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How Much Does Homeowners Insurance Cost?

Updated: October 2019

How much is homeowners insurance going to cost me? When you buy a new home, this may be one of the first questions that pops into your mind. And it's an important question, especially if you're trying to budget your living expenses. The short answer to that question is: It depends. These are some of the factors that may help determine how much you'll end up paying for homeowners insurance:

  • The deductible you choose
  • The value of your home and belongings
  • Your insurance claim history
  • Other variables, such as the age and location of your home

Watch this video to learn more about the factors that may affect the cost of homeowners insurance.

Video Transcript

Wondering what determines the cost of homeowners insurance? Here are some factors that may affect your homeowners insurance premium.

First, consider your types of coverage. Certain coverages, such as dwelling, personal property and liability, are standard parts of a homeowners insurance policy.

You may decide it makes sense for you to add optional coverages, as well. For instance, if you purchase water backup coverage, you'll likely pay a bit more for that added protection.

Each coverage in your policy has its own limit. A limit is the amount of coverage you purchase and the maximum amount your policy will pay for a covered claim.

The limits you select may play a role in the cost of your homeowners insurance. Next, think about your deductible. This is the amount you typically have to pay out of pocket toward a covered claim before your insurance coverage kicks in.

If you select a lower deductible, you will typically pay less out of pocket toward a covered claim. However, the overall cost of your insurance premium may be higher. On the other hand, if you choose a higher deductible, your out-of-pocket costs will typically be higher — but your premium may be less.

Homeowners insurance prices can vary because no two policies are alike. Contact a local agent to get a homeowners insurance quote for the coverages that fit your needs.

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How Much Homeowners Insurance Do I Need?

The types and amount of coverage you need depend on a number of factors. These include your home's location, size and amenities. There's no single "rule of thumb" that works for everyone.

Also, how much you pay for your house may not be a key part of the insurance equation. The formula for determining adequate insurance takes many other things into consideration.

Location

Geographic location often affects the type of risks your home is exposed to. For instance, if you own a home in Miami, you may want different insurance coverage limits than those set by the owner of the exact same home in Boston. Why? Dwelling coverage limits are based on replacement cost, which can vary by location due to different construction or material costs in each area.

Another factor is the cost of labor and materials in different geographic areas. Since homeowners insurance typically helps cover the cost of repairing or rebuilding a home if it's damaged or destroyed by a covered peril, the amount of insurance you may need partly depends on what it would cost to complete the work in your town. Labor costs, in particular, vary significantly in different markets.

And why wouldn't you simply choose dwelling coverage limits that match the purchase price of your house? The actual cost to repair or rebuild your home could end up being less than what you paid. Or, in some cases, it could actually be more costly to rebuild your home.

Building Materials And Upgrades

Does your home sport a custom tile roof? That may cost more to repair or replace than a house with a standard asphalt roof in the event of damage from hail or another covered peril. The same is true of interior details: Things like crown moldings, hardwood floors, a gourmet kitchen with granite counters or a spa-quality bathroom need to be factored in when determining the appropriate amount of insurance for your home.

Additional Structures

When choosing coverage limits, you'll likely want to consider items like a pool, shed, fences and other structures on your land that could potentially sustain damage so you can make sure your coverage limits meet your needs.

Personal Property Coverage

Personal property coverage is part of a standard homeowners insurance policy. If your clothes, appliances, electronics, furniture and other items are damaged, stolen or destroyed during a covered event like a break-in or severe storm, this coverage may pay to repair or replace them.

Generally, personal property coverage is set at a percentage of your home's "dwelling" coverage limit. However, this is an area you may be able to lower if you know you have less valuable belongings and want to lower your insurance costs.

Keep in mind you may want to purchase scheduled personal property for more expensive items such as jewelry, art and collectibles to make sure your limits are high enough for these items.

Liability Coverage

Many homeowners insurance policies include $100,000 in liability coverage, as well as some coverage for medical payments. Liability coverage may help pay for legal expenses and other costs if you were sued by someone who was accidentally injured on your property and later found legally responsible for their damages.

