Average Cost Of Homeowners Insurance In 2023

Experts estimate the price of home insurance to increase by 9% nationally this year. With this increase, consumers will undoubtedly be shopping around for better rates. But how much is homeowners insurance, on average?

Variables like location, dwelling amount, coverage options, and other factors can have a significant impact on the price of a homeowner’s insurance policy. In my almost two decades of insurance, the homeowner’s market has evolved, and prices along with it. So whether you’re a new homeowner or considering a policy update, read on to learn what you expect to pay for this vital coverage.

The replacement cost is generally the coverage you carry for your home. Often referred to as Coverage A or Dwelling Coverage, it provides protection for the structure of your home and anything attached to it, such as an attached garage or carport. The amount you carry for Coverage A will determine the limits for some other coverages on the policy.

For this reason, it’s essential to ensure you have the correct coverage for your home. In addition, you don’t want to lack the coverage you may need if you experience a loss. A recent survey conducted by the American Property Casualty Insurance Association finds that nearly two-thirds of all homeowners may be underinsured. It’s wise to periodically check that your coverage is rising along with inflation and notify your insurer if you make any updates to your home.

How Much Does Home Insurance Cost in 2023?

According to Forbes Advisor, the average homeowners’ insurance cost in 2023 is $1,582 per year for $350,000 in replacement cost coverage.  But the price of homeowners insurance can vary and depends on many different factors such as where you live, the replacement cost and age of your home, prior claims history, and deductible amount, among many others. The only way to determine the exact cost of a homeowners insurance policy is to get a quote from an insurance carrier or agent.

Average Homeowners Insurance Cost by State

Due to localized factors such as weather, construction costs, and insurance regulations, the price of homeowners insurance can vary by state. Insurance companies generally determine what to charge for insurance on the customer’s (or home’s) likelihood of having a loss and how severe that loss could be. For example, it may be more costly to insure a home in California due to the wildfire risk than it would be in Maine, where the wildfire risk is minimal.

Or since the construction costs are lower in Mississippi than in New York, the overall price of a home policy may be less because insurers know it will not cost them as much to rebuild. Insurers are businesses like any other and they need to be strategic in their pricing to remain profitable. And so they factor in each state’s exposure to loss, to determine the premium.

Five Cheapest States for Homeowners Insurance

The states that have the lowest prices for homeowners insurance are often because coverages are restricted in those states. For example, home insurance policies in Hawaii don’t usually cover hurricane damage whereas policies in other states will. This can cause the price of a policy in Hawaii to be less expensive.

Similarly, California homeowners pay 17% less than the national average for their insurance. This is because their standard policies won’t include coverage for significant events that may occur there, such as earthquakes or floods. Separate policies need to be purchased to cover those, and that can offset the cost of a regular home insurance policy.

Five Most Expensive States for Homeowners Insurance

On the flip side, the states with the most expensive homeowners insurance are likely due to the higher risk of widespread damage. The homes in these states are often exposed to weather events such as hail, tornadoes, or other storms that can cause significant damage. The top five most expensive states for homeowners insurance are as follows:

Average Cost of Home Insurance by City

Insurers use sophisticated pricing models to determine what they should charge for certain locations, even drilling down to different zip codes. This is important because if you have ever lived in a large city, you may know that certain sections of that city can be different. There could be more exposure to fire in one area with homes being so close to one another, or a higher risk of theft in another.

In addition, the cost to rebuild in a populated city can be much higher than in a suburban area. Take San Francisco, for example. San Francisco is cited as having one of the highest construction costs for single-family homes. This means that it would cost an insurance company more to rebuild these homes if they were involved in any type of loss. Therefore, the pricing of these areas should match the risk to insurance companies.

Average Homeowners Insurance Cost by Dwelling Coverage Amount

The biggest driver of your home insurance premium is going to be the dwelling amount.  The dwelling amount is typically your home’s replacement cost, which is determined by its specifics. Insurers will use a special replacement cost calculator to determine how much it would cost to rebuild your home.

Even carrying the same dwelling limit, the price of home insurance will vary by company. Different prices may also be charged due to other factors such as zip code, claims history, the condition of the home, roof age, safety features, or applicable discounts added. To ensure you are getting the lowest price, it’s best to shop around.

Average Homeowners Insurance Cost by Claims History

Home insurance policies protect your property from events such as fire, theft, wind, hail, or lightning. But the more claims you file for these damages, the higher your insurance will be. It seems like a double-edged sword, right?

