The worst states for homeowners insurance: Our 2022 analysis
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Over the last few months, the cost of living has increased sharply across the U.S. Consumers are paying sky-high prices at the gas pump and the grocery store, and overall housing costs in many U.S. cities are continuing to rise with no end in sight.
If you’re looking to buy a house in the near future, getting an affordable mortgage could also become more difficult. As the Federal Reserve attempts to battle inflation, mortgage rates are expected to increase faster than initially expected. As prices for homes in desirable areas continue to set records, homebuyers could face an even tougher market.
When mortgage rates go up, it means that many potential home buyers get priced out of the market. Even a mortgage rate increase of just 2% can equate to a significantly higher monthly payment. Coupled with the fact that home prices are already through the roof, it has made home buying much more expensive and less attainable for many Americans.
In addition, it’s important to consider other costs associated with homeownership, like home insurance. The cost of homeowners insurance depends largely on the state you live in, which contributes to the cost of living in various locations.
Key housing market trends
Most prospective home buyers know that the U.S. housing market is booming. Even though real estate experts claim the seller’s market is expected to continue, there is still an opportunity to purchase residential properties. Here are a few recent statistics on the current housing market:
- As of April 2022, home prices were up 15.5% compared to the same time last year. Today, houses are selling for a median price of $424,405. (Redfin)
- The average number of homes sold is down 12.4% year-over-year. There were 550,423 homes sold in April 2022, compared to 628,450 homes sold in April 2021. (Redfin)
- For a 30-year fixed-rate mortgage, the national average rate is currently 5%, which is down 1.9 points year-over-year. (Redfin)
- In April 2022, almost 60% of homes sold for more than the listing price. For comparison, only 8.4% of homes that sold had price drops. (Redfin)
- There were 1,332,428 homes for sale in the U.S. as of April 2022. That figure is down more than 10% year-over-year. (Redfin)
- The median number of days a house is on the market is 18 days. (Redfin)
- As of April 2022, new home sales declined for the third consecutive month. (U.S. HUD)
- Real estate inventory is increasing. The number of new homes for sale at the end of March 2022 was about 407,000 units, an increase of 3.8% from the end of February. (U.S. HUD)
- For the first time since 2011, the 30-year fixed-rate mortgage rate exceeded 5% in April 2022. (U.S. HUD)
Housing costs are impacted by location, which can also determine the cost of your home insurance. If you purchase a house in a state with a high risk of natural disasters or severe weather, you will likely pay a much higher rate for coverage.
For example, houses that are located in Tornado Alley often have the most expensive home insurance costs because property can get damaged in a tornado or windstorm. Similarly, homeowners in Florida pay higher-than-average rates due to the risk of hurricanes. It’s worth noting that the homeowners insurance market in Florida is currently in crisis, mainly due to fraud.
On the other hand, if you buy a house in a state with a low risk of severe weather, like Oregon or Utah, you can expect to pay a much lower rate.
However, home insurance rates aren’t only determined by your location. Other factors like the age of your home, credit score (in most states), claim history and insurance company also impact the cost.
Worst states for home insurance ranked
Before you purchase a house, it’s a good idea to look into the cost of home insurance in the state. To simplify the process, we did some research to figure out which state’s households were paying the most for their homeowners insurance for the worst value.
To create the rankings, we looked at factors like the average cost of home insurance in each state, incurred losses per state, median income spent on homeowners insurance per state and new residential constructions per state. In the table below, you can see which states are the worst for homeowners insurance:
|Rank (1 as worst)||State|
Top five worst states for home insurance
The top five worst states for home insurance usually have the most expensive rates. This is largely due to factors like the risk of extreme weather, the amount of incurred losses in that state as well as how much new residential housing is available. Here’s a closer look at the five worst states for homeowners insurance:
- Nebraska: Based on our study, Nebraska is the worst state for home insurance in the country. Because Nebraska is located in Tornado Alley, home insurance rates are higher than the national average, in part, to compensate for a potential natural disaster that could destroy your house. In addition to tornadoes, Nebraska homeowners also face risks like earthquakes, wildfires, extreme heat and flooding that contribute to the high cost of house insurance. Nebraska also scored in the bottom half in terms of incurred losses in the state as well as new residential units available.
- Kansas: Although Kansas is one of the cheapest places to live in the U.S., it’s one of the worst states for home insurance. In 2021, there were 39 tornadoes in Kansas, which was a significant increase from the year prior. In 2019, there were more than 100 tornadoes reported in Kansas, which resulted in $28,252,000 in damages. Although Kansas just barely ranked in the top half for incurred losses, the state ranked pretty low in terms of new residential units available.
- Oklahoma: Oklahoma is well-known for its tornado risks, but the state also faces a number of other weather-related threats that help make it the most expensive state for homeowners insurance, on average. For example, flash floods, severe thunderstorms, wildfires, earthquakes and even extreme winter weather can impact homes in Oklahoma. Even though the state ranked in the middle of the pack in terms of incurred losses and number of new residential units available, sky-high average insurance premiums still helped it earn a top spot on our ‘worst’ list.
