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The Average Cost of Home Insurance
As noted above, the average monthly cost of home insurance is $100 or $1,200 annually, according to the National Association of Insurance Commissioners and Insurance Information Institute.
However, this information will only give you an estimate of what it will cost you. The exact amount that you will pay for home insurance will depend on various factors.
And that’s why it’s important to have as much information as possible when determining the best home insurance coverage for your budget.
States With the Highest and Lowest Premiums
As you may expect, states that experience extreme weather conditions as well as those prone to natural disasters pay for the highest home insurance premiums. Those states include Louisiana, Texas, Florida, Oklahoma, South Dakota, Texas and South Carolina.
For instance, in Louisiana, home insurance premiums cost approximately $200 per month, which is almost double the national average.
The cheapest states when it comes to home insurance premiums are Vermont, Delaware, Pennsylvania, Oregon, Utah, Idaho, Nevada and Wisconsin.
In Oregon, the average monthly premium for home insurance is around $50 or $600 annually, which is almost half the national average.
Factors that Determine Home Insurance Premiums
As noted above, your home’s location has a big impact on your home insurance premiums. But apart from your home’s location, there are other key factors, which insurance companies use, to determine the insurance rates that you will pay. These factors include:
Your Home’s Replacement Cost
High-priced homes tend to cost more to insure since they will be more expensive to repair or rebuild. The repair and rebuilding costs will also depend on local construction rates, size of the house, the type of construction, and the style of the house.
Also, the insurer will check whether there are special features like a wood-burning stove or a fireplace. While a wood-burning stove can reduce energy costs, it can also increase your home insurance premiums.
Level of Coverage
As highlighted above, the higher the value of your house, the more coverage you will need. Consequently, you will be paying high insurance premiums. However, rebuilding and repair aren’t the only costs factored in your coverage amount.
Apart from rebuilding and repair, home insurance policies also cover personal property loss, liability against lawsuits as well as additional living expenses. And each of these types has a maximum amount.
If you want to increase the limit beyond the standard, then your home insurance premiums will also increase. So, make sure you read your policy document and check the limits.
And if you feel the limits are too low, then you should consider paying a higher premium to ensure you are adequately covered.
Age and Condition of the Home
Your home’s age, how it was constructed and the materials used will also play a part in determining your premiums.
For instance, if you have a vintage home, then you may be forced to pay for higher home insurance premiums compared to a conventional home. And the reason behind this is that older homes have materials that may be hard to find or costly.
Also, older homes may have outdated appliances or systems, which the insurer will view as higher risk. On average, a 30-year-old home will have a 1% increase while a 50-year-old home will have a 3% increase.
Whether your home is made of wood or brick may also determine your rates. For example, brick homes generally cost lesser to insure, compared to those made of wood. Also, homes made with fire-resistant materials cost 12% lesser to insure on average.
Security and Safety Features
Most insurance companies will reward you with some discounts if you install safety and security systems on your property since these systems will lower the risk for the insurer.
So, if you install alarm systems and you secure your windows and doors with deadbolts and locks, then you may end up paying lower premiums. However, make sure you first talk with your insurer before installing these systems to determine the discounts offered.
Apart from Massachusetts, Maryland and California, insurers in all other states will check your credit history when determining the rates you will pay.
For example, people with poor credit history tend to pay approximately 127% more coverage than homeowners with an excellent credit rating.
On the other hand, those with a fair credit rating will pay approximately 34% more than those with an excellent credit rating will.
Using the national average of $100 per month, homeowners with a bad credit history will be forced to pay $227 while those with a fair credit rating will pay approximately $134.
An insurance score is similar to a credit score. And it can affect your premium significantly. People with low insurance scores are viewed as a financial risk by the insurer, and this may lead to higher insurance premiums.
If your insurance score is extremely poor, then you may even find it hard to secure a home insurance policy. The good news is that you can improve your insurance score by repaying outstanding debts and avoiding things like tax liens or bankruptcies.
As much as dogs are a man’s best friend, insurance companies may not like them as much.
If you own aggressive dog breeds such as a Rottweiler or a pit bull, then some insurers may refuse to insure you while others may require you to pay higher rates.
So, if you own a dog, make sure you have all the dog’s details when discussing your policy needs with your insurer. Failure to reveal that information can lead to denial of your claims if the dog bites someone, among other issues.
While swimming pools, trampolines, spas and bathtubs may increase the value of your property, they may also drive your insurance premiums up.
The reason behind this is that they pose a higher injury risk. For example, a neighbor’s kid may wander into your swimming pool and drown. And since you will be held liable for this accident, your home insurance liability protection will compensate you.
Tips for Saving Money on Home Insurance Premiums
Most of the factors that determine your monthly home insurance premiums are outside your purview. However, there are several measures, which you can take to lower your home insurance premiums and save money. They include:
Increase the Deductible
A deductible is an out-of-pocket payment that the homeowner will pay to the insurance company when they file a claim. And once you pay this deductible, your insurer will then take over and cover the rest of the cost.
Increasing your deductible is highly likely to reduce your monthly insurance premiums. However, make sure you raise this figure to something that you can afford. If you find yourself in a situation where you have to file a claim and you can’t afford to pay for the deductible, then you will be in serious problems.
Bundle Your Policies
Instead of using different insurance companies for home insurance and auto insurance, it will be highly advisable to bundle them. When you purchase them from the same insurer, there is a high chance that your insurer will give you a discount and save you money.
Check if you Qualify for Discounts
Most insurance companies across the country offer a wide range of discounts for various situations. And if you qualify for these discounts, then you can save money on your home insurance. Some of the discounts offered by home insurance companies include:
- Age discount for those above 55 years
- Claims-free discount if you don’t file any claims for 10 years
- Gated community discount
- Non-smoker discount
- Homeowner’s association discount
- Water sensor discount
Improve Your Credit Score
As discussed earlier, a poor credit score can lead to high insurance premiums. Also, some insurers may refuse to cover you if your credit score is below the acceptable limits.
So, if you have a low credit score, it will be in your best interests to improve it first before you go shopping for home insurance.
Make Your Home More Resistant to Disasters
If you live in an area that is prone to natural disasters like hurricanes, severe winds, storms, hail, earthquakes and blizzards, then you should consider adding features that will make it more disaster-resistant.
Making your home more resistant to these natural disasters will not only help to make your home safer but may also lead to lower insurance premiums.
Home insurance is not something that you may like. Unfortunately, it’s one of those necessities, which you can’t live without, especially if you are a homeowner. The most important thing is to shop around, compare rates and then choose a package that covers your entire property adequately.