Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
Average homeowners insurance cost in October 2023
The average cost of homeowners insurance in the U.S. is $1,428 per year for $250,000 in dwelling coverage. However, your actual rates may vary depending on a variety of factors.
At Bankrate, we strive to help you make smarter financial decisions. To help readers understand how insurance affects their finances, we have licensed insurance professionals on staff who have spent a combined 47 years in the auto, home and life insurance industries. While we adhere to strict , this post may contain references to products from our partners. Here’s an explanation for . Our content is backed by Coverage.com LLC, a licensed entity (NPN: 19966249). For more information, please see our
What To Know First
The right home insurance policy can help to financially safeguard your most valuable investment: your home. As home insurance rates across the country continue to trend upwards, homeowners may want to know more about their coverage options, why rates are changing, if they have adequate protection and what they can do to find the lowest home insurance premium. Bankrate's insurance editorial team understands that informed consumers may be empowered to make stronger decisions.
Our team, which includes licensed insurance agents, has analyzed average home insurance premium data provided by Quadrant Information Services. We reviewed rates from every state to help you understand where your premium falls compared to averages in your area, plus offer tips that may help you save money on your home insurance policy.
On This Page
- How much is home insurance?
- How much does home insurance cost in my state?
- How much does home insurance cost by company?
- What affects my homeowners insurance rate?
- What does home insurance cover?
- How are home insurance rates changing?
- Home insurance industry trends
- How to reduce the cost of homeowners insurance
- Frequently asked questions
- Methodology
How much is home insurance?
Based on rate data provided by Quadrant Information Services, the national average home insurance premium is $1,428 per year — about $119 per month — for a policy with $250,000 in dwelling coverage. This is about three percent higher than the 2022 home insurance average of $1,383 for the same level of coverage. Insurance is not a one-size-fits-all product. Coverage and cost vary drastically based on several unique factors, including the age of a home, square footage, cost of building materials and location. Each state has different regulations and natural hazards that also impact how much home insurance is.
Key insights from Bankrate's 2023 home insurance rates analysis:
- In 2023, the average homeowner spends $1,428 on homeowners insurance per year for a policy with $250,000 in dwelling coverage.
- On average, the most expensive states for homeowners insurance in 2023 are Oklahoma, Kansas and Nebraska, while the least expensive states are Hawaii, Vermont and Delaware.
- Homeowners insurance costs are rising, likely due to inflation, supply chain disruptions and increased costs for materials and labor.
- According to our research, Erie, Auto-Owners and USAA offer some of the lowest average home insurance rates for $250,000 in dwelling coverage.
- On average, homeowners with poor credit histories pay 171 percent more for home insurance than homeowners with excellent credit.
How much does home insurance cost in my state?
To get a better sense of what your home policy might cost, it could help to review average home insurance rates in your state. Some states may not face a high risk of natural disasters, while others have a cheaper cost of living that makes it more affordable to rebuild after a claim. Based on Bankrate’s analysis of average home insurance costs, policies with $250,000 in dwelling coverage can cost less than $750 per year, as seen in Hawaii, Vermont and Delaware, but cost close to or over $3,000 a year in states like Oklahoma, Kansas and Nebraska. Below is a breakdown of the average cost of homeowners insurance by state.
Learn more: How to estimate the cost of home insurance
Average home insurance cost by state
The average annual home insurance premium for a home with a dwelling coverage amount of $250,000.
