Homeowners Insurance

Bankrate’s home insurance experts have compiled everything you need to know about home insurance in one place.

Owning a home means the reward of having a roof over your head you can call your own, but it also comes with risks like fire and theft, to name a few. One way to ensure that you’re protected against some of the most common risks is to get homeowners insurance. All insurance isn’t the same, however. How can you know what you’re buying? Here are answers to the top questions consumers have about home insurance.

What is homeowners insurance?

Homeowners insurance is a group of coverages bundled into one policy that can protect homeowners from unforeseen damage or loss from events such as weather, theft or vandalism.

Homeowners insurance provides relief in the form of cash or replacement of the contents of the home and the structure itself. It also provides liability coverage against claims from others that may have been harmed on your property. It providescoverage for the use of the home, as well.

What does home insurance cover?

Basic home insurance policies cover the repair or replacement of the structure of your house, as well as covered contents, from fire, wind damage or hail – as well as theft or vandalism. Other incidents are usually covered, though they may vary by policy. Loss of your use of the home is usually covered, as well; during the time you are waiting for repair or replacement, the policy should pay for alternate accommodations.

More comprehensive policies may include outside structures (such as garages or sheds) systems (sprinklers or home security) and machinery or equipment used outside of your home.

If you run a business from home or need specialty protections for expensive home contents (guns or collectibles), you might be able to buy these protections as additional riders. Check your contract language carefully to see what perils are specifically covered (or not covered), as well as what your insurance will pay to replace or repair.

Home insurance usually offers a level of liability protection. If someone falls and injures themselves in your driveway, for example, the policy can pay if you were to be sued.

How much does homeowners insurance cost?

Like most kinds of insurance, the cost will vary. Factors that determine your total cost for premiums include how much your home is worth, any outside structures, how you use your property and the total value of your possessions. The final cost can be hundreds up to thousands of dollars annually, depending on how low you want your deductible and whether you cover the full replacement cost of the home and its contents.

What is the best home insurance?

The best insurance for you depends on a number of factors. You want a policy that’s sufficient to replace the structure and contents of your home if it’s destroyed or damaged. Policyholders expect to have temporary accommodations while a new living arrangement is being prepared. A top policy will come with excellent customer service and make the claims process easy.

Which company has the cheapest home insurance?

The cost of home insurance is very personalized and follows a formula based on a variety of factors. What may be the cheapest company in one area may not be as affordable in another part of the country. Your home type, such as single-family versus condo, may alter the pricing, as well. Some companies won’t insure some types of housing. To get the best price on a policy, shop around with multiple companies.

How can I lower my homeowners insurance rate?

There are many ways to keep homeowners insurance costs down. Here are a few common ways:

  • Raise your deductible to secure a lower rate.
  • Pay your premiums upfront, instead of through monthly payments.
  • Bundle with your auto or life insurance.
  • Improve your credit.
  • Make improvements to the safety and security of your home, such as including additional fire prevention or home security technology. (Not all policies will lower your rate for these improvements, though.)

Going many years without filing a claim can have a long-term, positive effect on your rates.

Other industry-standard discounts may apply based on your demographics, such as rate cuts for couples, non-smokers and first-time homeowners.

How much home insurance do I need?

Figuring out how much insurance you need starts with calculating the replacement value of your home, or a similar home if it had to be rebuilt today. Then, add in the cost to replace your possessions, including any valuables or items that may not be easily purchased. Finally, consider the cost of an average liability claim—it might be much higher than the $100,000 limit in most basic policies. Consult with your insurance agent or company to see how these factors can be combined into a comprehensive home policy that protects your interests.

Who are the top 5 home insurance companies?

Some of the top home insurance companies in the U.S., according to Bankrate, are:

  • Amica Mutual
  • Allstate
  • Metlife
  • Geico
  • Farmers

What is flood insurance?

Standard home insurance doesn’t typically cover flooding, either from natural events or from structural failure. A separate flood insurance policy may be available in your area through select insurance companies who participate in FEMA’s National Flood Insurance Program. Like other policies, flood insurance doesn’t cover pre-existing water damage or a flood that’s already in progress at the time the customer buys the policy.

