Factors that impact your cost of homeowners insurance
Nationally, the average cost of home insurance is $2,151 per year. However, your exact rate will likely be different. Home insurance is a highly personalized product, and what you pay will depend on rating factors that are personal to you. Knowing what most home insurance companies look at when determining your rate can help you better understand your home insurance quotes, and may even help you to lower your premium.
Factors that affect the cost of home insurance
Some rating factors for home insurance are specific to you as a homeowner, while others have more to do with your home’s physical structure or the location. Your policy specifics will also factor into how much you pay for coverage. Overall, home insurance rates are a calculation of risk. If your insurance company sees you as more likely to file a claim or experience a loss due to a covered peril, you’ll likely pay more than average.
Location
Your state and even your ZIP code may influence the amount you pay in home insurance premiums. If your house is located in an area with a history of losses, such as vandalism, theft or weather-related events, you may see a higher rate. For instance, if you live in an area prone to tornadoes, you might pay more. For example, the average cost of home insurance in Oklahoma is $4,675 per year, while the average cost in Alaska (which had zero recorded tornadoes in 2023) is $1,189 for the same amount of dwelling coverage. However, location could have a positive impact, too.
Location also impacts the replacement cost of your home, since construction costs, including labor and materials, may vary depending on the region.
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Most location-based home insurance savings must be considered before you buy your home. After all, it’s unrealistic to up and move your property to a lower-risk ZIP code to obtain a discount. If you’re considering buying a home, consider using free online resources like Risk Factor or Climate Check to get more familiar with the disaster risks in your area.
Dwelling coverage
Dwelling coverage is the portion of your homeowners insurance policy that covers your home’s physical structure. Insurance companies and licensed agents have valuation tools that help calculate dwelling costs. An insurance agent — or online quoting tool — will likely ask you questions about your home to determine how much it might cost to rebuild. Be prepared to answer questions about the age of your home and major systems (HVAC, plumbing, electrical), the roof age and condition, the type of building materials used, the square footage and even the unique features of your home, such as dormers or architectural characteristics. These home valuation calculators are proprietary and each company has its own algorithms, so the rebuilding cost of your home will vary between providers.
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While you could technically lower your dwelling limit for a cheaper rate, most home insurance experts recommend against this approach. Opting for minimal home insurance could leave you underinsured and vulnerable to a substantial financial loss if and when your home sustains damage. Plus, your dwelling limit is an important baseline for other policy limits, as many other coverages are set as a percentage of your dwelling coverage. You can compare average rates for different dwelling limits in the table below.
Dwelling coverage limit Average home insurance rate $150,000 $1,274 $300,000 $2,151 $350,000 $2,450 $450,000 $3,056 $750,000 $4,824 If you are renovating or upgrading your home, it may be a good idea to keep in mind how these renovations may affect your insurance costs. For example, upgrading your home’s electrical system may offer you a cheaper premium or make you eligible to shop with more property insurance companies. On the other hand, finishing your basement or building an in-ground swimming pool is likely to increase your insurance costs because it increases the replacement cost value of your home. In either case, make sure to keep your insurance company up to date on any renovations you make to help avoid headaches if you need to file a claim in the future.
Credit history
In all states except California, Maryland and Massachusetts, insurers can use a homeowner’s credit-based insurance score as a rating factor when assessing the level of risk they are taking on. A higher credit-based insurance score is associated with lower risk by insurers. Insurance industry actuarial data shows that homeowners with poor credit histories are more likely to file claims than homeowners who have good or excellent credit.
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Building credit can take time, but the home insurance savings could be worth it in the long term. Based on our analysis of rate data from Quadrant Information Services, moving from a poor to an average credit tier could save you an average of $2,611 per year.
Credit tier Average home insurance rate Poor $4,973 Average $2,362 Good $2,150 Excellent $1,837
Claims history
Insurance companies often take previous claims filed within a certain time frame into consideration when calculating your rate. When a homeowner files a claim, their homeowners insurance company generally assumes they are more likely to file future claims — potentially even for the same reason. Having a history of filing insurance claims, even small ones, might indicate an even greater future claims risk for the insurance company.
Insurers may assess your personal claims history at current and prior properties. What that means is that even if you’re insuring a new home, your prior claims history from other homes will be visible to insurance companies for up to seven years on your Comprehensive Loss Underwriting Exchange (CLUE) report and will likely affect your premium on your new house. The CLUE database also includes claims filed that may have been denied by your insurer.
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Filing a claim will usually increase your premium. Below, we’ve broken down how average rates were affected by different home insurance claims:
Claim type Average home insurance rate after claim Difference from national average $80,000 fire loss $2,299 +$149 $31,000 liability loss $2,285 +$135 $5,000 theft loss $2,301 +$151 $12,000 wind loss $2,254 +$104 As a rule of thumb, most insurance experts recommend not filing a claim if the repair estimate is close to or less than your deductible. That way, you can avoid a surcharge on your premium and potentially save more in the long run. When in doubt about filing a claim, insurance professionals recommend discussing it with your insurance agent to help determine if you should move forward.