|
State
|
Average annual rate
|
Average monthly rate
|
% difference from national average
|
|---|---|---|---|
| Alabama | $1,631 | $136 | 14% |
| Alaska | $1,056 | $88 | -26% |
| Arizona | $1,268 | $106 | -11% |
| Arkansas | $2,123 | $177 | 49% |
| California | $1,225 | $102 | -14% |
| Colorado | $2,152 | $179 | 51% |
| Connecticut | $1,244 | $104 | -13% |
| Delaware | $679 | $57 | -52% |
| Florida | $1,981 | $165 | 39% |
| Georgia | $1,394 | $116 | -2% |
| Hawaii | $382 | $32 | -73% |
| Idaho | $905 | $75 | -37% |
| Illinois | $1,410 | $117 | -1% |
| Indiana | $1,225 | $102 | -14% |
| Iowa | $1,318 | $110 | -8% |
| Kansas | $3,083 | $257 | 116% |
| Kentucky | $2,009 | $167 | 41% |
| Louisiana | $1,992 | $166 | 40% |
| Maine | $947 | $79 | -34% |
| Maryland | $1,164 | $97 | -18% |
| Massachusetts | $1,199 | $100 | -16% |
| Michigan | $1,527 | $127 | 7% |
| Minnesota | $1,930 | $161 | 35% |
| Mississippi | $1,900 | $158 | 33% |
| Missouri | $1,769 | $147 | 24% |
| Montana | $1,736 | $145 | 22% |
| Nebraska | $2,951 | $246 | 107% |
| Nevada | $889 | $74 | -38% |
| New Hampshire | $736 | $61 | -48% |
| New Jersey | $775 | $65 | -46% |
| New Mexico | $1,789 | $149 | 25% |
| New York | $1,506 | $126 | 5% |
| North Carolina | $1,294 | $108 | -9% |
| North Dakota | $1,900 | $158 | 33% |
| Ohio | $1,140 | $95 | -20% |
| Oklahoma | $3,659 | $305 | 156% |
| Oregon | $723 | $60 | -49% |
| Pennsylvania | $760 | $63 | -47% |
| Rhode Island | $1,223 | $103 | -14% |
| South Carolina | $1,172 | $98 | -18% |
| South Dakota | $2,105 | $175 | 47% |
| Tennessee | $1,755 | $146 | 23% |
| Texas | $1,967 | $164 | 38% |
| Utah | $696 | $58 | -51% |
| Vermont | $658 | $55 | -54% |
| Virginia | $887 | $74 | -38% |
| Washington | $948 | $79 | -34% |
| Washington D.C. | $893 | $74 | -37% |
| West Virginia | $1,125 | $94 | -21% |
| Wisconsin | $890 | $74 | -38% |
| Wyoming | $954 | $79 | -33% |
*Rates are for $250,000 in dwelling coverage
What are the five cheapest states for homeowners insurance?
- Hawaii: $382 per year — 73 percent below national average
- Vermont: $658 per year — 54 percent below national average
- Delaware: $679 per year — 52 percent below national average
- Utah: $696 per year — 51 percent below national average
- Oregon: $723 per year — 49 percent below national average
What are the five most expensive states for homeowners insurance?
The states with the most expensive average annual home insurance premiums are Oklahoma, Kansas, Nebraska, Colorado and Arkansas. In each of these states, the average price of home insurance exceeds $2,000 per year, and in the two most expensive states — Oklahoma and Kansas — homeowners pay over $3,000 per year, on average. The higher rates are likely due to a higher risk of widespread home damage; many of these states are in an area of the country where tornado damage is relatively common. The average cost of homeowners insurance in these states is outlined below.
- Oklahoma: $3,659 per year — 156 percent above national average
- Kansas: $3,083 per year — 116 percent above national average
- Nebraska: $2,951 per year — 107 percent above national average
- Colorado: $2,152 per year — 51 percent above national average
- Arkansas: $2,123 per year — 49 percent above national average
Average cost of home insurance by city
|
City
|
Average annual rate
|
Average monthly rate
|
Percent difference from national average
|
|---|---|---|---|
| Los Angeles, CA | $1,368 | $114 | -4% |
| Chicago, IL | $1,570 | $31 | 10% |
| Houston, TX | $1,934 | $161 | 35% |
| Phoenix, AZ | $1,335 | $111 | -7% |
| Dallas, TX | $2,108 | $119 | 48% |
| Austin, TX | $1,715 | $143 | 20% |
| Fort Worth, TX | $2,090 | $174 | 46% |
| Columbus, OH | $1,157 | $96 | -19% |
| Charlotte, NC | $1,256 | $105 | -12% |
| Indianapolis, IN | $1,319 | $110 | -8% |
| Seattle, WA | $932 | $78 | -35% |
| Denver, CO | $2,170 | $181 | 52% |
| Washington, D.C. | $893 | $74 | -37% |
| Nashville, TN | $1,620 | $135 | 13% |
| Detroit, MI | $1,557 | $130 | 9% |
| Las Vegas, NV | $908 | $76 | -36% |
| Oklahoma City, OK | $4,148 | $346 | 190% |
| Portland, OR | $686 | $57 | -52% |
| Memphis, TN | $1,911 | $159 | 34% |
| Baltimore, MD | $1,224 | $102 | -14% |
*Rates are for $250,000 in dwelling coverage
- Weather-related risks: Standard homeowners policies generally do not cover flood damage or damage from earthquakes. In fact, some insurance companies do not cover homes in flood zones at all. Other insurance companies sell private flood insurance or offer earthquake coverage in standalone policies or endorsements for these types of disasters.
