Updated: November 1, 2024
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Homeowners insurance is a requirement for mortgage holders, safeguarding against losses from damage, theft or injuries on your property. For those owning their homes outright, while not mandated, carrying a policy is highly advised for comprehensive protection.
Choosing the right policy can be daunting and will be influenced by your home's location and lender's requirements. Understanding your necessary coverage will help you meet legal obligations and personal security needs.
When buying homeowners insurance, assess your property’s value and cost of rebuilding from the ground up to determine adequate coverage.
Mortgage lenders require you to have a homeowners insurance policy to help financially protect their investment in your home.
The average annual cost of homeowners insurance in the United States is $2,614. Compare quotes to find your best deal.
To buy homeowners insurance that suits your needs, assess your insurance requirements, explore optional coverages and compare rates. While the process may seem daunting to first-time homebuyers, understanding the basics simplifies navigation through the insurance landscape, ensuring you secure a policy that aligns with your unique situation.
It’s best to start your search for a homeowners insurance policy by assessing how much homeowners insurance coverage you need. A standard homeowners insurance policy covers destruction to the interior and exterior of your home, loss of your possessions via theft or damage and personal liability claims for injuries on your property.
If you’re buying a new home, determine what your lender requires for your policy. Different types of homes — such as condos, standalone dwellings and mobile homes — require different types of coverage. How much homeowners insurance you need depends on several factors, including your home, the value of your possessions and your budget.
Coverage Type | How Much You Need |
|---|---|
Dwelling coverage | The replacement or rebuilding cost of your home |
Personal property coverage | The value of your personal property |
Additional living expenses | 20% or more of your dwelling coverage |
Liability coverage | Enough to cover the total value of your assets |
Medical payments coverage | Up to $5,000 |
When choosing your homeowners policy limits, you'll want to purchase as much coverage as you can afford. At the minimum, MoneyGeek recommends buying a policy that can cover the replacement cost of your property if a disaster destroys it.
You should also be aware that insurers typically reimburse you in three ways: actual cash value, replacement cost value and guaranteed replacement cost or extended replacement cost.
Actual cash value refers to the current, depreciated value of your home and possessions, while your home's guaranteed replacement cost is the value it would cost to repair your home exactly as it is. This number is different from the resale value, which includes the value of the land. Meanwhile, extended replacement cost covers 25% to 50% beyond the value of your home.
Dwelling Coverage | Monthly Premium | Annual Premium |
|---|---|---|
$100,000 | $90 | $1,075 |
$250,000 | $165 | $1,979 |
$500,000 | $293 | $3,519 |
$750,000 | $424 | $5,086 |
$1,000,000 | $565 | $6,777 |
$2,000,000 | $1,168 | $14,020 |
$3,000,000 | $1,768 | $21,221 |
Higher coverage amounts result in higher premiums. In most cases, extended replacement coverage is the most costly insurance option homeowners can purchase.
In addition to the standard homeowners insurance coverage, you may also want to add on other policy options, such as coverage for floods, earthquakes or other issues. Some insurers require you to purchase optional coverage for certain types of homes or homes in certain areas. For example, you may need flood insurance if you live in a floodplain.
In most cases, flood and earthquake insurance are separate policies you must buy in addition to standard homeowners insurance. You may be able to partner with your home insurance company to purchase flood insurance backed by the federal government, or you could buy your own private flood insurance policy.
Coverage Type | What It Covers | What It Doesn’t Cover |
|---|---|---|
Flood insurance | Your home structure, additional structures on your property, and the furnishings and contents of your home | Basements and vehicles |
Earthquake insurance | Your home’s structure and contents | Outdoor buildings and areas like garages, pools and lawns |
Water backup of sewer | Damage to your home or property caused by water backup | Broken sump pumps, flooding |
Other structures insurance | Other structures on your property | N/A |
Replacement cost plus | Increases coverage by a percentage | N/A |
Ordinance or law insurance | The cost to rebuild a home and make sure it’s up to code | Additions or renovations unrelated to code |
Personal umbrella liability insurance | Additional injury or damage claims | Your own property |
There are multiple ways to shop for homeowners insurance, including online or through an independent agent or broker.
Working with a dedicated insurance agent or broker is excellent for people who aren’t sure of their insurance needs or need additional guidance. Shopping for insurance online is a good choice for savvy consumers who want to switch home insurance and are looking for the best deal.
Before you apply for a homeowners insurance policy, you’ll need to gather some information about yourself and your home, including:
Having this information handy ensures you get the most accurate quote available.
Shopping around for homeowners insurance policies will save you money and frustration down the road. Multiple factors are at play when buying homeowners insurance, and all play a part in the rates you receive. Factors that home insurers consider when determining your rate include your home’s age, your financial history, your credit score, the home’s location and your coverage limits. Nationally, the average annual cost of homeowners insurance is $2,614.
Be sure to compare home insurance quotes from at least three companies to save money on your home insurance policy. Looking at rates from multiple providers makes choosing the insurer with the most competitive pricing easier. In some cases, you can bundle coverage with other insurance policies, like auto insurance, and save hundreds of dollars per year on your premiums.