What is renters insurance?

Renters insurance is a group of coverages bundled into one policy that can protect renters from unforeseen damage or loss. It covers their property, their use of the property and liability that others may seek against them.

Here are Bankrate’s picks for the best renters insurance companies.

How much is renters insurance?

While the policy price will vary by customer and type of property covered, renters insurance is affordable. Average monthly premiums range from $15 to $30 a month.

What does renters insurance cover?

Most renters insurance policies cover your items in a rented property from events such as fire, wind, hail or theft. Renters insurance also provides some liability coverage, protecting you against claims if someone is hurt in your rented home. A good renters insurance policy will also protect other people’s property from damage the occurred in your home, as well as the cost for you to live somewhere else while your home is restored after an event.

How to compare home insurance rates

Homeowners insurance exists to help cover one of your largest investments. At its most basic level, home insurance provides financial protection against various perils or damaging events that may affect your home, such as theft, fire, storms and incidents that happen on your property. If you have a mortgage, your lender will require you to carry homeowners insurance.

When you purchase a homeowners insurance policy, you pay either a monthly or annual fee. Typically, insurance experts recommend purchasing enough coverage to rebuild your home and replace the value of the assets inside in the event that it is destroyed. By doing so, you reduce the chance of being left with costly out-of-pocket expenses and allow yourself to recoup your losses more quickly. It is important to note that the cost to rebuild your home is not the same as your home’s market value.

While the core purpose of homeowners insurance is consistent regardless of the home insurance company you choose, every provider is unique in its policy offerings. You have the ability to personalize your policy by choosing your coverage limits and endorsements and taking advantage of any available discounts. Factoring in these variables, along with your personal and financial situation, you will likely see a range of premiums when getting home insurance quotes from different companies. To compare quotes effectively, it might help to know more about home insurance.

Homeowners insurance coverages

The average annual cost of homeowners insurance in the U.S. is $1,312 based on a home with a dwelling coverage limit of $250,000. Several types of coverage are included in most standard policies to ensure your home insurance financially protects you in certain situations:

  • Dwelling coverage, also known as home structure coverage, protects your home’s physical structure as well as attached structures like a garage.
  • Personal property coverage makes up a large portion of your homeowners insurance and is designed to replace your home’s contents, including clothing, furniture, appliances and more. Standard personal property coverage may not offer enough coverage for particularly valuable items, however, so you may want to consider adding scheduled personal property insurance to your policy for high-value items.
  • Personal liability coverage helps financially protect you against potential legal fees from someone getting injured on your property.
  • Medical payments coverage operates similarly to personal liability, but specifically covers the medical bills of someone injured on or in your property, regardless of fault.
  • Additional living expenses (ALE), also known as loss of use coverage, helps cover food and temporary living expenses when you are displaced due to a covered peril. Covered expenses could include hotel, restaurant and laundry expenses.

Types of home insurance policies

There are several types of home insurance policies available, including:

  • HO-1 policies provide bare-bones coverage for a home for perils such as fire, theft and vandalism. This kind of policy only covers specifically named perils and excludes liability coverage.
  • HO-2 policies provide slightly more coverage than HO-1 policies and include some liability protection. HO-2 policies will cover detached structures, personal belongings and additional living expenses, but only from perils named in the policy.
  • HO-3 policies are the most common homeowners insurance policy type and include all the basic coverages. The key difference between HO-3 and HO-2 policies is that an HO-3 policy covers the physical structure of your home from open perils, or any that are not explicitly excluded from your policy.
  • HO-4 policies are designed for renters rather than homeowners. As renters insurance, HO-4s typically include many of the same coverages such as theft, explosions and additional living expenses, but coverage is limited to your personal property and does not include the actual structure since you do not own it.
  • HO-5 policies are the most comprehensive homeowners insurance policies available, and cover open perils for both your dwelling and personal property. As noted, coverage for open perils means any peril not specifically excluded, and your insurance company will provide a list of perils that are not covered, such as damage due to neglect.
  • HO-6 policies provide coverage for condominiums and have specific distinctions to account for what is covered — and not covered — by HOA policies. These policies, also known as condo insurance, typically cover the interior of your unit, personal property, personal liability, guest medical payments and loss of use.