- Fire risk: According to the Triple-I, structure fires caused over $8.7 billion worth of residential home damage in 2021, the most recent year with available data. Insurance companies assign homeowners premiums based on proximity to a fire station and fire hydrants because rapid emergency response often minimizes damage.
- Property crime risk: If you live in a high-crime neighborhood, your insurance rates might be impacted. You may be able to help offset this cost to your premiums by installing additional safety features in your home, such as deadbolts and a security alarm system.
How much does home insurance cost by company?
Home insurance is a multi-faceted product with many factors influencing your policy premium. Aside from location, claim history, square footage and several other rating factors, the amount of coverage you purchase and the company you choose may also impact the price of your policy. While $250,000 in dwelling coverage may be appropriate for some homeowners, it could be insufficient or too high for others. Some home insurance companies may use the age of your roof as a strong rating factor while others are more concerned with your home's proximity to the fire department.
Based on Bankrate’s analysis of policies with $250,000 in dwelling coverage, the most expensive carriers were Amica, The Hartford and Chubb, while Erie and USAA had the cheapest average home premiums for this coverage amount. Below you’ll find premium data provided by Quadrant Information Services for different coverage selections from some of the largest carriers by market share. We’ve also included our Bankrate Score to help you understand how these companies ranked based on several metrics, including average rates, J.D. Power customer satisfaction scores, financial strength, available digital tools and more. The Bankrate Score is out of a possible 5.0 points.
| Insurance company | Average annual rate | Average monthly rate |
|---|---|---|
|
USAA
3.7
Bankrate Score
|
Average annual rate
$969
|
Average monthly rate
$81
|
|
State Farm
3.2
Bankrate Score
|
Average annual rate
$1,462
|
Average monthly rate
$122
|
|
Erie
3.1
Bankrate Score
|
Average annual rate
$957
|
Average monthly rate
$80
|
|
Chubb
3.5
Bankrate Score
|
Average annual rate
$1,775
|
Average monthly rate
$148
|
|
Amica
3.5
Bankrate Score
|
Average annual rate
$2,996
|
Average monthly rate
$250
|
|
American Family
3.1
Bankrate Score
|
Average annual rate
$1,168
|
Average monthly rate
$97
|
|
Nationwide
3.2
Bankrate Score
|
Average annual rate
$1,153
|
Average monthly rate
$96
|
|
Allstate
3.5
Bankrate Score
|
Average annual rate
$1,340
|
Average monthly rate
$112
|
|
Farmers
2.9
Bankrate Score
|
Average annual rate
$1,664
|
Average monthly rate
$139
|
|
Travelers
3.3
Bankrate Score
|
Average annual rate
$1,249
|
Average monthly rate
$104
|
|
The Hartford
3.5
Bankrate Score
|
Average annual rate
$1,973
|
Average monthly rate
$164
|
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
| Insurance company | Average annual rate | Average monthly rate |
|---|---|---|
|
USAA
3.7
Bankrate Score
|
Average annual rate
$1,208
|
Average monthly rate
$101
|
|
State Farm
3.2
Bankrate Score
|
Average annual rate
$1,794
|
Average monthly rate
$150
|
|
Erie
3.1
Bankrate Score
|
Average annual rate
$1,269
|
Average monthly rate
$106
|
|
Chubb
3.5
Bankrate Score
|
Average annual rate
$2,313
|
Average monthly rate
$193
|
|
Amica
3.5
Bankrate Score
|
Average annual rate
$4,313
|
Average monthly rate
$359
|
|
American Family
3.1
Bankrate Score
|
Average annual rate
$1,464
|
Average monthly rate
$122
|
|
Nationwide
3.2
Bankrate Score
|
Average annual rate
$1,519
|
Average monthly rate
$127
|
|
Allstate
3.5
Bankrate Score
|
Average annual rate
$1,772
|
Average monthly rate
$148
|
|
Farmers
