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How Much Does Homeowners Insurance Cost?

how much does homeowners insurance cost

For homebuyers who are first-time buyers or homebuyers purchasing in a new state, or even if it’s been a while since you’ve owned a home, the cost of homeowners’ insurance has changed dramatically over the last two decades.

Home insurance companies are reacting quicker than usual to claims from natural disasters and insurance commissioners in “insurance friendly” states are doing little to stop the insurance companies from knee-jerk rate increases.

How much does homeowners insurance cost? Well, that depends on many variables but especially on the home’s location, age, and condition. In this article, we’ll drill-down into homeowners’ insurance and spread some light on the subject but first, let’s discuss the basics.


What does Homeowners’ Insurance Cover?


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The coverage that is provided in a homeowners’ policy depends on the “Form” of coverage the policy is written on. Without getting too far into the weeds, we’ll list the different forms but you should know that most policies are written using the HO3 form because it is the most popular form with insurance companies and insurance agents.

What differentiates one form from another are the perils that are covered and its specific use. Although there are eight different forms (HO1 through HO8), there are only three of these that are typically used for today’s homeowners.


  • HO3 Form – The HO3 form or Special Form is the most commonly used form for homeowners insurance because the perils it provides coverage for are usual and ordinary and the cost of coverage is considered reasonable. The HO3 does not, however, cover damage caused by flood or earthquake. If your home is located in an area where these risks are present, you’ll need to purchase a stand-alone policy for each.
  • HO5 Form – The HO5 form or Comprehensive form is typically referred to as an “open peril” form because it will cover every peril unless specifically excluded. This form also provides better coverage for personal belongings and higher liability limits. This form is not used by all companies and is generally more expensive than the coverage provided by an HO3. The HO5 form is typically used for very expensive homes. This form will also not provide coverage for flood or earthquake damage.
  • HO8 Form – The HO8 form is commonly used to insure older homes. Even though it is very similar to the HO3 form, the HO8 form was designed with certain special coverages that make it more suitable for older historic homes.


What coverages are the most common for Homebuyers Today?


As we mentioned earlier, the HO3 is the most commonly used form because it covers the home (dwelling), unattached structures, personal belongings, loss of use, personal liability, and medical payments.

More importantly, however, it is not the perils that your home is insured for but the perils that are excluded and there are a lot of them.

Here are the excluded perils for your house:


Power FailureNuclear HazardIntentional Acts
Water DamageGovernmental ActionsLaw or Ordinance
Theft while Under ConstructionVandalism if Vacant more than 60 DaysFungus, rot, or mold
Mechanical BreakdownDamage from smog, rust, or corrosionWear and tear
Damage associated with NeglectDamages caused by Your AnimalsDamage caused by rodents, insects, or birds
Expansion, shrinkage, settling, or bulgingDischarge, seepage, or dispersal of pollutantsSmoke damage caused by industrial operations or agricultural smudging
WarMovement of earthCollapse of property


How are Homeowners’ Insurance Rates Determined?



Believe it or not, homeowners’ insurance rates are calculated in much the same way as your car insurance is calculated. Just like underwriting for auto insurance, a homeowners’ policy is underwritten based on the risk of the dwelling (home instead of a car) and the risk of the owner (instead of the driver).

The risk of your property and belongings is developed by examining the replacement cost of your home and unattached structures and the actual cash value of your personal property.

Similar to car insurance, your risk is also based on where your home is geographically located. In other words, do you live in an area or state where natural disasters are common or is your home located where natural disasters are rare?

Homeowners also present certain risks like whether they’ve had numerous claims over time, whether they smoke or not, their credit score (also known as insurance score), in-home business, and their age. Click Here to review a sample application.


Which States have the highest rates and which have the Lowest?


Although every homeowners’ insurance policy differs in cost because of the underwriting information about the individual home and the homeowner, insurance companies do report rates that are based on national averages. Using this data we are able to share which states have the lowest rates, which states have the highest rates, and what the average national premium is:


Top 5 States with the highest annual Premiums:


Florida $2,055
Texas $1,947
Louisiana $1,847
Oklahoma $1,772
Mississippi $1,447
National Average $1083

Top 5 States with the lowest annual Premiums:

Oregon $574
Idaho $590
Utah $634
Wisconson $686
Washington $695
National Average $1,083

Data published by ValuePenguin.Com


As you can see, there is a rather large difference between the top 5 highest rates and the top 5 lowest rates. The main factors affecting the rates in each group are occurrences of natural disasters (hurricane, hail and windstorms, snowstorms, and brushfires) and the number of claims the insurance companies must pay as a result.

One could surmise that the average sales price of the home is driving up the cost of insurance however, they would be wrong. For example, the median sales price of a home in Tampa, Florida is nearly the same as the median sales price of a home in Boise, Idaho.

It is the claims frequency and the amount of those claims that is making the remarkable difference between the cost of homeowners’ insurance in Florida compared to the cost of homeowners’ insurance in Idaho. Your cost of insurance will always be predicated on your home’s risk exposure.


How can I reduce my cost of Homeowners’ Insurance?


Other than living in a state that is listed in the chart with the lowest rates, the best way to reduce your cost for homeowners’ insurance is:

  • Qualify for as many discounts as possible
  • Make sure the home you purchase is well-constructed and constructed with masonry rather than would.
  • Purchase a home with a new roof or up-to-date roof.
  • Find a home that has not had frequent claims filed by the previous owners.
  • Newly built homes typically cost less to insure than older homes
  • Select the highest deductible that you are financially comfortable with
  • Shop your insurance coverage with as many companies as possible


Frequently asked Questions

How do I find out if my house is in a flood zone?

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When you purchase your home, your lender will ask for a flood survey to determine what flood zone your home is located in (it could be more than one). Although every home is subject to flooding, Zone A and Zone V are considered the most hazardous.

If I believe my home is overinsured, what can I do about it?

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If you feel your agent or company has calculated the replacement cost of your home wrong, you have to provide acceptable proof to the company to have the amount of insurance coverage reduced.

What can I do if my homeowners insurance application is declined?

If an insurance company declines your application, they will provide you with a list of issues that must be corrected before they will approve your application. You can also apply with your state’s high-risk pool so you can have coverage while you are resolving the issues that caused the decline.

What are the sublimits on personal belongings?

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Most homeowners’ insurance policies have sublimits on valuable items that are frequently stolen such as jewelry, guns, and art collections. If you want these items covered for a higher amount, you can “schedule” them on your policy at appraised value or you can purchase a stand-alone personal article floater.


One Response

  1. It never occurred to me that the geographic location of your home can affect your insurance rates. My wife and I want to buy a new home so that we can have a few extra bedrooms for guests to stay in. It seems like it would be a good idea for us to talk with an insurance agent so that we can the coverage we need when we find a place we like.

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