Marital status
Whether you’re a first-time home buyer or have owned a home for many years, your marital status may impact your homeowners insurance rates. Insurers typically charge lower rates to married couples because statistical data shows a lower probability of filing claims compared to unmarried homeowners. However, marriage is prohibited as a rating factor in Hawaii or Massachusetts.
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Some companies offer a discount for just-married couples, which can help homeowners who are starting their lives together save on a policy for their home.
Age of home
If you live in an older home, you will likely pay a higher home insurance premium. The older the house, the more likely it is that aging construction materials could lead to damage to key components, such as electrical, plumbing or roofing. Older homes may need to be brought up to code as part of the rebuilding process, so you may want to consider adding ordinance or law coverage as part of your homeowners insurance policy.
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If your home is older, you might be able to take certain measures to modernize it and save money. For example, homes built before 1950 typically have knob and tube wiring, which may be more susceptible to electrical fires, and could increase the risk of a claim. Updating the wiring could reduce those risks and lower the chance of a fire, decreasing your premiums or helping you find a more competitive rate. In addition, some insurance companies provide a potential discount if you make renovations that improve the safety of your home — just make sure you let your insurance agent know about any changes.
Construction year Average home insurance rate 1959 $2,650 1982 $2,663 1992 $2,655 2010 $2,456 2016 $2,150 2020 $1,850
Deductible
A homeowners insurance deductible sets the amount you are financially responsible for after you file a claim. Agreeing to a higher deductible may decrease your premium, but it could also cost you more out of pocket. Some insurers offer diminishing deductibles on your home policy.
In Atlantic and Gulf Coast hurricane-prone states, homeowners may have a separate deductible for wind damage caused by named storms. Similarly, in tornado-prone states, homeowners may have a separate deductible for wind and hail damage.
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Increasing your deductible(s) could reduce your monthly premium, but this strategy should be approached with caution. It can be tempting to raise your deductible to the maximum your insurance provider offers to secure a lower premium, but this amount comes back around when you need to file a claim. Generally, most insurance agents and experts suggest you keep your deductible to a level you can reasonably afford to pay out of pocket at a moment’s notice.
Deductible Average home insurance rate $1,500 $2,094 $2,000 $1,969 $5,000 $1,760
Endorsements
Endorsements are additional coverages you can purchase to amend your home insurance policy, which provide broader coverage than what is typically included in a standard home policy. You can buy endorsements for valuable pieces of personal property, like jewelry, or to add more protection for your home. Water backup coverage, service line coverage and ordinance or law coverage are some other common ones. The more coverage you purchase from your insurance company, the greater level of financial protection you’ll have — though at a higher premium.
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It’s important to review your policy before your renewal and make sure you need all of the coverage you pay for. If you purchased a home business endorsement but have set up shop outside your home, you might not need that endorsement anymore. Reviewing your policy with a licensed insurance agent can help you determine which endorsements you need, and which may not be necessary on your policy.
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Surprising factors that impact your home insurance rate
Though the factors above relating to a home’s construction and replacement cost, claims history and the insured’s credit-based insurance score are typically the most significant, there are other factors considered in setting rates that may surprise you.
- Type of home insurance policy: There are several different types of home insurance available, which differ in terms of benefits, perils covered, cost and kinds of homes that qualify for coverage. Some policies insure your home and property at actual cash value, while others use replacement cost value. Usually, the more coverage you have, the more you’ll pay in premiums.
- Distance from water: “Flood zones play a key role in whether or not you need flood insurance,” says Sean Harper, CEO and co-founder of Kin Insurance. “If you have a federally-backed mortgage, like an FHA loan and your home is in a high-risk flood zone, you’re required to have flood insurance.”
- Distance from a fire station: Wherever you live, the premiums you pay for home insurance are likely to be impacted by the proximity of your home to a fire department and fire hydrant. The closer you are to a fire station and hydrant, the greater the likelihood a fire can be quickly extinguished and severe damage or complete destruction of your home averted. The insurance industry generally uses the Fire Suppression Rating Schedule (FSRS) from the Insurance Services Office (ISO) to determine your home’s fire risk.
- Pet breeds: Having pets, especially certain dog breeds and exotic animals, may also impact your rates or even your eligibility with some companies. “Some companies will simply raise your rates to account for the increased ‘bite risk,’” says Harper. “Even if your dog isn’t a ‘restricted breed’, a bite history could also impact your rate or ability to get coverage.” However, if you are disabled and have a service animal or emotional support animal with specialty training, discuss this with your agent or provider to see if a lower cost or discount will apply.
- Attractive nuisances: If you have attractive nuisances or items on your property like a pool or trampoline that could be potentially dangerous and appealing — especially to children — you will likely see higher homeowners insurance costs or eligibility restrictions. Many home insurers will not insure your property if you have a trampoline or a diving board for your swimming pool.