While insurance is meant to be a financial safety net for homeowners, filing too many claims can hurt you. Insurance companies view customers who have had a history of claims as irresponsible, or too risky to insure. Remember that insurance companies are a business and they are trying to take in more premiums than they will need to pay out in claims to be profitable.

Average Homeowners Insurance Cost by Home Age

The older your home is, the more expensive your home insurance will usually be. This is because older homes tend to have more issues than homes built more recently. Major systems within the home are often worn and break down more easily, causing homeowners to file more claims.

In addition, older homes can have ornate features or have been built with materials that aren’t as readily available. This means that the cost to rebuild will be higher, especially if the home is listed on a historical register. Getting the house up to current building codes after a loss can be particularly costly as well.

Lastly, newer homes tend to have more safety devices than older homes. Sprinklers, burglar alarms, water sensors, or generators are features that you may find in younger homes, but very rarely in older homes. Therefore, the price of the insurance will be lower in these homes.

Home Insurance Costs by Deductible Amount

A deductible is your out-of-pocket expense on an insurance policy. The more risk you take on by having a higher deductible, the lower your premium will be. Likewise, the lower your deductible, the more risk an insurance company has to take on, and so the price will be higher.

Insurers will typically offer deductibles in $250, $500, $1,000, and $2,500 increments. To choose the best deductible option for you, you should identify how much you can afford to pay in a loss. Saving money with a high deductible isn’t helpful if you aren’t able to come up with that amount at the time of a claim.

What Companies Offer the Cheapest Homeowners Insurance?

Even though most companies use the same factors to determine your home insurance premium, there are still companies that will be cheaper than others. Insurers can decide how much weight they want to assign to each factor, if at all. For example, some companies may choose to not look at credit scores to determine price, while others may weigh that rating factor very heavily.

This is one of the reasons why you will find different rates between insurance companies. Rates can also vary due to differences in the discount percentages, affinity or group discounts, coverage limits, and/or deductible amounts. So shopping around for cheaper rates is always a good idea.

As with any other type of insurance, the price you pay for home insurance will depend on several different factors. In addition, it will vary by insurance company and state. While this list is not exhaustive, here are a few of the most commonly used factors that will affect your homeowners’ insurance rate.

Location

The location of your home is one of the most significant drivers of your insurance premium. As we have discussed, this is due in part to the various weather events your home may be exposed to and the regulations set forth by the state in which the policy is written. However, the location also matters for more obvious reasons.

The distance to the nearest fire hydrant and fire station can determine the extent of fire damage to your home. As such, the price of your policy is also based on this information. Typically, homes that are within 1,000 feet of a fire hydrant and 5 miles of a professional fire station can expect to have lower premiums than homes that do not.

Also, houses that are situated in busy city locations may be more prone to theft or vandalism than homes in remote locations. This is another way in which your location matters to your home insurer.

Type of Home

The type of home you are insuring will also greatly impact the price of your policy. A multi-family is going to be larger and presumably have more kitchens and floors than a typical single-family home. Therefore, the cost to rebuild is higher.

There are also various styles of homes, and some types will be more expensive than others. Different architectural styles such as sloped ceilings, or flat roofs, may sustain more structural damage when involved in a loss. There is more risk to the insurance company with certain characteristics and so the cost to insure them will reflect that.

Home Size

In general, the size of your home will impact the replacement cost of your home, which will affect the price of your home insurance. Consider the cost to built a 4,000 square foot home as opposed to a 1,500 square foot home. There will be more materials and more labor involved, so the price to rebuild will understandably be higher.

Roof Construction

The type of roof on your home, including the shape, material and age will have an affect on your home insurance price as well. This is because the roof of a home is one of the most essential parts. It shields the home from the outside and protects you from wind, rain, ice, branches and debris.

Insurance companies will base your price on the durability and condition of your roof. The older a roof is and the less resistant it is to fire, hail and wind, the increased likelihood of damage to the interior of your home. As such, the price of your home insurance will be higher.

Home Characteristics

As mentioned a few times, the specifics of your home will determine it’s replacement cost, which will affect the price. Pocket doors, ornate detailing, crown moulding, and atrium windows or doors are all examples of characteristics that can drive up the price of your home’s replacement cost. These features are usually more expensive to purchase and therefore, cause the price of your home insurance to be higher.

Potential Liabilities

While things like swimming pools or trampolines are fun and a great way to pass the time, they can also be responsible for causing injuries. As such, owning them can cost you more money on your home insurance. Studies show that over 100,000 people are injured every year on trampolines and 500 of those end up with severe neurologic damage.

I have seen a fair share of trampoline related liability claims during my career and it’s been enough of a deterrent for me to not purchase one for my own children. But for those who feel differently and own a trampoline, you must consider the potential implications. Not only can you be held liable for any injuries that arise, but your home insurance company may increase your rates, and possibly decline to insure you at all.

