How Much is Homeowners Insurance on a $1 Million House?

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Updated: 15 March 2024
Written by
Jeff Bray
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When it comes to achieving the American Dream, many people have buying a home on their list of objectives. Owning a home is a big decision and means taking on big responsibilities – one of them is finding the right Homeowners Insurance. But with so many options available, how can you find the right one for you?

The worst thing you can do is focus only on getting a low price and, by so doing, buying a policy that doesn’t cover everything from the foundation to the roofing system. In my experience, homeowners want choices. They want to easily see what policies include and exclude to help them make the best decisions for them.

Educating yourself as a homeowner is a good idea since you’ll enjoy homeownership better when you make smart decisions. In this review, we’ll show you the ins and outs of Homeowners Insurance on a $1 million home.

Key Takeaways

  • The cost of home insurance is driven by the insurers’ judgment of the odds of you filing claims. This is referred to as risk.

  • Each state and city has different risks that influence Homeowners Insurance rates. Risks can include environmental dangers such as flood, fire, or earthquake.

  • Homeowners can protect their residences from risk by knowing their residences, the regions they live in, and buying the right Homeowners Insurance coverage.

How Much Is Homeowners Insurance on A Million Dollar House?

Homeowners may pay up to $5,000 annually for house insurance on a $1 million residence. That works out to $416.66 monthly. That said, what you pay every month will be based on things like your coverage tally and the way your policy is structured.

There are several factors that insurance companies look at when structuring premiums:

Your deductible: After reporting a claim, you will have to pay a certain amount of money before your insurance company steps in and covers the rest. What you pay is called the deductible. The higher your deductible is, the lower your premium is.

Where you reside: Your address will factor significantly into your premium. If the area faces significant risks for fires or crime, your insurance premiums will be higher. The good news is there are some ways you can reduce expenses – more on that later.

Claims history: Have you filed a claim before? Your rates can climb if you have a history of filing claims.

You may not be the problem: It’s possible, even if you don’t have a history of claims, to see your premiums increase. The crime rate in your neighborhood, for instance, can boost premiums.

Cost Of Homeowners Insurance by State

One of the largest factors in Homeowners Insurance is your location. Someone can pay $32 per month for home insurance for a $250,000 home in Hawaii and pay $304 for the same coverage for a $250,000 home in Oklahoma. It really is all about location.

For that same $250,000 residence let’s see the premiums in some other U.S. states.

Premium State
Maryland $97
North Carolina $108
New York $126
Florida $165
Utah $58
Tennessee $146
Washington $79
Illinois $117
Texas $164
California $102

Most expensive states

When considering the states with the most expensive Homeowners Insurance, let’s stick with the example of a $250,000 home. We have already seen that Oklahoma homeowners pay the most with policies coming in at $304 monthly. Other expensive states include the following:

State Premium
Kansas $257
Nebraska $246
Colorado $179
Arkansas $177
South Dakota $175

Cheapest states

Now, let’s check out the states offering the lowest monthly premiums for $250,000 homes. Hawaii homeowners can get policies at $32 monthly. Other cheap states include the following:

State Premium
Vermont $55
Delaware $57
Utah $58
Oregon $60
New Hampshire $61

Cost Of Homeowners Insurance by Policy Limit

When you buy a home, it’s always best to insure it for the full value. Usually, the lender will insist on it, so you won’t get the option of doing otherwise. Insurers work by quote-based increments of $100,000 or $50,000.

Remember that your residence’s sale price is not always the sum you want for your house insurance policy. This covers your dwelling only. House insurance safeguards your personal possessions should you experience a loss covered under the policy.

When you sustain a total loss, the payment should match the worth of your home and property. You’ll need added coverage, known as a rider, to cover the loss of extensive items like heirlooms, paintings, and artwork.

Cost Of Homeowners Insurance by Company

No two insurance companies are alike, and this fosters competition. You should seek quotes from three or more insurers and select the right one for your situation. As we touched on earlier, insurers put together their policies based on factors like your region. Each insurer rates this variable differently, so you need to keep this in mind when comparing quotes.

