Homeowners insurance cost: What you can expect to pay

Buying a home comes with more costs than the mortgage—like homeowners insurance.

“Homeowner’s insurance pays for losses and damage to your property if something unexpected happens, like a fire or burglary,” the Consumer Financial Protection Bureau (CFPB) explains. “When you have a mortgage, your lender wants to make sure your property is protected by insurance. That’s why lenders generally require proof that you have homeowner’s insurance.”

Read on to learn more about the cost of homeowners insurance, what it covers and more.

Key takeaways

  • Homeowners insurance is a necessary part of owning a home.
  • The cost of homeowners insurance varies based on a variety of factors—including the home’s location, age and condition, as well as the level of coverage.
  • There are some ways to lower homeowners insurance costs, and you might be eligible for some or all of these options.

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How is the cost of homeowners insurance determined?

While renters might insure their belongings through renters insurance, homeowners are required to have homeowners insurance when they buy a home. And you can do your own research and compare costs to see which insurers offer the lowest rates, the most coverage and more.

Not everyone pays the same amount for homeowners insurance because the cost can be affected by a number of different factors, including:

Location

Where you’re buying property can play a major role in how much you’ll pay in homeowners insurance.

For instance, homeowners insurance could be relatively inexpensive in areas that aren’t susceptible to natural disasters. But it can be significantly more expensive in, for example, midwestern states like Kansas, Nebraska and Oklahoma that are prone to tornadoes.

The potential for weather-related damage isn’t the only reason location is a major factor in the cost of homeowners insurance. The costs of materials and labor for potential repairs can also play a role, as can crime statistics.

Home size

The square footage of a home matters in calculating the cost of homeowners insurance. That’s because damage to a large home, for example, often costs more to repair than damage to a smaller home.

Home age

The age of the home is also a major factor in how much homeowners insurance will cost. The older a home, the more expensive coverage might be. And claims on an older home may pay out less than those on a newer one.

For instance, some policies state that in the event of a claim, damage to an older roof will pay out less than it would for a newer roof. Claims on newer roofs, on the other hand, may pay up to the full cost of repair or replacement.

The deductible

Like health insurance, the higher your deductible, the lower your monthly or annual payment for coverage. The lower your deductible or the more coverage you have, the more you’ll pay in insurance premiums.

The level of coverage

The more a homeowners insurance policy covers, the more it might cost. A policy that covers up to $250,000, for example, will cost less than a policy that covers up to $350,000.

And as the CFPB explains, “Standard homeowner’s insurance doesn’t cover damage from earthquakes or floods, but it may be possible to add this coverage.” Adding this type of coverage will increase the cost of the policy.

Past claims

The more claims you or previous owners filed on the home, the more you can end up paying in homeowners insurance now. If you have a history of filing a lot of claims, you might seem riskier to lenders, compared to those who haven’t filed many claims or any at all.

Your credit history

In some states, insurance providers may check your credit history when you apply for a homeowners insurance policy. Checking your credit can help insurers predict how likely you are to file a claim. Generally, the better your credit, the less likely you might be to file a claim and the better and cheaper your coverage might be.

What does homeowners insurance cover?

Homeowners insurance generally covers:

  • Your home. Sometimes called a dwelling, your home and other structures around your home, like a garage, shed and deck, are all covered.
  • Your personal belongings. This is what’s inside the home, like your furniture, clothes, electronics and valuables. The people and pets in your home are also covered.
  • Liability. This is what protects you from lawsuits. If someone falls or gets injured in your home, you could be held liable. Homeowners insurance can protect you in these instances.
  • Alternative living expenses. If your home ever gets destroyed or is otherwise unlivable due to circumstances out of your control—like a natural disaster—your homeowners insurance covers costs associated with temporarily living somewhere else. This could be short-term rental or hotel stays, some meals, pet-related costs, and more.

How much home insurance do you need?

The biggest factor in determining how much home insurance you need is how much it would cost to rebuild your home if it were completely destroyed.

There are different policy amounts based on different needs. When you contact your potential homeowners insurance company, they will go over the details about your home, including the coverage you need. If, for example, you have a lot of antiques or collectibles you keep in a large home, you might need more coverage compared to someone who lives in a smaller home with fewer valuables.

Is my mortgage insured under my homeowners policy?

Mortgage insurance, sometimes referred to as private mortgage insurance or PMI, protects your mortgage lender—not you—when you take out a home loan. You can usually avoid this if you have a down payment of 20% or more. If you can’t meet that down payment, you’ll need mortgage insurance.

Mortgage insurance and homeowners insurance are not the same thing. Mortgage insurance lowers the risk a lender takes on you when you take out a loan. It’s part of your mortgage payment and goes to your lender while homeowners insurance gets paid to a separate insurance company.

Home insurance costs by state

Remember: Where you live can have a profound impact on how much you pay in homeowners insurance.

In which state is homeowners insurance cheapest?

Hawaii has the cheapest homeowners insurance at an average of $382 a year. Vermont is next, averaging $658 a year. Then comes Delaware at an average of $679 annually.

In which state is homeowners insurance most expensive?

Oklahoma residents are currently paying an average of $3,659 a year for homeowners insurance—the most in the country. Next is Kansas at $3,083 and then Nebraska at $2,951.

What causes homeowners insurance rates to go up?

Homeowners insurance rates go up any time you file a claim. Think of it like auto insurance: If you get into an accident and you’re found to be at fault, the cost of your car insurance will go up after you file a claim.

Similarly, if you file a claim with your homeowners insurance provider, the cost of your homeowners insurance will go up.

Filing a claim isn’t the only reason the cost of your homeowners insurance can go up. For example, the cost can go up as your house ages. Inflation can also affect the cost of coverage.

How to lower the cost of homeowners insurance

Like other insurance options, there are ways to lower your homeowners insurance cost, including:

  • Raising your deductible. The higher your deductible, the lower your monthly or annual payments will be.
  • Bundling your insurance. Having different types of insurance with the same company could lower your total costs. Many insurance companies offer bundling for home, auto and more.
  • Discounts. Some homeowners insurance policies offer discounts for things like environmentally friendly updates and appliance upgrades.
  • Avoiding small claims. The more claims you make, the higher your premiums will be. If you can afford to pay out of pocket for minor home repairs, it could save you money compared to filing a claim instead.
  • Building or rebuilding your credit. Remember: Your credit history could impact how much you pay for homeowners insurance. This means building or rebuilding your credit could lower the cost. You can monitor your credit with CreditWise from Capital One. It’s free and available to everyone—even if you don’t have a Capital One account. And using CreditWise won’t hurt your credit scores.

Homeowners insurance costs in a nutshell

Homeowners insurance is a necessary part of owning a home. It might be one of many surprising costs of homeownership that you should be ready for. Take time to compare policies from insurance companies that are available in your area. And don’t forget to monitor your credit—the better your credit, the lower the cost of homeowners insurance might be.

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