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Home protective systems and devices: Having smoke detectors, a doorbell camera or a security system may help reduce the chance of filing a claim and in turn generate a discount to lower your premium.
This is just a snapshot of some of the additional factors that affect your home insurance rates. However, insurers consider multiple pieces of information that may affect homeowners insurance premiums, including ones that might not be mentioned.
As a homeowner, try to focus on the rating factors that you can control, not the ones you can’t. You may pay more for insurance if the prior owner put in several claims on the home or if you live more than five miles away from a fire station. However, talk to your agent about what kind of safety features you can install to help offset some of those costs.— Shannon Martin, Bankrate Insurance Analyst
How does owning or financing a home impact my premium?
If you have a mortgage on your home, you may not be the only one with a say on how much home insurance you need. Most mortgage lenders require homeowners to have a home insurance policy. Depending on your location, you may also be required to carry a flood policy. Your lender has a significant insurable interest in your home, and requiring you to have home and flood insurance helps safeguard their financial investment.
If you own your home outright, it’s up to you how much home insurance you have — if you have any at all. As of mid-2023, 12 percent of homeowners admit to going without an insurance policy according to a consumer survey conducted by the Insurance Information Institute (Triple-I) and Munich Re. However, most insurance experts recommend against “going bare.” Your home is likely one of your largest financial investments, and without insurance, you could be left in a serious financial bind if your home is damaged.
Frequently asked questions
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If your home insurance seems too high, you might be able to lower your rates by reducing your coverage. However, before you adjust your coverage, ensure that you have enough financial security to pay for any out-of-pocket expenses you might face if your policy doesn’t cover a loss. You may want to speak with an insurance agent to find other ways to save on your policy or compare rates from other providers before you reduce your coverage.
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Making renovations to your home may lower your homeowners insurance premiums, but it typically depends on the updates, the insurance company you insure your home with and your policy specifics. For example, putting a new roof on your home could lower your premium, but remodeling your home could also increase your premiums. If your heating, electrical or plumbing systems are older, you may get access to a lower premium by upgrading them to new systems. To find out what improvement can potentially lower your home insurance premiums, it may be helpful to contact your insurance company or speak with a captive or an independent insurance agent.
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Hazard insurance for your home refers to the portion of your policy that covers damage to your home’s structure, or “dwelling”. Your mortgage company may request that you have dwelling coverage at a specific limit so that its financial interest is protected in the event of a coverage claim. The other parts of your home insurance policy, such as personal property and personal liability coverage, protect your personal financial interest as the homeowner, but these types of losses do not concern the lender.
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With inflation and the changing insurance market landscape, many homeowners may ask, “Why is my home insurance so high?” Several factors can make insurance premiums higher than what a homeowner would prefer. According to Triple-I, replacement costs for homes spiked 55 percent between 2019-2022 due to supply chain disruption, rising costs of construction material and labor shortages. It’s important that your policy is up to date and reflects current construction costs.
Some premium factors you have some control over, such as choice in deductible limit, additional coverages and material enhancements. Others, such as square footage, age of the home and location, are much more complicated to change. If you are unhappy with the cost of your home insurance premium, contact your agent to review discount options and consider shopping other insurance providers for a better rate.
Methodology
Bankrate utilizes Quadrant Information Services to analyze April 2024 rates for all ZIP codes and carriers in all 50 states and Washington, D.C. Quoted rates are based on married male and female homeowners with a clean claim history, good credit and the following coverage limits:
- Coverage A, Dwelling: $150,000, $300,000, $350,000, $450,000, $750,000
- Coverage B, Other Structures: $15,000, $30,000, $35,000, $45,000, $75,000
- Coverage C, Personal Property: $75,000, $150,000, $175,000, $225,000, $375,000
- Coverage D, Loss of Use: $30,000, $60,000, $70,000, $90,000, $150,000
- Coverage E, Liability: $500,000
- Coverage F, Medical Payments: $1,000
The homeowners also have a $1,000 deductible, a $500 hail deductible and a 2 percent hurricane deductible (or the next closest deductible amounts that are available) where separate deductibles apply.
These are sample rates and should be used for comparative purposes only. Your quotes will differ.
Credit: Rates were calculated based on the following insurance credit tiers assigned to our homeowners: “poor, average, good (base) and excellent.” Insurance credit tiers factor in your official credit scores but are not dependent on that variable alone. The following states do not allow credit to be a factor in determining home insurance rates: California, Maryland, Massachusetts.
Claims: Rates were calculated based on the following insurance claims assigned to our homeowners: “fire ($80,000 in losses), liability ($31,000 in losses), theft ($5,000 in losses) and wind ($12,000 in losses).”
Year built: Rates were calculated based on the following years built for homes and assigned to our homeowners: “1959, 1982, 1992, 2010, 2016 (base) and 2020.”
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