You Need Homeowners Insurance. This Is What Determines the Price

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Nearly every American homeowner has homeowners insurance, according to The Insurance Information Institute. It’s clear why: a house is likely the most valuable asset that you possess, and you’ll want to protect it in the case of a catastrophic event such as a fire, downed tree or accident within the home.

“Without a homeowners policy, a person would have to pay the cost out of pocket, or stand to lose their entire property investment,” says Nancy Albanese, vice president of personal insurance at Bryn Mawr Trust Insurance Advisors.

Although home insurance is pretty much universal across the United States, costs vary wildly depending on numerous factors. Read on to learn more.

How Much Does Homeowners Insurance Cost?

The average annual premium of “all-risks” coverage on dwellings, the most common home insurance package, is $1,249 as of 2018, according to The National Association of Insurance Commissioners. Costs vary based on which state the property is in — expect to pay more in hurricane-prone Florida and areas of California susceptible to earthquakes — and other factors.

How Is Price Determined?

Many factors also affect the price a company may quote you, such as the type of dwelling — whether it’s a condo, single- or multi-family home, or a co-op — how old the house is, the square footage, what types of materials the house is made up of, whether you have an alarm system, and its proximity to a body of water. Then there are less obvious factors, such as distance to a firehouse and whether it’s a volunteer or paid force, the interior design, whether there’s a pool, and even if there’s a certain kind of dog in your home.

“Insurance carriers also use credit as an underlying factor,” says Nancy Costa, account executive at Masterson Insurance Agency, Inc., an insurance company. “The better the credit, the better the rating tier will be. The deductibles and endorsements that each person chooses will also reflect in price.”

Is Homeowners Insurance Worth the Cost?

While homeowners insurance isn’t required by law, if you purchased your home with a mortgage, your lender will likely require it. That said, homeowners insurance is undeniably a good investment. Not only does it protect what is likely your most valuable asset, but also the place you call home. 

Kevin Lang, president of Lang Insurance, puts it more bluntly. “If your house burns down, a pipe bursts in your living room, anything that could go wrong in your house, that’s what your insurance covers,” he says. “If you have a half-million-dollar house and it burns down, and your insurance costs $3,000 per year, which would you rather pay?”

How Should You Choose a Provider?

One factor to help consumers choose an insurance carrier is financial ratings from agencies such as A.M. Best Company, whose top score is A+. There are also many consumer sites that rate companies.

“Some insurance carriers distribute their policies directly to consumers or through their exclusive agents,” Albanese says. “Others utilize independent agencies, which can represent numerous insurance companies, allowing consumers to obtain quotes with multiple companies from a single source.” 

Pro Tip

Numerous factors impact the price of homeowners insurance, including things you can and can’t control. Find a company with a good rating that you trust.

You should also seek out referrals from friends and neighbors for licensed agents that work in your area, who can walk you through the right amount of coverage for your home and help you find the best price. Review any quotes carefully to understand what exactly the policy covers and what it doesn’t (many homeowners insurance policies don’t cover floods, for example).

“Make sure you are not just getting the basics and are taking into consideration replacement costs, water backup and sump pump coverage, and equipment breakdown,” Costa says. “Those are just a few important coverages a policy could cover. You want to make sure you are cautious of everything. Having someone you trust will help make this search easier while making sure you are protected properly at a reasonable price.”

Are Discounts Available?

Homeowners insurance premiums can change every year, and there are numerous factors that will reduce the price. Discounts are available for first-time home buyers, military veterans, and retirees. The installation of an alarm system and video cameras, fire sprinkler system, backup generator, and water leak detection/shut-off system lowers premiums. Home improvements such as updating the roof and plumbing, heating, and electrical systems can also reduce costs. If you live in an area prone to hurricanes, install strong windows, or if you live in a place that’s known to experience earthquakes, retrofit the home to withstand them.

“There can be discounts for having a favorable claims history and for having multiple policies with the same insurance carrier (for example, bundling homeowners and auto insurance),” Albanese says. “Finally, carrying a high deductible is a good way to keep the cost of the policy low. It is good practice to purchase a broad policy with adequate coverage limits, and to self-insure against smaller occurrences by taking a higher deductible.”


Homeowners insurance costs can vary widely based on numerous factors, including what state you’re in as well as where your home is located. Be sure to choose a plan that has a wide amount of coverage so that you’re not caught off-guard in case of a catastrophic event.