Home prices keep going up. They’re rising faster than wages. Does home insurance have to follow suit? Not necessarily. We will review the average monthly cost of home insurance and the factors determining that cost, from new build home insurance to insurance for older homes.
Then we’ll share ways to lower your home insurance rate, and what the best companies are to compare.
The Basics of Home Insurance
The average homeowner’s insurance rate is $2,305 annually. Sound way too high? Then you must live in Hawaii, Vermont, or Utah, which are among the states with the cheapest homeowners insurance. Or does it seem low? Then perhaps you live in Oklahoma, Kansas, or Florida, which top the list of states with the most expensive homeowners insurance,
Let’s look at what home insurance consists of and the factors insurance companies use to determine your rate in addition to your state. While you can adjust your coverage limits and deductible, there are four types of coverage provided in standard homeowners insurance:
- Dwelling protection covers your home’s structure (the foundation, walls, roof, and other structures such as a deck or a garage)
- Other structure protection applies to detached buildings, such as a shed, a pool house, or a separate garage
- Personal property protection covers the personal belongings inside the home
- Liability protection covers you if someone not part of your household is injured on your property
Factors of Home Insurance
You would assume that as home prices continue to rise, home insurance prices would be directly tied to that. But when it comes to insurance, there are a lot of moving parts. The average home insurance premium doesn’t vary much when you compare market value.
Instead, here are some of the main factors that determine your home insurance rates.
The Home’s Location
Insurance is higher in states with more storm frequency and higher insurance fraud. Even within your state, insurance rates can vary by city, neighborhood, and even by street, as areas with a higher amount of crime translate to higher insurance rates.
Even your location in proximity to services factors in — the closer your home is to a fire station, the better your insurance rate.
The Ins and Outs of Your Home
The newer the home, the less expensive the insurance: When a claim for damage is filed for an historic or older home, the reconstruction costs to restore it is pricier.
Additionally, if you have a trampoline or hot tub, your rates may be higher. These are considered “attractive nuisances” to insurers because they increase risk of injury and therefore the risk of claims.
Type of Insurance Policy
Beyond the basic coverage, there are several different types of insurance, and rates are generally higher for more comprehensive plans, which can include broader coverage for personal property.
Your Claim History
If you’ve filed a home insurance claim in the past, that flags you as a potential risk and could raise your rate by as much as 10 to 40 percent.
Your Marital Status
Singles are considered more of a risk than married couples because the latter tends to file less home insurance claims.
Pets in the Family
Yes, there are some breeds of dog that are considered risky. Since many homeowners insurance policies cover dog bites, higher premiums are associated with dog breeds such as pit bulls, rottweilers, doberman pinschers, akitas, and wolf-dog hybrids.
Insurance Factors for New-Build Homes
New-build home insurance is needed both during construction and after move-in, and there are many factors affecting your rate for that type of home insurance as well.
During construction, the construction company has their own policy covering building materials and liability, but that protects their company; it doesn’t cover the buyer. You need to find a company that sells home insurance covering the construction period and then converts into traditional homeowners insurance once you move in.
Contact insurance agents before signing any contracts and find out if the land you want to build on is insurable, the base quote for the type of coverage you need, and any location-based factors impacting your policy.
If you have a home while you’re doing a new build, contact your current homeowners insurance agent about extending the liability coverage to the new home while it’s under construction.
You especially need liability coverage if you own the land, in case of an accident causing injury during construction. Sometimes contractors own the land when hired to build a new house,and you don’t own the land until post-build. If you don’t own the land, then liability falls on the contractor.
Insurance Factors for Older Homes
Insurance rates for older homes are usually higher because older homes typically have dated systems and structures, which present a higher risk of damage. And items that add charm to an older home such as wood stoves and original appliances can lead to expensive claims.
It’s best to insure your older home through a carrier that specializes in this type of property.
For example, some insurance companies will try to insure an older home on an actual cash value policy. You want to insure your home on a replacement cost basis. While the value of an older home may be lower due to age, the cost to replace such a home is often higher than expected, especially if there are special features or unusual building materials.
How to Reduce Your Home Insurance Rate
If you’re savvy with your money and took advantage of homebuying hacks, then you’ll be happy to learn there are several ways to save on your home insurance as well.
