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How Much Does Home Insurance Cost?

You’ve negotiated a good deal on your new dream home.

It’s in the perfect neighborhood, and in great shape. Even better, those monthly mortgage payments won’t stop you from going out to nice dinner once in a while or even heading off on vacation.

But hold on. Did you factor in the cost of homeowners insurance? The cost of homeowners insurance typically doesn’t have a big enough impact that you end up stuck inside your new home without living it up outside of it. Still, it is extremely important to factor in insurance costs to figure out what’s right for your situation—and your budget.

Of course, lenders almost always require homeowners insurance before signing off on the loan. And even if you’re fortunate enough to not need a loan, you’ll need good insurance to protect your investment.

So you know you need it, but how much are you going to pay for it? According to Realtor.com, the average annual premium costs about $952.

But depending on your situation you could pay more or less than average. Just how much relies on several factors that we will explore -- including your deductible, the value of your home and belongings, your history of claims, and other variables such as the cost and age of your home.

Selecting the right deductible for you

Your deductible is one key factor in how much you will pay. If you select a policy with a high deductible, the annual cost for your insurance policy should be lower. Of course, when you go to make a claim, you will pay more out of pocket to meet that deductible. Conversely, if you pick a lower deductible, the cost of your insurance will be higher, but you won’t suffer sticker shock when it comes time to put in that claim. Figuring out your household expense (and entertainment) budget is one way to decide on whether to go with a higher or lower deductible.


Make sure you have enough coverage

While we’re focusing on the actual cost of homeowners insurance, it’s essential that you get the right amount of coverage. Specifically, you need enough insurance that would allow you to rebuild in the event of a total loss. In other words, don’t pinch pennies by choosing a lower limit that will hurt you in the event of a catastrophe. Ask your agent about replacement cost versus actual cash value.  Replacement cost is typically the way to go because you could rebuild after a major loss without concern for depreciation.  And for added protection, ask your agent about ERIE’s guaranteed replacement cost.


Are you planning improvements?

Is your new home going to be move-in ready, or a fixer-upper? If you are planning on doing major upgrades to your home that will boost its value, keep in mind that your insurance will likely rise as well. If and when you do a home improvement project, report that to your insurance company so they can adjust the limit, if necessary. Also, if the ‘home improvement’ project is the result of damage to your home make sure you have what’s known as “loss of use” coverage that reimburses you for hotel costs or apartment rental if your home is a total loss or became uninhabitable after a covered loss. You would want that reimbursement if you’re forced out of your home while repairs are made.


Make sure you have enough liability coverage

When you buy homeowners liability coverage you’re investing in peace of mind. Homeowners liability coverage protects your assets in case someone gets hurt on your property. You might not realize this, but it also provides coverage for some incidents away from the home. Lawsuits are pretty common these days, and can be extremely costly. That’s why you should make sure you buy an appropriate amount of coverage. You might also want to consider a Personal Catastrophe Liability policy, which adds another $1 million to $5 million in liability coverage to your homeowners as well as your auto coverage.


Customize your coverage with endorsements

You probably don’t think about your sewer or drains backing up and swamping your home – that is until it happens. That’s why it’s important to consider additional coverages such as sewer & drain backup coverage along with coverage for high-value belongings. There are two more endorsements to consider: Identity Recovery coverage in the event you become a victim of identity theft and earthquake coverage to make sure you are prepared for the truly unexpected. 


The value of your home and your possessions

It’s a pretty simple formula -- If your home costs more, you’re going to pay more to insure it. You need a good, solid assessment of your home’s worth. Also, you might want to consider an appraisal for your prized belongings and talk to your insurance agent to see if you should consider any supplemental coverages to make sure your valuables are properly covered.


Your history of claims

When it comes to insurance, your past can influence your future. How much you pay for homeowners insurance can be significantly affected by how many claims you’ve made previously. It stands to reason that homeowners with fewer claims would pay less, and those with more claims would pay more. Those with more claims are proven to be a higher risk for insurers.


Geography

Geography — as it relates to frequency of natural disasters — plays a role in your costs. If your home is near an area that is prone to hurricanes, tornados or forest fires, to name some examples, your homeowners insurance is going to be more expensive.


Other key factors

There are several other factors that could influence how much you pay for homeowners insurance.


Saving suggestions

You could reduce the amount of your premium if you have security features such as a security alarm system, carbon monoxide detectors and smoke alarms. Check with your agent about potential discounts.


Shop wisely

Shopping for insurance solely on price can end up being a costly mistake. You should compare costs of homeowners insurance, while making sure you have a clear understanding of what each insurer is covering. A great deal isn’t so great if you end up shelling out a lot more money in the event of a major claim. And after you’ve done your research and assessed your specific needs, you should be worry free enough to relax and enjoy your new home knowing you’re covered with the right insurance at the right price.