The three basic Homeowners Insurance policies are:

HO1: Basic Form – This is called a ‘named peril,’ which refers to a list of perils the tenant can encounter on your policy. Incidents not on the list won’t be covered.

HO2: Broad Form – It covers more than the basic HO1. Specifically, it covers the named perils and other issues like falling objects, the weight of ice and snow, and the overflow of water or stream.

HO3: Special Form – This happens to be the most prevalent kind. It merges HO1 and HO2. It also adds Liability insurance, Medical Payments, Additional Living Expenses, and personal property coverage. The special form is known as an ‘open peril,’ meaning it covers all perils save for those excluded.

Each of these will carry a different cost, so when pricing your policy, ensure you receive the correct HO form policy quote.

How Do You Calculate Your Home Insurance Needs For a $1 Million House?

It is vital to understand your home, and that’s true whether you’ve lived there for a short time or many years. A house insurance policy is one of the most significant insurance decisions you will ever have to make if you experience a loss and have to file a claim.

It is vital to consider factors like the following prior to making your purchase.

  1. The home itself – You need coverage if you lose your home because of a covered peril.
  2. What if someone gets injured at my residence? – You need coverage to pay for expenses if someone is hurt on your property. It will cover liability and medical costs.
  3. Other buildings around your home – You need coverage for structures on your property like garages, doghouses, and sheds.
  4. What you own – You need coverage from personal possessions in the event they’re misappropriated or lost.
  5. What if I can’t live in my residence? – You need coverage to pay for living expenses if an incident means you can’t live in your home during the rebuild phase.

Looking at these factors will help you figure out the right target policy for a $1 million home. You’ll want to ensure it’s enough.

What Do You Need to Cover in A $1 Million Home?

We mentioned it earlier, but let’s focus on it a bit more. What should you cover in your $1 million home? A regular HO3 policy has lots of coverage levels, but there are many exclusions also. Among the exclusions are the following:

  • Flood damage
  • Rodent infestation
  • Foundation issues
  • Neglect
  • Mold damage
  • Intentional damage
  • Earthquake
  • Power failure
  • Pet damage
  • Defective construction

While this is the case, you can get some riders to cover some of these excluded items.

Earthquake Damage

A standard HO3 won’t usually include earthquake-related damage. But you can add an earthquake rider to get the coverage you want for your home or possessions.

Flood Damage

Let’s look at rainwater. A home insurance policy will cover water damage if the water falls from the sky. The policy will also cover most damage caused by hurricanes without you needing to buy a separate rider or deductible. You won’t be covered if the water rises from beneath the earth. You’ll require a flood rider for such coverage.

Important: If you own valuables, they might not be covered by your home insurance policy. You may need to get extra coverage to cover things like artwork, paintings, and other collectibles.

Does a $1 Million Home Need Replacement Cost Coverage?

A car loses value the moment someone drives off the dealership lot. The same can be said, albeit to a lesser extent, about a home. After a seller hands the keys to a buyer, the house starts losing value. While the depreciation isn’t as steep, the house will depreciate, nonetheless.

When looking at Homeowners Insurance, consider replacement cost vs. actual cash value:

Actual Cash Value (ACV): When buying a home, you pay $1 million. As your home gets older, it loses its value. When you file a claim 10 years later, the house might be worth $970,000. This is the ACV.

Replacement Cost Value (RCV): When buying a home, you pay $1 million. When you file a claim 10 years later, the house might be worth $970,000. But you will get $1 million. You won’t get a lower payout because of depreciation.

There are some add-ons to RCV — Guaranteed and Extended Replacement cost. Guaranteed will rebuild your residence to the specs of the original home. Extended will factor into the equation home value inflation.

A home that cost $1 million to build may cost $1.1 million to construct now. It is intended for people residing in disaster-prone regions like Tornado Alley.

How to Get Home Insurance for My $1 Million House?

