy doesn’t cover, such as:

• Increased dwelling coverage: If disaster strikes your area, a surge in labor and material costs could surpass your dwelling coverage limits. Coverage like extended or guaranteed replacement cost helps cover additional costs.
• Increased coverage for high-value items: If you own pricey possessions like family heirlooms or jewelry, you might want to consider scheduling personal property for high-value items.
• Other types of coverage: You may want to plug coverage gaps with add-ons such as water backup coverage or buying higher limits for expensive landscaping.

Related: How much home insurance do you need?

Deductible amount

You’ll choose an insurance deductible when you purchase a policy. The deductible is the amount taken out of your insurance check if you make certain claims, like a theft claim. Common deductible amounts are $500 and $1,000 but can be more.

Generally, the higher your deductible, the less you’ll pay in home insurance premium. That’s because your insurance company will pay out less money if you file a claim.

Other factors in home insurance premiums

Here are some other common cost factors used for setting home insurance premiums:

• Your claims history. Homeowners with a history of insurance claims could end up paying more for coverage.
• Dogs. Having a dog is often seen as a higher risk for dog bites and insurance claims, which can lead to higher rates. Home insurance companies ban some dog breeds.
• Your credit. Some insurance companies use a credit-based insurance score as a pricing factor. California, Maryland and Massachusetts do not allow insurers to use credit as a factor in home insurance premiums.

How Do I Pay My Homeowners Insurance Premium?

You can typically pay for home insurance premiums in two ways:

• Directly to the insurance company. Common payment options are monthly, quarterly, semiannually or annually.
• Through an escrow account. If your home insurance payment is made through your mortgage company, it’s generally paid through an escrow account. This is a separate account where your mortgage lender collects money for your homeowners insurance and makes the payments on your behalf.

How Do I Buy Homeowners Insurance?

The best way to buy home insurance is to compare quotes among multiple companies. That’s because prices can vary drastically for the same type of coverage from company to company.

You can get free home insurance quotes:

• Online. You can typically get free quotes on 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 for a quote, or you can contact an independent insurance agent who can gather quotes from several insurance companies.

Don’t forget to ask about home insurance discounts. You can often find savings for home security features, loyalty discounts, having a new house, paying in full and by bundling your auto and home insurance.

Related: Affordablehomeowners insurance

Cheap Home Insurance by Company

Here are the average annual premiums for large insurance companies. Keep in mind, your costs will vary depending on several factors, such as the cost to rebuild your home and where you live.

Homeowners Insurance Premium FAQ