2.9
Bankrate Score
|
Average annual rate
$2,232
|
Average monthly rate
$186
|
|
Travelers
3.3
Bankrate Score
|
Average annual rate
$1,654
|
Average monthly rate
$138
|
|
The Hartford
3.5
Bankrate Score
|
Average annual rate
$2,452
|
Average monthly rate
$204
|
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
| Insurance company | Average annual rate | Average monthly rate |
|---|---|---|
|
USAA
3.7
Bankrate Score
|
Average annual rate
$1,440
|
Average monthly rate
$120
|
|
State Farm
3.2
Bankrate Score
|
Average annual rate
$2,224
|
Average monthly rate
$185
|
|
Erie
3.1
Bankrate Score
|
Average annual rate
$1,601
|
Average monthly rate
$133
|
|
Chubb
3.5
Bankrate Score
|
Average annual rate
$2,858
|
Average monthly rate
$238
|
|
Amica
3.5
Bankrate Score
|
Average annual rate
$5,400
|
Average monthly rate
$450
|
|
American Family
3.1
Bankrate Score
|
Average annual rate
$1,749
|
Average monthly rate
$146
|
|
Nationwide
3.2
Bankrate Score
|
Average annual rate
$1,884
|
Average monthly rate
$157
|
|
Allstate
3.5
Bankrate Score
|
Average annual rate
$2,205
|
Average monthly rate
$184
|
|
Farmers
2.9
Bankrate Score
|
Average annual rate
$2,832
|
Average monthly rate
$236
|
|
Travelers
3.3
Bankrate Score
|
Average annual rate
$2,051
|
Average monthly rate
$171
|
|
The Hartford
3.5
Bankrate Score
|
Average annual rate
$2,889
|
Average monthly rate
$241
|
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
Top five least expensive companies for home insurance
- Erie: $957 per year — 33 percent below national average
- USAA: $969 per year — 32 percent below national average
- Auto-Owners: $1,049 per year — 27 percent below national average
- Nationwide: $1,075 per year — 22 percent below national average
- Travelers: $1,249 per year — 13 percent below national average
What affects my homeowners insurance rate?
The purpose of insurance is to share financial risk with another entity (an insurance provider), making a potential loss more manageable for the policyholder. Factors that increase or decrease the amount of risk the insurance company assumes can heavily influence insurance premiums. Understanding the most influential factors that impact your home insurance rates may help you save money when purchasing a new home or starting a policy with a new insurance provider.
Average home insurance cost by dwelling coverage amount
Dwelling insurance — also known as coverage A — is the limit your insurance company will pay to repair or rebuild your home when damaged by a covered peril. Having the appropriate level of coverage may help financially protect one of your biggest financial assets.
It is also important to note that other parts of your insurance policy, such as other structures, personal property and loss of use — typically listed as coverage B, C and D, respectively — are based on percentages of the dwelling coverage. For example, if you have $200,000 worth of insurance for dwelling coverage, you probably have $20,000 or 10 percent of coverage A allotted for other structures coverage. Depending on your state, you may also have separate deductibles for wind or other storm damage. That additional deductible will also likely be calculated as a percentage of your dwelling coverage.
While selecting lower coverage limits may save you some money on your policy premium, it may undercut the coverage you need throughout the rest of your policy. The proprietary rate data below highlights how dwelling coverage limits affect average homeowners premiums.
| Dwelling coverage limit | Average annual rate | Average monthly rate |
|---|---|---|
| $150,000 | $975 | $81 |
| $250,000 | $1,428 | $119 |
| $350,000 | $1,879 | $157 |
| $450,000 | $2,343 | $195 |
| $750,000 | $3,761 | $313 |
Learn more: How much home insurance do you need?