Getting rates from the best home insurance providers is an excellent place to start. These include companies like Allstate, USAA, Lemonade, State Farm and more. Customers can also use online policy comparison tools to compare homeowners insurance quotes all in one place. Note that while price matters, comparing coverage options is equally helpful to ensure you get the financial protection you need.
State | Dwelling Coverage | Annual Premium | Premium % Change
vs. National Average |
|---|---|---|---|
$100,000 | $1,436 | -32% | |
$250,000 | $1,117 | -47% | |
$250,000 | $1,982 | -6% | |
$100,000 | $2,039 | -3% | |
$500,000 | $2,002 | -5% | |
$250,000 | $3,156 | 50% | |
$250,000 | $1,649 | -22% | |
$250,000 | $717 | -66% | |
$250,000 | $2,359 | 12% | |
$250,000 | $2,147 | 2% | |
$500,000 | $764 | -64% | |
$250,000 | $1,051 | -50% | |
$250,000 | $1,751 | -17% | |
$100,000 | $954 | -55% | |
$100,000 | $1,242 | -41% | |
$100,000 | $2,878 | 37% | |
$100,000 | $1,120 | -47% | |
$100,000 | $1,625 | -23% | |
$250,000 | $1,046 | -50% | |
$250,000 | $1,671 | -21% | |
$500,000 | $2,864 | 36% | |
$250,000 | $2,341 | 11% | |
$250,000 | $2,735 | 30% | |
$100,000 | $1,377 | -35% | |
$250,000 | $2,710 | 29% | |
$250,000 | $2,595 | 23% | |
$250,000 | $2,972 | 41% | |
$250,000 | $906 | -57% | |
$250,000 | $898 | -57% | |
$250,000 | $1,228 | -42% | |
$250,000 | $1,408 | -33% | |
$250,000 | $1,402 | -33% | |
$250,000 | $1,498 | -29% | |
$250,000 | $2,270 | 8% | |
$100,000 | $938 | -55% | |
$100,000 | $2,520 | 20% | |
$250,000 | $811 | -61% | |
$250,000 | $1,348 | -36% | |
$250,000 | $1,321 | -37% | |
$250,000 | $3,377 | 61% | |
$250,000 | $2,545 | 21% | |
$250,000 | $3,466 | 65% | |
$250,000 | $3,390 | 61% | |
$250,000 | $1,081 | -49% | |
$250,000 | $1,197 | -43% | |
$250,000 | $2,058 | -2% | |
$250,000 | $1,106 | -47% | |
Washington D.C. | $500,000 | $1,713 | -19% |
$100,000 | $843 | -60% | |
$250,000 | $1,257 | -40% | |
$250,000 | $1,965 | -7% |
While it’s worth considering costs when shopping for homeowners insurance, it’s not always best to go with the cheapest homeowners insurance quote. MoneyGeek also recommends looking at other factors, including coverage, customer satisfaction ratings, financial stability and customer reviews.
After comparing quotes, you’ll need to decide on a policy and finalize the details, including its billing plan, deductible and start date. If you’re buying a home, these details must align with lender requirements to close your loan. If you’re buying a house with a mortgage and not just replacing your current policy, you may need lender approval before purchasing a policy.
Once you've decided on a homeowners insurance policy and finalized the details, all that's left is officially submitting your policy application. Once you pay your first premium, you'll have home coverage beginning from the start date of your policy.
It’s important to make sure the primary homeowner is listed on home insurance to ensure their financial interest is fully protected. Co-owners, spouses, and others with a financial stake in the property should also be named on the policy. Additionally, family members living in the home or individuals like mortgage co-signers need to be included to avoid coverage gaps.
If your insurance provider drops or rejects your coverage, exploring options like the FAIR Plan is a practical solution to secure homeowners insurance. These state-specific plans are for homeowners who face difficulties obtaining insurance through traditional markets, offering essential protection from various risks.
To navigate this alternative, comparing FAIR Plans to policies from private insurers that specialize in high-risk coverage is crucial. Consulting with an insurance broker can also simplify the process, providing access to tailored advice and options that meet your unique needs and ensuring your home adheres to the necessary standards for approval.
Several factors, such as location and home value, influence how homeowners insurance premiums are calculated. Here's a straightforward look at these variables:
Understanding these factors can help you make informed decisions when purchasing insurance, ensuring you receive the best coverage for your specific needs and budget.
Homeowners insurance is vital to financially protecting your home, but finding and purchasing it can be confusing. MoneyGeek answered some of the most common questions about homeowners insurance below to help make the process easier.
How much homeowners insurance you need largely depends on the value of your home and personal possessions. Generally, you should purchase the necessary coverage for rebuilding your house and replacing all your possessions.
We recommend purchasing extended replacement cost coverage if you want to insure your home for more than it's worth to cover replacement and repair costs. This option covers a certain percentage beyond the value of your home.
Some factors that help insurers determine the value of your home include your home’s square footage, location, building materials, age and major upgrades or additions. While a more valuable home will typically come with a higher insurance premium, it also means that your home is more likely to be fully covered in the event of a total loss.
How long it takes to get homeowners insurance usually depends on the complexity of the property and the insurer's process, typically ranging from a few days to a week. The process involves getting a quote, submitting an application and undergoing an underwriting review. Starting early and having all the necessary information ready can help speed up how long it takes to get homeowners insurance finalized.
About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.
