Average Homeowners Insurance

When comparing home insurance policies, the first and most critical step is to know the average homeowners insurance rate in your state. Of course, be sure that you compare quotes with the same deductibles and liability coverage limit so you can come up with an unbiased decision.

According to a recent survey, the national average homeowners insurance is $1,228 (when it comes with a $1,000 deductible, $200,000 dwelling coverage, and $100,000 liability coverage). However, the insurance premium varies significantly from state to state due to these three main factors: susceptibility to catastrophic weather events, home values, and construction cost.

Catastrophic Weather Events

Some of the most expensive states for homeowners include Massachusetts, Florida, Oklahoma, and Louisiana because of their severe weather issues, such as significant snowfall, hail, tornadoes, and hurricanes.

While it is true that you have no control over weather-related factors, it doesn’t mean that you’re stuck with an expensive insurance premium. Our independent insurance agents can help you find discount programs and special rebates and give you advice on how you can become eligible for huge credits.

Aside from flooding, homeowners in Massachusetts pay extra insurance premium because nasty winter exposes them to higher risk of property damage due to freezing and melting ice.  However, you could ask for a “good homeowners” discount if you install pipe insulation and heating cable that will prevent frozen pipes, which are the most common cause of property damage.

Other common causes of property damage are wind, significant snowfall, and hail. Consequently, you can expect to pay cheaper homeowners insurance rates or a 5-10 percent discount if you install impact-resistant roofing. Just make sure that it is done by a professional (keep the receipt as proof) and the roofing material is tested by an approved laboratory.

The Impact of Median Home Values on Average Homeowners Insurance

The market value of your home is another factor that has a large influence on the average homeowners insurance for a state. But, paradoxically, industry experts suggest that you should not rely solely on home values when deciding on your coverage limit.

If you’re one of the average homeowners who insure their property for repairs without giving much thought about the cost to rebuild your home, you’re making a potentially costly mistake. In particular if you live in a zip code that has a high incidence of weather-related property damages.

Always remember this general rule: if it costs $400,000 to rebuild your home following catastrophic damage, this is the same amount you’ll need to be insured for to avoid huge out-of-pocket expenses should fire or other unforeseeable events occur.

A good number of homebuyers are underinsured because of forced lenders insurance that only requires the minimum dwelling coverage, which pays for the damage to their home and possibly its total replacement cost. This means that their personal belongings, the detached structures that they paid for, and the other at-risk assets are not covered by their forced lenders homeowners insurance policy.

To avoid the risks that come with being underinsured, make sure that you purchase a standard homeowners policy, which covers your personal items, such as appliances, furniture, electronics, clothes, sporting goods, etc.

One way to lower your insurance premium is to “tweak” your personal property coverage. For instance, you may want to drop the replacement cost coverage for actual cash value if you don’t have any expensive property.

Construction Cost

You may wonder why the average homeowners insurance in Massachusetts is higher insurance than from other states like Utah, Maryland, Michigan, and Nevada. Take note that aside from their more favorable weather conditions, they also have a cheaper construction and replacement cost.

Nonetheless, you don’t have to acquiesce to high insurance premiums. After all, even if your zip code is considered expensive by insurance companies, choosing a home that is made of certain building materials might give you a huge discount.

Remember that it is cheaper to insure homes made of bricks and concrete blocks than houses made of wood, which is perceived to be more prone to fire, wind, and pest-related damage.

Older homes are also more expensive to insure than newer ones because the antiquated wiring, plumbing, and foundations pose a high risk of fire and water damage. Surveys have shown that the cost variation could be as high as 25 percent.

If you live in an older home, installing new wiring could slash your insurance premium by 10 percent on average because of the perceived lower risk of fire. Also, credits are given with additional renovation, such as installation of new pipes, foundations, etc. which are less likely to malfunction or result in water damage.

Types of Insurance and Coverage Levels

Aside from your zip code, the types of insurance and coverage levels will also determine your insurance premium.

To reiterate, dwelling coverage is the minimum coverage as it pays for the home repair in the event of damage caused by a covered cause. In the ideal scenario, this must also cover the total cost should you need to rebuild your home after a catastrophic event.

Hence, our insurance agents recommend purchasing the highest coverage levels and limits that you can reasonably afford.

Aside from the dwelling coverage, a standard homeowners insurance package comes equipped with the following additional protection:

  • Other Structures – detached structures like the garage, shed, and fence should also be included in your homeowners insurance policy.
  • Loss of Use – this pays for your housing and living expenses if you need to move out while your property is being repaired or rebuilt after catastrophic damage caused by a covered cause.
  • Personal Property – this covers your personal items, such as clothes, furniture, electronics, appliances, etc. Often, the limit of your personal property coverage is expressed as a percentage and it’s usually 50 percent of the item’s cost.
  • Personal Liability Coverage – if someone who is injured inside or outside your property decides to sue you, this coverage kicks in; this also applies to property damage for which you are held legally liable.
  • Medical Payment – this is a cheaper version of personal liability coverage because it only covers the medical bills of an injured guest in your house and comes with very low limits of $1,000-$5,000.

How to Enjoy Rates Lower Than the Average Homeowners Insurance

You can lower your insurance rate without being underinsured through shopping around, re-evaluating your needs and policy every time it is up for renewal, asking your home insurer for discounts, choosing a higher deductible, and a number of other steps.

  • Increase Deductibles – higher deductibles inevitably lead to lower premiums because you assume more risk should any covered damage occur. Furthermore, companies like higher deductibles because consumers are less likely to file a claim and instead pay the damage with their own money.
  • Avoid Small Claims – take note that if you file more than one claim in a 10-year period, it will affect your insurance premium for years to come. Hence, avoid small claims, which may force your insurer to drop your policy if they become too frequent because you’ll be considered too expensive or too risky to insure.

Always bear in mind that a homeowners insurance policy is ideally reserved for huge catastrophic damage.

  • Shop Around – it is a good idea to compare three or more home insurance policies with the same deductible, coverage levels, and types of insurance coverage. This will allow you to flag rates that are higher than the state or national average.

While it is understandable that average homeowners are price-conscious consumers, make sure that – aside from cost – you also consider other pertinent factors, such as the company’s complaints ratio and customer satisfaction, claims processing, and financial stability and solvency.

  • Re-evaluate Your Policy Periodically – take a look at your existing policies and ever-changing requirements to avoid overlapping and obsolete coverages. For instance, you should drop floater coverage if you have sold your art collection and expensive jewelry, or you should eliminate your flood insurance if you have moved to a new neighborhood where there is no history of flooding.
  • Ask for a Good Homeowners Discount – if you eliminate risks that home insurers shun or penalize with an expensive insurance premium—e.g. older plumbing, electrical panels, and pipes; substandard roof and foundation; certain dog breeds; and other known hazards— you can expect to pay lower rates.

Installing smoke detectors, fire extinguishers, and security alarm system is also rewarded with lower homeowners insurance rates.

  • Bundle Your Policies – surveys have shown that home insurance policies are 10-15 percent cheaper on average if the homeowners also purchase auto insurance from the same company.
  • Other Discount Programs – seniors, members of certain professional or alumni associations, and loyal policyholders (that have stayed with the same insurer for at least 10 years) typically enjoy a 5-10 percent discount on average.
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