Purchasing house insurance doesn’t need to be a difficult process. We understand you want to know about insurance for a $1 million house, and we have recommended getting at least three quotes from insurance companies. Assuming you’ve already done the above-mentioned, what do you need to do next?

Compare your quotes

Don’t assume the lowest quote is the best quote. It might turn out to be. But you need to get three or more quotes and then compare apples to apples to find the right policy. Read everything carefully so you know exactly what you’re getting.

1

Explore options

Cash value vs. replacement cost will influence your monthly premium. It can also assist you in the future to replace your home in the event of a total loss.

2

Explore discounts

If your home insurance company also offers car insurance, consider switching your car insurance over so that you use the same service provider. You can save money by bundling insurance coverages.

Where you work and which organization you are part of can also lower your Homeowners Insurance premium. You can lower it even more by going paperless and paying annually rather than monthly.

3

Talk to a live person

You can get Homeowners Insurance online, but you should speak to a live agent. That will ensure you get the best possible coverage for your needs and that you get discounts you might not find on your own.

4

How to Save On Homeowners Insurance for a $1 Million House

It’s possible to save a lot of money on your house insurance. This is one of the best reasons to speak with a live agent. The agent can ask questions, answer questions, and search for discounts to help reduce your insurance premium. Earlier, we discussed bundling and going paperless. But there are, as you’ll see below, other ways you can slash your bill.

Deductible and coverage limits

Reducing your policy limits can help you lower your premium.

Construction code

If your house is up to code or you’ve retrofitted it for storms, you can lower your premium.

Installing security cameras

Installing security cameras in your home and on your property can deter criminals and lead to lower premiums.

Your credit score

Insurance companies look at your credit score when figuring out your insurance rates. Improving your credit score can reduce your premium.

Where you live

Living in a low-crime region will lead to lower house insurance.

Factors That Affect the Cost of Homeowners Insurance

We mentioned that where you love is a big factor when determining premiums. Other factors include things like the following:

Age of the home

How old is the home? A newer home will be cheaper to insure than an older one since, among other things, the newer home will likely be more up to code.

Weather

Living along the Gulf Coast, in earthquake country, or in tornado alley, will lead to higher insurance rates. You’ll need add-on riders to cover some of these potential incidents.

Proximity to fire hydrant

The closer your home is to a fire hydrant, the lower your house insurance will be.

Building materials

What your home is constructed out of will influence your insurance cost. Wood and sheetrock or brick and mortar can play a role in what you pay in premiums.

Other elements that can play into your insurance premium are how many people live in your area, specific state regulations, and marital status.

FAQs

Is it difficult to get Homeowners Insurance on a $1 million house?

It’s not hard to seek out Homeowners Insurance for a $1 million residence. The primary thing is to locate an insurer selling coverage in your area. When you fill out applications to get quotes, ensure you’re comparing apples to apples. So, don’t compare an HO1 policy to a HO3 policy, for instance.

What is the cheapest state for $1 million homeowner insurance?

Vermont works out to be the least expensive state to buy home insurance in.

What does Homeowners Insurance cover?

The most common Homeowners Insurance policy, which is HO3, covers the residence itself, other structures like a garage or shed, your personal possessions, additional living costs if you are displaced, and personal liability if someone gets hurt on your property.

What is excluded by Homeowners Insurance?

There are thirteen perils that Homeowners Insurance won’t cover. But you can buy riders to cover some of those excluded items. The thirteen named perils are the following: Flooding, nuclear hazard, local building ordinance or law, pest infestations, mold or wet rot, certain dog breeds, wear and tear or neglect, power surges, earth movement, home-based business liability, intentional damage, war, and government action.

What are the most expensive states for $1 Million Homeowners Insurance?

Kansas, Oklahoma, and Nebraska are among the costliest states to get home insurance. These states are within Tornado Alley. But you can lower your monthly costs in various ways. You can buy a home made of brick, for instance. You can also install shatterproof glass or storm shutters.

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