In some cases you may want to increase your liability coverage. If you have a lot of assets, you could, unfortunately, be a target for lawsuits simply because people assume you have money to pay for damages. Another reason you may want to consider increasing your liability limit is if you have a backyard pool or trampoline because those types of items may increase the risk that a visitor is injured at your home.

It's fairly inexpensive to increase liability coverage on your homeowner's policy. For even greater liability protection, you may want to consider purchasing a personal umbrella policy. Umbrella coverage typically offers at least a $1 million limit and kicks in after the limits of your homeowner's policy are exhausted.

How The Deductible You Choose Affects The Cost Of Your Policy's Premium

One factor that determines how much you pay for homeowners insurance is the deductible, which is your share of a covered claim.

You can typically select the deductible for your property coverage in your homeowners policy. For example, you could choose a $1,000 deductible that would apply to your dwelling coverage, other structures coverage and your personal property coverage.

If you choose a higher deductible, the annual premium for your insurance policy will likely be lower. The downside? If you have to make a claim for repairs to your home, you'll be required to shell out more money before your insurance helps cover the cost of repairs. On the other hand, choosing a low deductible could increase your premium, but you will pay a smaller amount when you file a claim.

Your Policy's Premium And The Value Of Your Home And Property

Your homeowners insurance premiums are also tied to how much coverage you purchase. If you're buying an insurance policy to cover a home that's worth $250,000, you're going to pay more than someone whose home is worth half that amount.

Protecting Your Home

Your insurer can suggest appropriate dwelling coverage limits based on the type of home you're insuring and the materials it's made of. You may also be able to buy additional dwelling coverage, up to a certain amount. It's important to understand that your dwelling coverage limit is meant to help pay to completely rebuild your home if it's destroyed by a covered peril. So, you may not be able to purchase dwelling coverage with limits lower than what your home is worth. The Insurance Information Institute (III) also suggests that homeowners take inflation into account when choosing their coverage limits. For example, your home may be worth $300,000 today, but if you had to rebuild it after a covered loss in 5 years, it may cost $325,000 to rebuild. Be sure to ask your insurance agent about inflation guards when purchasing a policy.

Protecting Your Personal Property

The amount of personal property coverage you buy affects the premium for your homeowners insurance policy. Homeowners insurance usually includes personal property coverage, which helps pay to repair or replace your belongings if you experience a covered loss. Say your belongings are worth $50,000. You'll want to ensure that you buy enough personal property coverage to replace all of your personal items if they're damaged or destroyed. Otherwise, if a disaster strikes, you may not receive enough money to replace all of your stuff. However, keep in mind that the more coverage you buy, the more expensive your policy premium will be. Be sure to document and create an inventory of all your items to help ensure you purchase enough coverage.

Your Claim History And Homeowners Insurance Premiums

The rate you pay for homeowners coverage can be affected by your insurance claim history. Homeowners who have had fewer claims typically pay less for insurance than those who have filed more claims.

Home Age, Risk Factors And Other Things That Affect Cost

Many factors may affect the cost of your homeowners insurance policy. Here are some of the factors that may affect how much you pay for home insurance, according to the III:

  • The age of your home
  • Condition of the roof
  • Where you live
  • Your home's features (such as a swimming pool or fence)

When you're shopping for homeowners insurance, it helps to understand how the coverages, coverage limits and deductibles you choose affect the cost of a policy. It's a good idea to talk to a local insurance agent if you need help understanding a home insurance quote or your current home insurance coverage.

Related Resources:

This content is for informational purposes only and may not be applicable to all situations.

Coverage subject to terms, conditions, and availability. Policy issuance is subject to qualifications. Allstate Insurance Company, Allstate Indemnity Company, Allstate Fire and Casualty Insurance Company, Allstate Property and Casualty Insurance Company, Northbrook, IL. © 2020 Allstate Insurance Company, Northbrook, IL.
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