Factors that affect homeowners insurance rates

Where you live, the condition of your home and the cost to replace it play the most significant role in determining your home insurance premium, but certain personal and financial factors, such as your marital status and claims history may also influence your rate. The insurance company’s goal is to collect information that helps determine risk to calculate your premium. When you start looking for a home insurance policy, it may help to do some research to determine your home’s replacement cost and the total value of your personal belongings to calculate how much coverage you will need. You might want to speak with a licensed insurance agent to determine what you actually need and what coverage options are available.

Homeowners insurance rates by state

Every state has unique factors, such as extreme weather events, that could affect your homeowners insurance premium. To start your home insurance search, it may help to know how your state compares to others in the nation. Afterward, consider looking into the common weather hazards and other factors associated with your ZIP code that may further influence your premium.

State Average annual cost Percent of median household income
Alabama $1,624 2.89%
Alaska $1,040 1.33%
Arizona $1,189 1.68%
Arkansas $2,142 3.93%
California $1,014 1.30%
Colorado $1,659 2.29%
Connecticut $1,184 1.36%
Delaware $680 0.92%
Florida $1,353 2.32%
Georgia $1,376 2.43%
Hawaii $376 0.43%
Idaho $835 1.27%
Illinois $1,322 1.78%
Indiana $1,150 1.72%
Iowa $1,289 1.95%
Kansas $2,694 3.68%
Kentucky $1,839 3.30%
Louisiana $1,813 3.51%
Maine $956 1.44%
Maryland $1,124 1.18%
Massachusetts $1,307 1.49%
Michigan $1,120 1.75%
Minnesota $1,785 2.19%
Mississippi $1,773 3.96%
Missouri $1,558 2.57%
Montana $1,826 3.03%
Nebraska $2,816 3.85%
Nevada $822 1.16%
New Hampshire $724 0.83%
New Jersey $751 0.86%
New Mexico $2,024 3.81%
New York $987 1.37%
North Carolina $1,295 2.12%
North Dakota $1,841 2.63%
Ohio $1,111 1.72%
Oklahoma $3,519 5.92%
Oregon $712 0.96%
Pennsylvania $730 1.03%
Rhode Island $1,193 1.70%
South Carolina $1,142 1.84%
South Dakota $1,917 2.98%
Tennessee $1,625 2.87%
Texas $1,863 2.76%
Utah $647 0.77%
Vermont $686 0.92%
Virginia $1,013 1.25%
Washington $863 1.05%
Washington, D.C. $902 1.06%
West Virginia $1,124 2.09%
Wisconsin $986 1.46%
Wyoming $805 1.24%

Homeowners insurance rates by carrier

Each carrier has a unique underwriting process and coverage offerings, so do not be surprised if you get different quotes from different insurance companies for the same coverage options. That is why it is a good idea to get quotes from multiple carriers so you can see which ones offer you the best coverage for your money. The table below showcases average annual premiums for a home insurance policy with a $250,000 dwelling coverage limit from the top providers in the U.S., listed in order of market share.

Home insurance company Average annual premium
State Farm $1,503
Allstate $1,458
USAA $992
Farmers $1,980
Travelers $1,269
American Family $1,295
Nationwide $1,042
Chubb $1,630
Progressive $1,026

Flood insurance for homes

Damage from floods is not covered under standard homeowner’s insurance policies, but flood insurance is available through the National Flood Insurance Program (NFIP) and some private insurers. Flooding can cause costly damage to your home and belongings and could happen at any time. If you live in an area prone to flooding, your lender may require you to purchase flood insurance.

On average, U.S. homeowners spend $700 per year on flood insurance, although like any insurance policy, your actual rates will vary. Flood policies usually require payment in full, so it is a good idea to research any area you plan to move to so you know in advance if flood insurance will be necessary.

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