It’s not only trampolines or swimming pools to be concerned about either. Anything that substantially increases your risk of liability can affect your rates. This includes dogs, fire pits, swing sets, or tree houses.

Claim History

The more claims you file, the riskier you are to insure, and the higher you can expect your insurance premium to be.  From an insurance company’s perspective, a responsible home owner will take steps to prevent damage from occuring, and they will subsequently file fewer claims. As such, the price of insurance policies are often set to incentivize those with no or minimal losses.

Most insurers will offer a claim free discount or overall lower rates for these homeowners. But insurance exists for a reason, and losses happen. To ensure you aren’t penalized, try to only file claims for the financial catastrophic losses that you aren’t able to pay for out-of-pocket.

Insurance Company

Home insurance prices vary by insurance company since not all companies weigh each factor the same. Some may put more emphasis on claim history, while others may put more on credit score, for example. There can also be a difference in base rate amounts and discounts offered.

Credit Score

Most insurance companies will use a credit-based insurance score to determine home insurance premiums. Statistically, those with a lower credit score will be more likely to file claims. While the use of credit scoring in insurance rate-making has been at the forefront of controversy lately, many insurers are continuing to use it and I don’t anticipate it going away anytime soon.

However, there are some states who have banned its use. In states like California, Massachusetts, and Michigan, insurers are prohibited from using credit scores to determine prices. Here is how you can expect your credit score to affect you in other states:

Deductible

Remember that the higher deductible you choose, the lower your price of insurance will be. This is because you are shouldering more of the responsibility in a loss, which means your insurance company doesn’t have to pay as much. You are retaining more of the risk yourself.

Consider someone who has a $2,500 deductible on their home insurance. They aren’t going to be filing claims for any loss less than this amount. The insurance company is saving money by not having to worry about those smaller claims.

Home Age

The age of your home greatly impacts the price you pay for your insurance because as a whole, older homes are riskier to insure. Characteristics of homes that were once commonplace decades ago are not always the safest today. Underground oil tanks, knob and tube electrical wiring, and lead paint are all examples of this.

Dogs & Other Animals

As mentioned previously, anything that increases your liability as a homeowner has the potential to impact the price and even eligibility of your home insurance. Dogs and other animals are no exception. According to the CDC, about 4.5 million dog bites occur in the United States and 800,000 results in medical care.

If a homeowner gets sued as a result of their dog biting or hurting another individual, the financial impact can be devastating. The liability coverage under a homeowner’s policy is $100,000 at a minimum, so the insurance company could wind up paying a significant amount in legal fees. This is why many insurance companies restrict certain dog breeds from coverage altogether.

Additional Structures

Homeowners’ Insurance automatically provides 10% of your Dwelling Limit to cover any additional structures you may have on your property that aren’t attached to your house. Structures like unattached garages or sheds come to mind. But if this Other Structures limit is not sufficient to cover the additional structures on your property, you can increase this amount.

For example, if you insure your home for $250,000, this leaves you with a $25,000 coverage limit for anything unattached to your home. But if you have a barn, shed, and unattached garage that equals $50,000 in total, you will need additional coverage to protect these structures. Understandably, an increase in the amount you are insured for will affect the price of your policy.

Building Materials and Upgrades

When it comes to renovations or upgrades to your home, there are a couple of ways this can impact the price of your home insurance policy. First, as you renovate your home, you must consider the effect the upgrades can have on your replacement cost. Most likely, it will cause the replacement cost to increase, which also increases your price.

Secondly, you may also need coverage for the building materials while your home is under construction. There is special coverage one can add to their insurance policy to ensure these materials are covered in the event of a loss. But of course, adding additional coverage will also affect the price of your policy.

Either way, if your home is undergoing any major changes, it’s imperative to chat with your insurance company or agent.

What Could Make Homeowners Insurance Go Up?

There are a few factors that can cause your homeowners’ insurance to increase. The first and most obvious one is filing a claim. If you file a claim, there is a risk that your price will increase at your next renewal. But there are some additional factors outside of your control that you may have not considered:

• Age of Home – As your home ages, you may notice the price of your policy increasing. This is because major systems such as electrical or heating start to deteriorate and increase the risk of loss as the home gets older.
• Inflation – With the cost of building materials and labor increasing, so will the cost to rebuild your home in a loss. Insurance companies need to increase their prices as their expenses also increase.
• Extreme Weather – Extreme weather events can cause insurance companies to have a significant number of losses in one area. The more they pay out in claims, the higher the price of their policies will need to be to recoup those losses.

