On average, the annual cost of a homeowners insurance policy in 2020 is $1,445, but in reality, the average cost between different regions, states, and individual households can range greatly. A number of factors come into play when an insurer is determining your home insurance quote, including:
- Home age
- Condition of the home
- Replacement cost/coverage limits
- Homeowner’s credit history
- Homeowner’s insurance history
- Home location (region, state, neighborhood)
Table of Contents
- 1 How Natural Disasters Impact Home Insurance Cost
- 2 How High Cost-of-Living Affects Premiums
- 3 How Home Insurance Costs Can Change Over Time
- 4 How Homeowners Cost Varies Based on Coverage Limits
How Natural Disasters Impact Home Insurance Cost
Home insurance includes more than just dwelling coverage. Standard policies will also include personal property, liability, medical bills for guest accidents, and loss-of-use coverage for you and your family. The same rules apply to these types of coverage for dwelling coverage. Your insurer will only cover events that are caused by named perils.
For example, if there is damage to your personal property, but it occurs as a result of flooding, your policy won’t use funds of your personal property limit to repair or replace the damaged items. Depending on where you live, you may need to consider how you will protect yourself financially from these excluded perils.
In many areas of the country, homeowners have to worry about specific natural disasters. Hurricanes and the resultant flooding are common in southeastern states like Louisiana, Florida, Texas, North Carolina, South Carolina, Alabama, and Georgia. Tornadoes are frequent in states like South Dakota, Texas, Kansas, and Oklahoma, while states like California, Hawaii, Alaska, and Nevada are most affected by earthquakes.
As a result, homeowners in these states will often need to take out an additional policy along with their main home insurance policy in order to protect their home and belongings fully. This contributes to the average cost of home insurance.
How High Cost-of-Living Affects Premiums
On top of these extra policies, homeowners in more expensive areas will need higher coverage limits for their dwelling coverage. Home insurance policies should be bought with the intention of fully covering the cost to completely rebuild the home in the event that it is totally lost during a covered event, such as a fire.
The replacement cost is calculated using the building costs, which include the cost of materials and labor to rebuild the home. In a high cost-of-living area, these costs will be increased, which will mean a more expensive policy and a higher premium, too.
That’s why Florida often has the highest-costing home insurance policies. The state has a higher risk of hurricanes, tornados, and floods compared to other areas in addition to having a lot of expensive real estate due to being on the coast.
How Home Insurance Costs Can Change Over Time
The National Association of Insurance Commissions (NAIC) has reported that, in the last decade, the cost of home insurance has risen almost 47%. Homeowners need to frequently update and reevaluate their policies, not only to make sure their home is adequately covered but to know that their insurer is giving them the best rate possible.
In 2019, Florida homeowners paid $3,575 for their homeowners policies, which was almost three times as much money as the national average cost. On the opposite end of the spectrum, Hawaii had the lowest average premium, at $337, which is only 27% of the national average cost.
Top 5 U.S. States for Most and Least Expensive Average Homeowners Insurance in 2019
|Most Expensive States||Average Home InsurancePolicy Cost||Average Home InsurancePolicy Cost||Least Expensive States|
If you compare those statistics to the 2020 averages, you can see just how much home insurance costs can change in a year’s time and why it’s important to regularly reevaluate your policy as much as insurance companies regularly recalculate the risk and costs of insuring properties in different regions of the country.
Top 5 U.S. States for Most and Least Expensive Average Homeowners Insurance in 2020
|Most Expensive States||Average Home Insurance Policy Cost||Least Expensive States||Average Home Insurance Policy Cost|
|South Carolina||$2,321||New Hamshire||$773|
How Homeowners Cost Varies Based on Coverage Limits
The total coverage limit you need for the replacement cost of your home will have the biggest impact on the final cost of your policy.
Based on surveys conducted by Bankrate, these dwelling coverage limits have the following corresponding average annual premium:
- Under $50K – $681
- $50 to $75K – $781
- $75K to $100K – $839
- $100K to $125K – $875
- $125K to $150K – $914
- $150K to $175K – $954
- $175K to $200K – $990
- $200K to $300K – $1,081
- $300K to $400K – $1,242
- $400K to $500K – $1,466
- Above $500K – $2,164
For states with higher averages of home insurance premiums, these values can be used to find a relative estimate of what you might expect to pay for policy coverage limits where you live.