Average home insurance cost by credit rating
In most states, your credit history could be used as an insurance rating factor. Depending on where you live, home insurance companies will generally review your credit history when you apply for a quote. This is because credit history can be an indicator of risk — studies show that those with lower credit scores tend to file more claims compared to those with higher credit scores. As a result, home insurance for people with bad credit is generally more expensive compared to those with average, good and excellent credit scores. If you own your home with a partner, their credit history may also impact your rates.
Not all states factor in credit scores, however. California, Hawaii, Maryland and Massachusetts do not allow the use of credit scores for insurance rating purposes.
| Dwelling coverage amount | Poor credit | Average credit | Good credit | Excellent credit |
|---|---|---|---|---|
| $250,000 | $3,274 | $1,571 | $1,428 | $1,207 |
Does marital status impact home insurance rates?
For both home and auto insurance, carriers usually place shoppers who are married or in a recognized domestic partnership in a lower-risk group. This is because married couples tend to file fewer claims. Therefore, may receive slightly lower premiums.
However, if your spouse has other personal rating factors that may negatively impact your rates, like a poor credit history, owning and insuring a home together may increase your premium. If homeowners divorce and update their policies, their insurance rates may change for several reasons, including individual rating factors and the change in marital status itself. If the change in marital status impacts the premium, it will likely happen at the next renewal.
Average home insurance cost by claims history
Damaging events can happen to even the most responsible homeowner. If your home was damaged by an event covered by your policy, like wind, fire or theft, or someone sues you for injuries sustained at your residence, your home insurance policy could step in to cover the damages. However, a surcharge could be added to your policy at renewal.
| Type of claim | Average dollar amount of claim paid out* | Average annual rate after a claim |
|---|---|---|
| Wind | $11,650 | $1,570 |
| Liability | $30,324 | $1,749 |
| Theft | $4,415 | $1,763 |
| Fire | $77,340 | $1,773 |
Average home insurance cost by deductible amount
Your deductible is another factor that can impact the cost of your home insurance. Generally, the higher your deductible, the lower your rate. When you set a high deductible, you take on some of the risk that would otherwise be transferred to your homeowners insurance company. In turn, your carrier will usually offer you a cheaper premium.
A high deductible means a higher out-of-pocket expense in the event of a covered claim, so choosing a deductible you can comfortably pay with no warning is essential. While selecting a high deductible can be a valid cost-saving measure for some homeowners, others might experience financial hardship if they need to file a claim and can’t afford their deductible. Additionally, your lender may issue maximum deductible limits under the terms of your loan.
To provide a baseline, below you’ll find average rates for some of the most common home insurance deductible amounts:
| Deductible amount | Average annual rate for $250,000 in dwelling coverage |
|---|---|
| $1,500 | $1,368 |
| $2,000 | $1,273 |
| $5,000 | $1,111 |
Average home insurance cost by home age
The age of your home is also a factor that home insurance companies consider when determining your premium. Older homes might be more expensive to build back after a loss, especially if you need to bring them up to modern safety and building codes. Below is a look at how much an average home insurance policy might cost depending on the age of a home.
| Date home was built | Average annual rate |
|---|---|
| 1959 | $1,748 |
| 1982 | $1,750 |
| 1992 | $1,748 |
| 2010 | $1,669 |
| 2020 | $1,218 |
Average home insurance cost by home characteristics
Every home is different, which means insurance companies rate each home on a case-by-case basis. Your home’s specific characteristics will play a role in determining how much you pay for homeowners insurance.
- Roof condition: The age and condition of a home’s roof play a role in homeowners insurance rates. Older roofs may not withstand windstorms or hail damage as well as newer roofs. Likewise, roof materials can affect your homeowners insurance rate. Some types of roofing material may be more resistant to damage, which could lower your premium, and other types may be more expensive to repair or replace, which could increase your premium.