How Much Homeowners Insurance Do You Need?

It’s hard to say for certain how much insurance you need on your home. But a good place to start is with your agent or insurance company’s replacement cost calculator. Once you know the estimated cost to replace your home, you can base your policy around that number.

I always recommend insuring your home 100% to it’s replacement value. Insuring it for less (less than 80%) can often trigger coinsurance penalties from the insurance company. This means that your loss payout is reduced by the percentage amount you were under insured.

The remaining coverages on the policy will be based on percentages of your dwelling coverage amount, with the exception of liability and medical coverage. Carrying a larger liability limit is ideal, so you should price out what you can afford. $300,000 is a great starting point.

Be sure to disclose any ornate or unique features of your home to ensure you have enough coverage. It’s better to be honest at the time of policy purchase than to leave important details out and find out you have no coverage at the time of a claim. Ask questions if you don’t understand and lean on your agent or carrier representative to guide you in the right direction.

What Are the Types and Limits of Homeowner Insurance?

A standard homeowners’ policy is an HO-3 Special Form, which refers to the type of events it will provide coverage for. The structure of the home is usually covered on an open-peril basis, which means it covers anything that could possibly happen, unless it’s specifically excluded. The personal property portion of the policy is covered on a named peril basis, which means it only covers the events described in the policy. These events typically include the following:

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Damage caused by aircraft
• Damage caused by vehicles
• Smoke
• Vandalism
• Theft
• Volcanic eruption
• Falling object
• Weight of ice, snow or sleet
• Accidental water overflow or steam
• Sudden and accidental tearing apart, cracking, burning, or bulging of certain household systems (e.g. plumbing, heating, air conditioning, etc.)
• Freezing
• Sudden and accidental damage from electrical current

Homeowners may purchase a comprehensive form, or HO-5 policy if they would prefer broader coverage. This policy offers open-perils coverage for both the structure of the home and personal property. But this policy is more expensive than the HO-3 since more coverage is provided.

What Does Home Insurance Cover?

Beyond the events a home insurance policy will cover, you also have the amount of coverage provided. All homeowners policies have two major sections of the policy. Section I focuses on the home and Section II focuses on the homeowner’s liability.

Coverage A – Dwelling Coverage

The main driver of premium is your home’s dwelling coverage. This is seen as Coverage A- Dwelling Coverage on your policy documents, and provides coverage for the structure of your home itself. It also includes anything attached to the home as well.

This limit you carry for this coverage is most often your home’s replacement cost as estimated by the insurance carrier. While you can choose a lower limit, it’s not advised. Especially since the remainder of the coverages in Section I are based on percentages of this limit.

Coverage B – Other Structures

Coverage B- Other Structures is typically 10% of your dwelling (Coverage A) amount and covers anything unattached to your home, such as a detached garage or shed. This limit is provided whether you have any other structures on your property or not. There is no additional premium to carry this coverage as it’s built into the policy.

If you have structures that exceed 10% limit provided, there is an option to purchase additional coverage. However, there is a cost associated with it. Your agent or carrier can help you determine if this is needed and how much extra coverage you may need.

Coverage C – Personal Property

The personal property coverage, also known as Coverage C provides a limit up to 50% of the coverage A limit. It provides coverage for a customer’s property, including furniture, appliances, clothing, and electronics. Some types of property such as jewelry, furs, or silverware are covered as well, but have different sub-limits.

Important: To best illustrate what would be considered personal property, I like to imagine flipping your home upside down. Anything that would fall out would be covered under coverage C!

Coverage D – Loss of Use

Coverage D- Loss of Use is sometimes referred to as Additional Living Expenses coverage. It is generally 20% of the Coverage A amount and pays for additional expenses for you to live elsewhere if your home is unhabitable after a loss. It’s important to note that it will only pay for any additional expenses incurred and not the routine expenses you would have to pay anyway, such as your mortgage or utilities.

Coverage E – Liability

Your liability coverage is noted under Coverage E. This coverage provides protection for bodily injury or property damage you may cause to another person. Insurance companies usually start offering coverage at $100,000 but you can often select limits as high as $1,000,000, depending on the company.

Liability coverage is how your insurance company would defend you against lawsuits if your dog bites someone or if someone is injured on your property. The more assets you have, the higher you will usually want your liability limit to be. This is because you have more to protect against lawsuits. Those with teenage children may also want to increase their liability limits to ensure they have adequate protection in case something happens.

