Insurance
Home Insurance Calculator: Estimate Your Homeowners Cost
Updated: May 22, 2024
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Jul 26, 2024
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Table of Contents
Factors Used to Calculate the Cost of Home Insurance
Insurance providers consider various factors when calculating your home insurance premium, such as when and where your home was built, what environmental hazards there are, how much your home is worth and more. For instance, if you live in an area prone to wildfires, you might have to pay more for insurance.
Other factors that affect your home insurance costs include:
Factor | Description |
|---|---|
Your Coverage Level | How much home insurance coverage you have plays a significant role in your costs. Getting high dwelling coverage limits or personal property limits can increase how much you pay annually. But, not having enough coverage can leave you with a significant shortfall if you suffer a loss. |
Your Deductible | A home insurance policy’s deductible is the cost you pay out of pocket before your insurer steps in to cover repairs and replacements. Increasing your deductible can lead to lower monthly rates, but it also means you need to have enough saved to pay up if you incur a covered loss. |
Your Home’s Location | Insurers consider where you live and the environmental hazards of your area. Living in an area prone to hurricanes, tornadoes and wildfires, or in an area with a higher theft rate or population density, can affect your rates. |
Your Home’s Age | Older homes typically come with higher premiums, as the cost to repair damages may be higher due to outdated materials or systems. Conversely, newer homes are often cheaper to insure due to modern building codes and systems. |
Your Credit Score | In most states, insurers will consider your credit history when setting your premium. However, in California, Hawaii, Massachusetts and Michigan, insurers are not allowed to use credit-based insurance scores as a basis to determine rates. |
Your Claims History | Having a frequent history of claims can affect your rates. Claims typically stay on file for seven years and are captured in the industry's Comprehensive Loss Underwriting Exchange (CLUE) database. CLUE also tracks claims that were filed but denied by an insurer. |
Home Insurance Estimates by Coverage Level
Insurers calculate your home insurance premiums based on the limits of your desired dwelling coverage, which pays to repair your home, and personal property coverage, which replaces your personal belongings. Higher limits often translate to more expensive property insurance — the premium for $1 million in dwelling coverage, for instance, costs an average of $7,947 per year, $5,333 more than the cost of a policy with $250,000 in coverage.
Understanding how home insurance rates are calculated by coverage level allows you to tailor your policy to both current needs and future contingencies, ensuring you get the best value. Use the table below to see home insurance estimates for different coverage levels.
| $100K Dwelling / $50K Personal Property / $100K Liability | Annual Premium$1,518 |
| $250K Dwelling / $125K Personal Property / $200K Liability | Annual Premium$2,614 |
| $500K Dwelling / $250K Personal Property / $300K Liability | Annual Premium$4,373 |
| $750K Dwelling / $375K Personal Property / $500K Liability | Annual Premium$6,139 |
| $1MM Dwelling / $500K Personal Property / $1MM Liability | Annual Premium$7,947 |
Home Insurance Estimates by State
Aside from your home’s value, location is one of the most significant factors impacting home insurance coverage and costs. This is because your location has a lot to do with how insurance companies calculate potential risks. For example, if you live in an area prone to natural disasters like hurricanes or wildfires, you can expect your premiums to be higher.
Similarly, if you live in an area with a high crime rate or an elevated risk of burglary or vandalism, you’ll likely end up paying more for home insurance. On the flip side, if you live in a safe area with few risk factors, your premiums will typically be lower.
Data filtered by:Results filtered by:
State:
State:
Coverage:
Coverage:$250K Dwelling / $125K Personal Property / $200K Liability
| Alabama | Annual Premium$4,767 |
| Alaska | Annual Premium$1,624 |
| Arizona | Annual Premium$2,298 |
| Arkansas | Annual Premium$4,679 |
| California | Annual Premium$1,000 |
| Colorado | Annual Premium$4,087 |
| Connecticut | Annual Premium$2,434 |
| Delaware | Annual Premium$911 |
Rates fluctuate because different states have varying risks and regulations. For instance, coastal states might have higher premiums due to the increased risk of hurricanes, while states in the Midwest might see elevated rates because of tornado threats and severe convective storms.
The stability of a state's insurance marketplace can also lead to variations in average premiums. Some states might have a plethora of providers, fostering competitive pricing, while others might have limited options, leading to higher average costs. Additionally, the local cost of living and construction can influence repair and replacement expenses, further impacting rates.
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How to Calculate How Much Home Insurance You Need
How much home insurance you’ll need depends on your unique circumstances, including how much the replacement cost value of your home is — what it would cost to rebuild — and how much savings you have. When determining how much coverage to purchase, you’ll need to decide what limits are best for you for dwelling, personal property and personality liability coverage. You’ll also need to consider whether or not other coverages — such as flood or earthquake insurance — are appropriate.
Establish Your Dwelling Coverage
Dwelling coverage covers damage to your home’s physical structure. In general, you should aim for your dwelling coverage to equal the current cost of replacing your home if a disaster destroys it. For example, if your home would cost approximately $200,000 to rebuild from the ground up, you purchase that same amount of dwelling coverage or a bit more to add some buffer.
MONEYGEEK EXPERT TIP
If you aren’t sure how much it would cost to rebuild your home, contact a professional prior to purchasing insurance to avoid being under or overinsured. Due to rising costs of construction materials and labor, the Insurance Information Institute reported replacement costs increased a cumulative 55% from 2019 through 2022. — Mark Friedlander, Director, Corporate Communications, Insurance Information Institute
Determine Your Personal Property Coverage
Personal property coverage covers damage to all personal property and possessions inside your home. This can include everything from valuable furniture items and electronics to jewelry and more.