- Construction quality: Many homeowners policies do not cover the expense of bringing a home up to the current building code following a claim. Insurance companies sometimes offer an optional “ordinance or law endorsement,” which can help pay for expenses related to code upgrades made during covered repairs.
- Special features: Features such as hot tubs and swimming pools can make a home more appealing, but they can also increase homeowners insurance premiums if they raise repair and replacement costs and add liability risks. Homes with recreational features such as a pool, sauna or hot tub might need higher liability coverage in case a guest sustains an injury.
What does home insurance cover?
Every homeowners insurance policy provides specific protections which help guard against substantial financial loss due to fire, storms, theft, vandalism and legal liability. The most common home insurance coverage types include:
- Dwelling coverage, equal to your home’s rebuilding cost: This pays for covered damages, up to your dwelling coverage limit, that affect your home’s primary structure and attached structures such as carports or garages. This coverage is typically set at replacement cost value.
- Other structures coverage, usually 10–20 percent of your dwelling coverage limit: This coverage provides property damage protection for structures not attached to your home, such as a detached garage, driveway, fences or shed.
- Personal property coverage, usually 50–75 percent of your dwelling limit: This protects the contents of your home, including clothing, furniture and electronics. Within your personal property coverage, you may have additional sublimits. For example, you may only have 10 percent of your personal property coverage for items stored at other locations, and you may have a cap on coverage for certain items, like fine art and jewelry. You may have the option to choose between replacement cost coverage or actual cash value coverage. Replacement cost policies are typically more expensive than actual cash value policies.
- Personal liability coverage, usually between $100,000 and $500,000: This pays for medical expenses or damage to others’ property if you are legally liable for injuries on your property, incidents that happen away from your property or damage to others’ property. It also covers legal fees if a lawsuit is brought against you by the injured party.
- Medical payments coverage, usually between $1,000 and $5,000: This covers the medical expenses for someone outside your household who is injured on your property, regardless of fault.
- Loss of use coverage, usually between 10–30 percent of your dwelling coverage: This provides coverage for additional living expenses should you need to temporarily stay elsewhere while your home is being repaired after a covered claim.
Not every homeowners insurance policy contains the same components. If you are unsure what your policy covers, talk to your agent or insurance company for clarification.
How to estimate the cost of insurance
Ultimately, the goal of home insurance is to help you rebuild your home and replace your personal property after a covered claim. The best way to estimate your home insurance cost is by getting an accurate account of how much coverage you need in the event of a total loss and evaluating your level of risk. To calculate how much coverage you need, you will need the following information:
- Estimate the replacement cost value (RCV) of your home
- Estimate the replacement cost of any detached structures on your property, such as sheds, fences and garages
- Estimate the cost to replace your personal property. This includes any items not permanently attached to your home, from clothing and furniture to appliances and electronics
Next, take a look at what additional risk can impact your home. These risks can take the form of liability concerns or potential physical hazards. Reviewing coverage concerns with your agent, along with estimates of the values noted above, will help you get an accurate estimate of homeowners insurance from multiple carriers.
Keep in mind
Here are some talking points you can keep in mind when speaking with your agent. Having specific questions ready ahead of time will help your agent quickly identify the appropriate endorsements and liability limits.
- Do you have a dog?
- Do you have a swimming pool, trampoline or any other attractive nuisance on your property?
- Do you frequently entertain guests in your home?
- Do you have a home-based business?
- Do you have any personal items or collections that need special coverage, such as jewelry, art, furs or valuable stamps?
- Do you live in a moderate- to high-risk area prone to floods, earthquakes or wildfires?
What is the 80% rule in homeowners insurance?
The 80 percent rule, also known as the 80/20 home insurance rule and the coinsurance clause, states that homeowners must insure their home for at least 80 percent of its replacement cost value or RCV. If a home experiences a loss and is insured for less than 80 percent, insurance companies only pay the claim based on the percentage of coverage held, divided by the amount needed to be covered at 80 percent. Some home insurance companies require carrying more than 80 percent to qualify for a policy.