- Minnesota: If you live in Minnesota, your average annual home insurance rates are about $500 more than the national average. Minnesota experiences lots of severe weather, like windstorms, blizzards, droughts and extreme heat, wildfires and more. These weather-related risks can cause destruction to residential homes, which contributes to the high cost of insurance in the state. These risks likely contributed to Minnesota snagging 7th place in terms of incurred losses, although the state ranked slightly above average for availability of new residential units.
- New Mexico: New Mexico rounds out the top five worst states for home insurance. Homeowners in New Mexico deal with extreme heat and earthquakes, as well as thunderstorms, windstorms and flooding, which can all cause property damage. As of May 2022, firefighters were battling New Mexico’s largest wildfire, which had already burned 333 homes. All of these factors may be why New Mexico residents pay nearly $600 more per year, on average, than the national average rates for home insurance. Although the state did fairly well in terms of incurred losses, it did not do as well when it comes to the number of new residential housing units available.
Top five best states for home insurance
If you live in one of the top five best states for home insurance, you probably get the luxury of paying a much lower average rate. In addition, these states tend to have lower severe weather risks, and fewer insured losses overall. Here are the top five states for home insurance, and why they made our list:
- Utah: Our study showed that Utah is the best state for homeowners insurance. Utah homeowners face few weather-related risks that could damage or destroy a home. Because there are few insured losses in an average year, home insurance companies are able to keep rates low for most homeowners. The state ranked tenth-best in terms of new residential units available and above average for incurred losses.
- Delaware: Delaware is one of the smallest states and has a low population. It’s one of the best states for home insurance, in part because of the low risk of natural disasters and severe weather. Delaware also has a lower cost of living than many other states, although home prices are rising along with the rest of the country. Still, its average annual home insurance rates clock in almost $700 below the national average and its incurred losses were the fifth-lowest in the country. It did fare slightly below average in terms of new residential units available.
- Nevada: Nevada has a relatively low cost of living, and 63% of the state is federal land that is not developed and has no residential houses. Because Nevada has few severe weather risks, the cost of home insurance is more affordable than in many other states. However, home insurance premiums are likely more expensive in the more populated areas of Nevada, like Reno and Las Vegas. The state also scored above average in terms of incurred losses and number of new residential units available.
- Hawaii: While the cost of living in Hawaii is not cheap, it’s still one of the best states for homeowners insurance. Average annual rates are nearly $1,000 less than the national average. Despite its coastal location, Hawaii does not experience many natural disasters on an annual basis. Some of the most common weather-related risks are flooding, earthquakes and tsunamis, but they are rare. Hawaii had the sixth-lowest incurred losses, although it did not fare well on our list of the number of new residential units available, coming in seventh place for the fewest available.
- Oregon: Oregon has a very moderate climate, although wildfires, flooding and severe storms do happen on occasion. Overall, average home insurance rates are much lower in Oregon than in many other parts of the country. Most home insurance companies in Oregon see fewer insured losses on an annual basis, which contributes to the lower average cost of insurance, and the state ranked slightly better than average in terms of new residential housing units available.
Resources for homeowners
If you are wondering how much homeowners insurance costs, it largely depends on your state. In states with a high risk of severe weather, for example, the cost of home insurance can be extremely high, even if you buy coverage from one of the best home insurance companies.
One thing home insurance does not depend on is the market value of your home. So, even in a hot housing market, it’s still possible to get cheap homeowners insurance if the cost to rebuild your home stays relatively low. Fortunately, there are a variety of ways to save money on home insurance, no matter where you live. Here are a few suggestions for getting cheap home insurance.
- Shop around: Before you purchase a home insurance policy, it’s a good idea to shop around, compare providers and get multiple rate quotes for the type and amount of coverage you want. Comparing quotes will help you find the lowest rate for your situation. In addition, you might want to consider shopping around for new quotes periodically to ensure you are getting the best rate possible.
- Protect your home: Many home insurance companies offer policy savings for homeowners who have smoke alarms, fire sprinklers or a security system installed in their home. This can reduce the risk of a theft or fire claim. You can also find discounts for having an impact-resistant roof and fire-resistant building materials.
- Raise your deductible: Almost every home insurance policy has deductibles, usually for dwelling coverage and personal property coverage. By increasing your deductibles, you pay a lower monthly rate. However, keep in mind that you will have to pay more out-of-pocket in the event of a claim, so weigh the pros and cons before choosing higher deductibles as a way to save money.
- Look for other discounts: In addition to protecting your home, most home insurance companies offer other potential discounts. One of the biggest usually involves bundling more than one insurance policy with the same company, such as home and auto. You can also typically get discounts for loyalty, living in a gated community or buying a new construction home. Ask your insurance agent about all available discounts when purchasing a policy.
To determine the worst states for homeowners insurance, Bankrate examined the following data sets and scored each state in these categories, then averaged their scores to determine their final ranking on our list:
- Average overall cost of homeowners insurance by state (rate data provided by Quadrant Information Services, analyzed by Bankrate insurance experts to calculate averages weighted by population.
- Incurred losses by state, according to the Insurance Information Institute (Triple-I)
- Average percent of income spent on homeowners insurance in each state (calculated using rate data provided by Quadrant Information Services and average income data provided by the U.S. Census Bureau)
- Number of permits applied for to build single residential units in each state, according to the U.S. Census Bureau