What Is a Homeowners Insurance Premium?

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Buying a home is a big accomplishment, but it’s also a major investment. Before you get ready to move in, make sure you have a homeowners insurance policy to protect the physical structure of your home and your personal belongings.

Shopping for home insurance can be confusing, especially if you’re a first-time home buyer. You’re probably aware of something called a “premium,” but maybe you don’t know exactly what it means. Keep reading to learn more about home insurance premiums and how they work.

Homeowners insurance premiums explained

Your homeowners insurance premium is the amount of money you pay every year to keep your insurance policy active. Most people pay their premium on a monthly basis, but others choose to pay the annual cost in a lump sum. Your premium can also be added to your mortgage payments if you have one.

When you purchase a new home insurance policy, the insurance company will look at a variety of factors to calculate your premium. Some are personal factors, like your age, credit score, marital status and claims history. Other factors are related to your home, like the zipcode, year it was built, square footage and general condition.

Ultimately, some homes and homeowners are riskier to insure than others. For example, it’s much less risky for the insurance company to cover a newer home, or a homeowner with a good credit score, than it is to insure a home in poor condition, or a homeowner with a low credit score. The more risk you carry, the higher your premium will be.

If you fall behind on your home insurance payments, your coverage won’t automatically end. Most insurance companies give you 30 days to make up the missed payments before they cancel your policy. If your coverage is cancelled, it will make it harder for you to get another insurance policy in the future.

How much does the average homeowners insurance premium cost?

The average home insurance premium in the United States is $1,211 per year, according to the Insurance Information Institute (III). However, the price of home insurance varies based on a number of factors. You might pay more or less than the national average based on your age, claims history or credit score.

One of the biggest factors that impacts your premium cost is where you live. The cost of home insurance is different in every state. In general, homeowners who live in states with a high risk of severe weather pay the most for their insurance.

Here are the most expensive states for home insurance:

Here are the cheapest states for home insurance:

Factors considered in your homeowners insurance premium

Your home insurance premium is calculated based on a variety of factors. Naturally, certain factors can cause your premium to increase or decrease.

For example, if you filed a costly home insurance claim within the past year, you should expect to pay a higher rate when your policy renews. Or, if your credit score recently dropped a few points, it’s possible that your rate could go up. Sometimes, your premium increases after your state gets hit with a major storm or natural disaster, even if your area wasn’t affected.

There are also some factors that can lower your home insurance premium. For example, if you recently improved your credit score, you might get rewarded with a lower rate. You can also increase your deductible, or take advantage of discounts to save some money on your premium.

Additionally, the insurance company will probably lower your premium if you’ve recently made renovations or updates to your home that made it safer or more resilient. Some examples include:

  • Installing a home security system
  • Installing an impact-resistant roof
  • Installing storm-proof windows and doors
  • Installing a deadbolt lock

How to pay your homeowners insurance

When it comes to paying your home insurance premium, you have a few options. It all comes down to personal preference.

One way is to pay the premium through your mortgage lender. With this option, your lender will add the cost of your insurance premium to your mortgage payment. With each payment, the lender sets aside a portion of the money that goes directly to your insurance company.

The other option is to pay the insurance company directly, which works like any other bill. You can charge your premium to a credit card, mail in a check, or set up direct deposit from a bank account. You can choose to pay annually, bi-annually, or monthly.

One thing to consider is that many insurance companies will give homeowners a small discount on their premium if they pay the annual cost in full, rather than in monthly installments. Additionally, some companies offer discounts if you sign up for automatic payments using a credit card or bank transfer.

Frequently asked questions

What is the average home insurance premium?

The average home insurance premium in the United States is $1,211 per year, or around $100 per month. However, you might pay more or less than the average premium depending on a number of factors. Your zip code, credit score, and claims history can all affect your rate, as well as the size, age and condition of your home.

Are there other home insurance costs besides the premium?

Your premium is the amount of money you pay each month to keep your policy in force. But if you have to file a claim, you’re also required to pay a deductible. A deductible is the amount of money you pay out-of-pocket towards a loss before the insurance company will reimburse you. You can choose a deductible when you buy home insurance, but it usually ranges from $500-$2,000.

How do I get a price quote for my premium?

When you’re shopping for home insurance, it’s easy to get price quotes from different providers. Most insurance companies have an online quote tool that will calculate your sample rate based on information you submit. The quote might not be completely accurate, but it will give you a good idea of what you can expect to pay.

Written by
Elizabeth Rivelli
Insurance Contributor
Elizabeth has two years of experience writing for insurance domains such as Bankrate.com, The Simple Dollar, Coverage.com and NextAdvisor, among others. In addition to auto insurance, Elizabeth regularly writes about home insurance, renters insurance and life insurance. She also covers industry trends and general insurance education.