- Here is an example of the 80/20 home insurance rule in action:
- Home replacement cost = $250,000
- Insured is carrying = $175,000
- Claim value = 20,000
- Deductible = $2,000
If the insured was covered for at least $200,000 (80 percent of the RCV) they would receive a claim payout of $18,000. This is the full amount minus the deductible. Since they are insured at 70 percent RCV, they would receive $12,000 instead.
$20,000 x ($175,000 / $250,000) = $14,000 - $2,000 (deductible) = $12,000
Or
Amount of loss x (coverage you have / coverage you should have) = claim amount - deductible = claim payout
Many home insurance companies have inflation guards built into policies. Upon each renewal, the replacement cost of the dwelling increases to account for rising labor and building material costs. Homeowners can easily find themselves below the 80 required when they make home improvements, but don’t report the increased value to their home to the insurance company, or when they cut back on coverage to save money. Any time you make changes to your home or want to reduce coverage, speak with a licensed insurance professional to ensure your limits at least meet or exceed the 80 percent mark.
Locate your homeowners policy documents to understand if and how your insurance provider implements the coinsurance clause. A declaration page is issued to the policyholder at each policy renewal and every time you make a policy change. However, you may only receive your entire policy contract — which is usually 25–30 pages long — at the time of new business. Using the table of contents, locate Section I Conditions. Since each company uses different terminology, you will want to look for a term similar to coinsurance clause, property insurance adjustment or inflation guard. As always, work closely with your insurance agent to better understand the intricacies of your insurance policy.
How are home insurance rates changing?
Generally, home and auto insurance premiums have been increasing post-pandemic, partly due to inflation. As building material prices and labor costs continue to rise, home insurance carriers must raise premiums to cover their increased claims expenses.
Also, according to Triple-I, the effects of climate change may directly impact home insurance costs. Damage from wildfires, tornadoes, hurricanes and floods costs more each year, causing some insurance companies to limit their coverage in high-risk areas. The National Centers for Environmental Information recorded 60 natural disasters over the past three years that caused over $1 billion dollars in damage each. After adjusting for inflation, damage from billion-dollar disasters from the past three years averages out to $149.2 billion per year.
Understanding home insurance rate trends may be integral in finding a policy that fits your needs and budget. See the carrier comparison tool below to compare average homeowners insurance rates for $250K in dwelling coverage from 2021 to today. Quoted rates are based on 40-year-old male and female homeowners with a clean claim history, good credit and $250k in dwelling coverage on their policies.
Quoted rates are based on 40-year-old male and female homeowners with a clean claim history, good credit, and $250k in dwelling coverage.
Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
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Coverage.com, LLC is a licensed insurance producer (NPN: 19966249). Coverage.com services are only available in states where it is licensed. Coverage.com may not offer insurance coverage in all states or scenarios. All insurance products are governed by the terms in the applicable insurance policy, and all related decisions (such as approval for coverage, premiums, commissions and fees) and policy obligations are the sole responsibility of the underwriting insurer. The information on this site does not modify any insurance policy terms in any way.
Home insurance industry trends
The home insurance market has faced a number of challenges in 2022. Now that we’re well into the third quarter of 2023, we are better able to see the ripple effects of last year. Insurance is reactionary — it takes some time for insurance companies to recoup losses (in the form of increased premiums) caused by inflation, widescale weather-related disasters and other complex challenges. Insurance companies must file for rate increases with the Department of Insurance in each state it operates, and this can cause a lag between the cause of the rate increase and the actual rate increase itself.
- Although signs point to cooling inflation, the increased cost of materials and labor continues to rising homeowners insurance rates. While not ideal, these rate increases help companies ensure they have enough money in their claims reserves to pay out higher losses.
- In an effort to stabilize the collapsing Florida homeowners insurance market, the state legislature passed Senate Bill 2-A in late 2022. Among many things, this bill focused on eliminating one-way attorney fees and the assignment of benefits that help perpetuate widescale roofing scams. In another show of promise, a new home insurance carrier (Tailrow) has applied to do business in the state. Although it will likely be some time before homeowners in Florida see relief in the form of lower premiums, the state’s volatile homeowners insurance market could be heading in the right direction.
