When it comes to homeowners insurance premiums, there are many variables. Understanding the various components that go into factoring premiums can help homeowners make an informed decision and, in some cases, find ways to lower homeowners insurance costs.
When insurers talk about homeowners insurance premiums, they are referring to the amount you must pay to keep your policy active. Whether you pay monthly, quarterly, or annually, timely insurance premium payments ensure that you can file a claim and receive compensation for damage to your home and belongings. Some homeowners pay premiums directly to their insurance companies, while others roll the premium into monthly mortgage payments as part of an escrow account.
When it comes to calculating your homeowner’s premium, insurance companies rely on a number of factors.
- Location plays an important role in terms of how safe your neighborhood is considered to be, particularly if you live in an area prone to floods, hurricanes, windstorms, or other natural disasters. Population density, crime statistics, and even the distance between your home and the nearest fire station can influence your premium.
- Insurers also take into account the amount of coverage when providing a premium estimate, as property values and replacement costs can vary significantly across the US.
- Credit scores come into play, although some states restrict or prohibit the use of such information to determine premiums. Homeowners with higher credit scores generally pay lower premiums, as they are considered less risky than those with lower credit scores.
- Deductibles directly correlate to premiums since insurers know that lower deductibles mean higher payments from the insurance company. Those looking to lower their premiums often agree to a higher deductible.
- Claim history It also gets a close look from insurance companies as they use this information to calculate the likelihood that owners will file future claims. Insurers can even see the number of claims filed in your zip code.
The average American homeowner pays just under $1,250 a year for a home insurance premium, according to the Insurance Information Institute (III). But premiums can vary substantially from state to state. Louisiana residents pay the highest average premiums at $1,987 per year, according to III data, while Oregon residents pay an average of just $706. Wyoming and Kentucky fall right in the middle, with average premiums of $1,187 and $1,152, respectively.
And the costs are rising. Premiums on average increased by more than 12% from 2017 to 2021, says the III. Major disasters, increased demand for building materials, labor shortages, and the lingering effects of the COVID-19 pandemic have all contributed to higher premiums for homeowners.
For some homeowners, a high premium just doesn’t fit their budget. These people can use several different methods to lower their insurance costs.
- Request a higher deductible may be an option for homeowners who would rather risk paying a higher deductible in the event of a claim than budget for a higher monthly premium.
- Multi-line discountssometimes known as pooling, You can often help lower premiums by consolidating policies with a single insurer. For example, a couple can bundle their auto and homeowners insurance and potentially pay less than they would by insuring their home and car with different providers. Most insurers offer similar savings with renters insurance.
- change insurer can lower rates in some cases, so it’s important for homeowners to get multiple quotes and compare premiums before buying a policy. It’s also worth reviewing your current coverage to make sure you’re still getting the best deal from your insurer. If you change insurers, make sure the new policy is in force before canceling your existing one to avoid a gap in coverage.
According to data compiled by US News and World Report, Erie Insurance offers the cheapest average insurance premium at $98 per month. However, Erie only does business in 14 states, mostly on the East Coast. If Erie isn’t an option, you may want to consider Liberty Mutual, ranked second in our ranking of the cheapest homeowners insurance companies. Liberty’s average monthly premium is $112.75.
Average monthly homeowners insurance premiums
These numbers represent averages, but owners should keep in mind that individual rates may vary based on policy type, location, and the other factors discussed above.
The Most Affordable Homeowners Insurance Companies of 2022
All fees listed are for illustrative purposes only. You must contact the insurance company or insurance agent directly for applicable quotes.
There are several methods of paying homeowners insurance premiums. Mortgage lenders often require homeowners who put down less than 20% of their down payment to pay for home insurance through an escrow account. Lenders generally pay the premiums annually and break them down into monthly payments as part of the mortgage.
After more than 20% of your mortgage loan is paid off, or if you own your home outright, you can decide how and when payments are made. Some homeowners keep their premium included in their mortgage for convenience, while others start making direct payments. At this point, homeowners can also decide if they want to make annual, quarterly, or monthly payments. Some insurers offer discounts to those who pay for a full year in advance.
No. You cannot deduct the cost of a homeowners insurance policy from your federal income tax, according to the Internal Revenue Service (IRS). The only time the IRS allows such a deduction is when someone owns property but rents it out. You may be able to claim a deduction if you are self-employed and work from your residence. Talk to a tax professional if you have questions about income taxes and your homeowners insurance policy.
Filing a claim can cause your homeowners insurance premium to go up. How much you can increase depends on several factors, including the type of claim (for example, a loss caused by a windstorm versus one caused by your own carelessness), how much the claim is, and how many claims you have filed in the past . Every time homeowners file a claim, they are recorded in the Comprehensive Loss Underwriting Exchange’s database. Insurers can review up to seven years of homeowners insurance claims, which can affect premium increases long after the initial claim.
To learn more about homeowners insurance, visit our other guides:
Related 360 Reviews
For more information on other types of insurance, see the following guides:
Why you can trust us
At US News & World Report, we rank the best hospitals, the best colleges, and the best cars to guide readers through some of life’s toughest decisions. Our 360 Reviews team uses this same unbiased approach to rate insurance companies and agencies. The team does not store samples, gifts or loans of products or services that we review. In addition, we maintain a separate commercial team that has no influence on our methodology or recommendations.
US News 360 Reviews takes an unbiased approach to our recommendations. When you use our links to purchase products, we may earn a commission, but that does not affect our editorial independence in any way.