What are homeowners insurance premiums and how do they work?

What is a homeowners insurance premium?

A home insurance premium is the amount of money a homeowner pays for insurance coverage for a specified amount of time, called the policy term. Generally, a homeowners insurance policy only remains active so long as the associated home insurance premium is paid.

Most home insurance companies offer flexible payment options, with the ability to pay premiums monthly, quarterly or annually. If you have a mortgage, your lender will often pay your homeowners insurance premium through your escrow account as part of your monthly mortgage payment. Your lender then pays the premium annually to your insurer.

How are home insurance premiums calculated?

When you purchase a new home insurance policy, the insurance company will review various rating factors to determine your premium. Some are personal to you, such as your claims history. In states that allow it, credit history may also be used. Other rating factors are related to your home like the ZIP code, the year it was built, the square footage, its general condition and its proximity to a fire station, to name a few.

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

Each home insurance company also has a unique underwriting algorithm, which is why you'll see rates change across different providers. One company may be okay with a somewhat older roof, but another may see it as a larger risk and charge you more to insure it.  

Learn more: Factors that impact your cost of homeowners insurance

Average cost of home insurance by company

Below, we've rounded up average home insurance premiums from some of the largest insurers. The rates displayed here are for the same types and levels of coverage, illustrating how premiums can vary by company. For this reason, it’s usually a good idea to shop around for insurance before purchasing a policy.

How much is the average homeowners insurance premium?

Based on April 2025 data from Quadrant Information Services, the average annual cost of home insurance in the U.S. is $2,267 for $300,000 in dwelling coverage. However, the price of home insurance varies based on a number of factors. As mentioned, you might pay more or less than the national average based on details specific to you and your home.

One of the biggest factors that impacts your premium 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 or communities with high levels of burglary and vandalism pay the most for home insurance.

Average cost of home insurance by state

The most expensive states for home insurance include:

The cheapest states for home insurance include:

What is the difference between a homeowners insurance premium and a quote?

A quote is how much a home insurer estimates you’ll pay based on the information you provide during the inquiry process. A premium is the final amount that the policy will cost.

When you shop for homeowners insurance, you’ll usually provide basic information to a home insurance company about your property, the types of coverage you'd like and the amount of coverage you need. For instance, you might specify whether you need coverage for a pool or expensive personal property like art or jewelry. You’ll need to provide your address too, since location greatly affects how much you pay for insurance. Depending on the insurance provider, you might have to answer specific questions about the home’s structure, such as the age and condition of your roof, as well.

In return, the company will generate a homeowners insurance quote. The quote typically details what coverage your potential policy would provide and up to what dollar amount (called a policy limit). The quote should also show how much you would be expected to pay in order to keep the policy active — this is your premium. 

Keep in mind that your quoted premium could change as the insurance provider finalizes your policy and verifies information.

Reasons your homeowners insurance premium can change

At times, you might need to make coverage changes to your insurance policy that impact the premium. Other times, the insurance company might make a rate or coverage adjustment. Either way, it is common for homeowners insurance premiums to change each renewal period. Whether your premium increases or decreases depends on the specifics.

While many factors can impact the cost of home insurance, one of the most common reasons for a premium increase is due to inflation protection. Also known as “inflation guard,” insurance companies increase the level of coverage on your insurance policy each year to account for the rising cost of building materials and labor costs associated with repairing your home. Without adjusting for inflation, policyholders could be underinsured, especially if you experience a total loss and the home needs to be completely rebuilt.

It is important to note that insurers must file a justifiable request and receive approval for broad rate increases with the Department of Insurance in each state where they operate.

Homeowners insurance premium increases

Factors that could cause an increase in your homeowners insurance premium are:

• Your insurer has filed for an average rate increase in your state.
• You renovated your home.
• You purchased new high-value items like fine jewelry.
• You filed claims.
• Crime rates increased in your ZIP code.
• Your home is located somewhere where severe weather events and other natural disasters are becoming more common or causing more damage.
• Your coverage limits increased to keep in line with replacement costs.
• You extend your coverage limits for personal property or other items or add new endorsements to your policy.

Homeowners insurance premium decreases

Applying discounts is one of the best ways to decrease your homeowners insurance premium. A home and auto bundle is often the largest discount on offer. Depending on the insurer, you might also earn a discount for adding safety devices like burglar alarms or smart home features. Improvements, such as adding a new roof or updating your electrical system, may also make you eligible for a discount.

Another way to lower your homeowners insurance premium is to increase your policy’s deductible. However, a higher deductible means a higher out-of-pocket expense if you file a claim, so think through this adjustment carefully.

Lowering your coverage limits can also reduce how much you pay for home insurance, but this should be done with caution, too. Reducing your limits could leave you open to financial strain if you need to file a claim. Examples of when it might make sense include if you filled in a swimming pool and could potentially lower your liability insurance limit, or if you sold an expensive ring and no longer need as much scheduled personal property coverage. Experts recommend speaking with a licensed insurance agent for guidance.

How to pay your homeowners insurance premium

When it comes to paying your home insurance premium, you have a few options:

• Pay your insurance through your escrow account.
• Pay your insurance directly to the insurance company.

Escrow account payments

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 monthly mortgage payment and keep it in an escrow account along with funds for your property taxes. With each payment, the lender sets aside a portion of the money that goes directly to your insurance company. Depending on your lender and loan type, this may be required.

Direct to insurance company payments

The other option is to pay the insurance company directly, which works like any other bill. Depending on the insurer, you may be able to charge your premium to a credit card, mail in a check or set up an electronic funds transfer (EFT) from a checking or savings account, which is a direct deposit to the insurer. With direct premium payments, you can usually choose to pay annually, bi-annually, quarterly or monthly. Some companies offer discounts if you sign up for automatic payments using your bank’s routing and account number as opposed to a credit or debit card.

Keep in mind that some installment plans have service fees in addition to the monthly premium. Paying for your entire policy term (typically a year) in full may mean you can avoid service fees. Further, many insurance companies will give homeowners a discount if they pay the annual premium upfront.

Frequently asked questions