- Hurricane risk is causing home insurance struggles for Louisiana homeowners and insurance carriers operating in the state. However, Louisiana passed a bill in early 2023 that resulted in an insurance incentive program. This program could bring more insurers to the state, motivate current Louisiana companies to take on more business and help depopulate the state’s insurer of last resort, Lousiana Citizens.
- Three of California’s major home insurance providers have limited new policies in the state. State Farm and Allstate have paused writing new home insurance policies altogether, while Farmers has put a cap on the number of new home insurance policies they intend to write in the Golden State. Each insurer cited increased wildfire risk, a costly reinsurance market and heightened rebuild costs as some primary motivators for the decision.
How to reduce the cost of homeowners insurance
Homeowners insurance is a good way to shield your finances from sudden misfortune in many cases, but it can have a large impact on your budget. Thankfully, there are ways to save on your homeowners insurance premium, which could help you get the valuable protection you need at a price that works with your wallet. If you need to lower your home insurance bill, consider taking the following steps:
- Bundle your auto and home policies: Many insurers reward customer loyalty with what’s known as a bundling discount. If you purchase multiple policies from the same provider, you may shave some money off your premium.
- Compare home insurance quotes: Shopping around and reviewing homeowners insurance quotes from three or more companies could help you find the coverage you need at the most competitive price.
- Ask for discounts: Bundling is not the only way to save. Insurers generally have multiple discounts you can apply to your policy. For instance, if you remain claims-free for a certain period of time, you may be able to lower your premium. Or, if you install a home security system, your insurer may offer a discount. Speaking with a representative from your home insurance company can be a good way to help you identify any new savings opportunities.
- Choose appropriate home coverage types: Understanding which type of home insurance is right for you, which optional coverage types you need and what policy limits are best for your situation could help you prevent over- or under-insuring your home.
- Improve your credit score: Most states take your credit into consideration when you purchase home insurance. Homeowners with lower credit scores have a higher statistical likelihood of filing claims and, as such, usually pay higher rates. Improving your credit could lower your premium over time.
- Work with an independent agent: Working with any licensed insurance professional can be helpful, but independent insurance agents may have a significant impact on your home insurance cost. Independent agents work with numerous companies, which allows them to provide a single touchpoint for you while taking over the legwork of shopping your account.
- Renovate your home: Some home renovations, like getting a new roof or replacing old, out-of-date electrical or plumbing systems, can help lower your premium. These projects could reduce the risk of home damage, which, in turn, may save you money on insurance.
- Increase your home insurance deductible: Your deductible is the amount of a claim you are willing to pay out of pocket. Most homeowners insurance policies have a minimum $1,000 deductible, although $500 deductibles may be an option with some companies. The higher your deductible, the lower your premium, but the more you’ll pay out of pocket if you file a claim.
Frequently asked questions
Methodology
Base profile
- Coverage A, Dwelling: $250,000
- Coverage B, Other Structures: $25,000
- Coverage C, Personal Property: $125,000
- Coverage D, Loss of Use: $50,000
- Coverage E, Liability: $300,000
- Coverage F, Medical Payments: $1,000
- Coverage A, Dwelling: $350,000, $450,000
- Coverage B, Other Structures: $35,000, $45,000
- Coverage C, Personal Property: $175,000, $225,000
- Coverage D, Loss of Use: $70,000, $90,000
- Coverage E, Liability: $300,000
- Coverage F, Medical Payments: $1,000
Bankrate Scores
- Tier 1 (Cost & ratings): To determine how well auto and home insurance companies satisfy these priorities, 2023 quoted premiums from Quadrant Information Services (if available), as well as any of the latest third-party agency ratings from J.D. Power, AM Best and the NAIC, were analyzed.
- Tier 2 (Coverage & savings): We assessed companies’ coverage options and availability to help policyholders find a provider that balances cost with coverage. Additionally, we evaluated each company’s discount options listed on its website.
- Tier 3 (Support): To encompass the many ways a home insurance company can support policyholders, we analyzed avenues of customer accessibility along with community support. This analysis incorporated additional financial strength ratings from S&P and Moody’s and factored a company’s corporate sustainability efforts.