To determine how much personal property coverage you need, you should make an inventory of your personal belongings and estimate what it would cost to replace them. This number is what you should aim for as a personal property coverage limit. In some cases, your insurer will automatically set your personal property coverage at 50% of your dwelling coverage.
CREATING A HOME INVENTORY
Determining the right amount of personal property coverage is simpler with a comprehensive home inventory. There are several methods for creating home inventories, including:
- Digital Documentation: Use a smartphone or camera to capture each room. Focus on valuable items — note their serial numbers and unique features. Store these files on cloud storage or an external drive for added security and quick access after a catastrophe.
- Mobile Apps: Opt for specialized home inventory apps. They allow for cataloging easily, attaching photos and saving digital receipts, streamlining the entire process.
- Traditional Approach: Use a spreadsheet or notebook to list items room by room. Include descriptions, purchase dates and estimated values. Pair this with printed photos for a complete record. Store this inventory in a secure location, like a fireproof or safe deposit box.
Set Your Personal Liability and Medical Payments Coverage
Personal liability insurance is designed to protect homeowners from financial liabilities should they unintentionally cause harm or damage. When deciding on the amount of personal liability coverage for your home insurance, it's essential to consider various factors:
- Evaluate the assets you wish to protect, such as your home, savings and investments. The more assets you have, the higher the coverage you might need to shield yourself from potential lawsuits.
- Think about the potential risks associated with your property. Do you have a swimming pool, trampoline or other features that might increase the likelihood of injuries?
- Consider the area you live in; some regions have higher lawsuit costs than others.
Remember: while it's tempting to opt for the minimum coverage to save on premiums, it's crucial to ensure you're adequately protected to avoid significant financial setbacks in the event of an unforeseen incident.
MONEYGEEK EXPERT TIP
If you're having trouble determining how much personal liability and medical payments coverage is appropriate for you, consult an insurance agent or financial advisor who can provide insights tailored to your specific situation.
Consider Other Coverages
While the core components of home insurance, such as personal liability and personal property coverage, are essential, there are additional coverages available that homeowners might overlook. These can be crucial depending on individual circumstances:
- Flood Insurance: Standard policies often exclude flood damage. If you reside in a flood-prone area, this separate policy is invaluable. Flood coverage can be purchased through the federally-backed National Flood Insurance Program or dozens of private flood insurers.
- Earthquake Insurance: Similar to flood coverage, earthquake damage isn't typically covered by standard homeowners insurance policies. Those in seismic zones should consider purchasing this additional coverage as an endorsement or a separate policy. In California, earthquake insurance is offered through the California Earthquake Authority.
- Sewer Backup: This covers damages when sewers or drains back up into your home, a scenario not usually included in basic policies.
- Valuable Items Endorsement: If you possess high-value items like jewelry or art, standard policies might not offer sufficient coverage. An endorsement ensures these items are fully protected.
By exploring these additional coverages, you can tailor your insurance to your unique needs, ensuring comprehensive protection for every aspect of your home and belongings.
How to Purchase Home Insurance
After carefully evaluating your needs, getting a home insurance quote online is a quick and easy process that can help you find the best home insurance companies for your needs. Understanding the steps to buying a policy ahead of time can expedite the process.
1
Assess Your Requirements
Determine the amount of coverage you need for your dwelling, personal items and potential liabilities.
2
Set Coverage Limits
Opt for limits that would adequately finance the replacement of your home and possessions.
3
Think Beyond the Basics
If your home is located in an area prone to hazards, like floods or earthquakes, you should also consider purchasing additional insurance coverage, including hazard, flood and earthquake insurance.
4
Compile Your Personal Information
In most cases, you can fill out a short form on the insurance company’s website with your personal information to get a quote. You can also provide personal information by phone or in-person to receive sample premiums.
5
Explore Your Options
Every insurer offers something unique. Take a moment to compare home insurance quotes and find what fits with your budget and coverage needs.
6
Choose a Provider
Settle on your preferred policy, payment arrangement and initiation date.
7
Seal the Deal
Complete your application and pay your initial premium.
MONEYGEEK EXPERT TIP
To get a quote online, in person or by phone, you’ll need to provide some basic information about yourself and your home, including:
- Personal information (name, date of birth, Social Security number)
- Your home’s address
- Recent renovations or repairs
- The age and condition of your home
Expert Advice on Estimating Home Insurance Costs
MoneyGeek consulted with industry experts to share their insights about the best ways to estimate your home insurance costs.
- What's the best way to estimate my home insurance costs?
- How do companies calculate home insurance?
- Are online home insurance quotes from insurance companies finalized quotes or estimates?
Dr. Daniel GatesAssociate Professor of Business, Director of Assessment at Bryan College
Richard Conde, Ph.DAssistant Professor at the University of Houston-Downtown
Anthony OrlandoAssociate Professor of Finance, Real Estate & Law at California State Polytechnic University, Pomona
Heidi Petschauer, CICPresident, Petschauer Insurance
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About Mark Fitzpatrick
Mark Fitzpatrick has analyzed the property and casualty insurance market for over five years, conducting original research and creating personalized content for every kind of buyer. Currently, he leads P&C insurance content production at MoneyGeek. Fitzpatrick has been quoted in several insurance-related publications, including CNBC, NBC News and Mashable.
Fitzpatrick earned a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He is passionate about using his knowledge of economics and insurance to bring transparency around financial topics and help others feel confident in their money moves.