Coverage F – Medical Payments

Medical payment coverage is similar to liability in that it will offer protection for bodily injury that you cause. However, the difference is that this coverage is not intended for acts for which you are legally responsible. Rather, coverage F covers events you may feel morally obligated to take care of.

For example, suppose you have a guest over at your home who trips due to an un-tied shoelace and gets injured. Even if you’re not liable for their injury, you could file a claim through your homeowners’ insurance to pay for their medical bills. The limits offered for this coverage are significantly less than what is offered for liability as you would most often not file a claim this small.

Other Home Insurance Coverages You May Need

In addition to the coverages mentioned above, there are some other coverages one can add to their homeowners’ insurance. One additional coverage is flood insurance. Most home insurance policies specifically exclude flooding, and the only way to have coverage for this type of loss is through purchasing a separate policy.

Earthquake is not a coverage that is commonly offered through a standard home insurance policy and a separate policy would need to purchased for this as well. Like flood insurance, a separate policy can be purchased through FEMA for an additional cost. This can be an important add-on if you live in an area that is affected by earthquakes.

Lastly, one of the most commonly added on coverages to a homeowners policy is sometimes referred to as scheduled personal property endorsement or jewelry rider. As we discussed earlier, some specific types of personal property are subject to sub-limits. This means that you may have a $5,000 bracelet but may only get $2,500 for it if it were stolen.

With a scheduled personal property endorsement, you can insure that $5,000 bracelet for that exact amount. This endorsement also insures items on an all-risk basis, meaning that you would be covered for anything that could happen to it, as long as it’s not excluded. Scheduling your high value items are the best way to insure them.

What Types of Damage Are Not Covered by Homeowners Insurance?

As with any type of insurance policy, there are exclusions, of which you should be aware. The following are some damages you can expect to not be covered by your homeowners insurance:

• Intentional Damage – Damage that you intentionally cause is never covered by insurance. Losses must be accidental or sudden and caused by one of the covered events specified in your policy.

• Flood – As mentioned previously, flood is a peril that needs to be insured under a separate insurance policy through FEMA.

• Pest Infestations – Damage caused by termites, ants, and other pests are not covered under your policy as remediation is considered part of your home’s routine maintenance.

• Earthquake – Any type of earth movement, including earthquake needs to be insured under a separate insurance policy.

• Mold – Generally, homeowners’ insurance policies exclude mold damage. However, there are some cases in which it can be covered, so you should always chat with your agent to confirm.

How to Reduce the Cost of Homeowners Insurance?

After discussing all the ways in which your homeowners’ insurance premium can increase, I’m sure you’re asking yourself how you can reduce the overall cost. Luckily, there are a few things you can do.

• Increase Your Deductible- Remember that the more risk you take on with your deductible, the less your price will be. A standard home insurance deductible is typically $500 but if you can afford a higher deductible in a loss, you can save money every month by increasing your deductible to $1,000 or even $2,500.

• Add Discounts- Confirm you are getting all applicable discounts for which you are eligible. Add additional safety features to the home to get a credit on your policy, such as water detection or burglar alarms.

• Shop Around- Get quotes from other homeowners’ insurance carriers. Since the coverages, deductibles and discounts offered can vary between companies, it’s very likely you may find a lower price elsewhere.

How to Choose the Best Homeowners Insurance

As you’re shopping around for homeowners insurance, you will want to evaluate more than just price. While price should be an important consideration, it shouldn’t be the only one. Here are some additional things you should look at to determine the best homeowners insurance for you.

First, do your research. There is a ton of information online about any specific insurance company, such as financial ratings and customer or claims reviews. These can tell you a lot about a carrier.

Additionally, try to evaluate your coverage needs and let that guide you in your search. For example, you may own expensive art work that you display in your home. Try to find an insurer who offers a personal property schedule for these pieces and is experienced in handling these types of claims.

Lastly, lean on the experts. Licensed independent agents work for you, and not the companies they represent. Let them help you find a company that can best fit your needs at a price you can afford.

Do You Need Homeowners Insurance?

While homeowners insurance is not legally required by the state like auto insurance is, it is often mandated by your bank if you have a mortgage. Since they are fronting you the money to purchase the home, they want to protect their interests. But regardless of whether you have a mortgage or not, it is a good idea to purchase anyway.

Consider the risks of not having home insurance. A hurricane snaps a tree branch that falls onto your roof or your dog inadvertently knocks an elderly visitor to the ground who breaks their hip. These may sound like far fetched scenarios, but wind and hail damage account for 45.5% of all homeowner losses, and homeowners average $31,663 in bodily injury liability losses per year. If you don’t have the funds to pay for these losses out of pocket, homeowners insurance is needed.