Review Your Coverage
Review your policy annually to see if there’s anything to change and to make sure you’re receiving all available discounts.
For example, The Hartford has a retiree discount, and Allstate features a discount at age 55. And many companies offer loyalty discounts and no-claims history discounts, and the amount of years for each varies by company.
Raise Your Deductible
If your savings can handle the risk of taking a higher deductible, then you can lower your premium. According to the Insurance Information Institute, bumping up a default deductible of $500 up to $1,000 can save you up to 25 percent.
Replace Aging Systems
Replacing an older roof or water heater can lower your insurance premium. These are big-ticket items, but you’re saving money in the long run by not deferring maintenance.
Enhance Your Security
If you can lower the risk of burglary via everything from adding deadbolts to a home alarm system notifying the police or fire department, most companies will offer a discount for that.
Bundle Your Insurance Policies
This is a popular way for insurance companies to thank you heartily for the additional business of having two or more insurance policies through them, such as home and car. This discount can be up to 25 percent.
Compare Online Quotes
You’ll be surprised in the differences in number-crunching among insurance companies, so it pays to research at least three companies to get the best balance between coverage and cost.
Luckily, there isn’t a monopoly on great deals for home insurance.
Best Insurance Companies for New Builds
Some of the best home insurance for new builds comes from the big names in the insurance game.
One of the top insurance companies is also one of the largest and has nationwide coverage, including auto insurance so you can bundle policies to save money.
Liberty Mutual is also great for techies. In addition to its mobile app, it offers a variety of useful digital resources. The Home Gallery App helps you quickly take care of that onerous but important task of creating an inventory of your personal belongings; Alexa Skill for Liberty Mutual lets Amazon Echo owners receive advice on common home topics!
Also nationwide and a bundle-policies possibility, the National Association of Insurance Commissioners has rated it a top property insurance company.
State Farm is best for local agent support with an extensive network of agents. It also has high customer satisfaction ratings and a robust mobile app.
The Better Business Bureau gives this company an A+, and it’s highly recommended for its customer satisfaction. You can bundle policies with Allstate as well. The company is best for discounts, as it has an above-average number of them, so you can save big on your premiums.
Best Insurance Companies for Older Homes
There are a few good options for older homes, too.
The company has an A+ BBB rating and works directly with the National Trust for Historic Preservation. This home insurance is geared more towards higher-end older homes, so it features above-and-beyond coverage that includes replacement cost, loss of use, and more.
For older homes that don’t qualify for standard insurance, Foremost provides competitive homeowners insurance for older homes and also has an A+ rating. Its options include extended replacement cost.
And since Foremost Insurance is owned by Farmers Insurance Group, you can get multi-policy discounts not just with other Foremost policies, but with Farmers products, too.
The company with 18 percent of the home insurance market makes the cut here as well for matching Foremost and Chubb in BBB ratings and as another competitive insurer for older homes.
Also, State Farm includes water backup coverage in its homeowners insurance program. Older homes need extra protection from potential water damage, especially if the home has its original plumbing.
Best Home Insurance Companies Overall
If you’re looking for an overall good insurance company, check these picks out:
This company has competitive rates, discounts, and high ratings for customer satisfaction, stability, and reputation. Additions to standard policies includes the Premium Home Choice Package, which adds business, computer, credit card, and water backup coverage.
Best for seniors, AARP members can take advantage of savings and credits to lower home insurance rates. Additions to standard policies includes two options:
The Home Advantage Package adds Identify Fraud Expense coverage, “new for old” actual cost replacement, reimbursement for lock replacement, and personal injury liability protection.
And their additional stand-alone options include Green Rebuilding and Assisted Living Care Coverage.
Military families and veterans have a top option, thanks to the company’s excellent reputation for customer satisfaction and financial stability. Additions to standard policies include coverage for loss due to a covered peril of military uniforms or equipment you own if the loss occurs while you’re on active or reserve duty, with no deductible.
Now that you know the best ways to save money on your home insurance, perhaps it’s time to join the popular home-remodeling movement and makeover your kitchen or bathrooms!
Karen Condor is an insurance expert who writes and researches for the insurance comparison site, ExpertInsuranceReviews.com. She is a first-time homeowner in Greenville, South Carolina, who has saved hundreds of dollars annually by recently switching her home and car insurance and taking advantage of discounts.