What is homeowner insurance?
Homeowner insurance (home insurance) is a form of property insurance to cover losses and damages to your home, your property, and your liability for injuries on your property. Homeowner insurance policies are standard "package policies;" it usually covers four kinds of damages on the insured property: interior damage, exterior damage, loss or damage of personal belongings, and injuries on your property. Homeowner insurance is not expensive but necessary and often required if you have a mortgage.
Why do you need homeowner insurance?
There is no law that homeowner insurance is required. However, according to the Insurance Information Institute (III), mortgage lenders are most likely to need you to have homeowner insurance coverage. Because before they agree to fund or finance your home purchase, the mortgage company mostly asks your house to be insured. The insurance protects the financial investment by providing money to repair or rebuild your house if it is damaged or destroyed by a fire, a tornado, or other specific risks.
Home protection
Covers your home structure, personal belongings, and attached structures like garages against fire, theft, vandalism, and more.
Liability coverage
Protects you financially if someone is injured on your property. Covers legal expenses, medical bills, and even pet-related incidents.
Mortgage requirement
Most mortgage lenders require homeowner insurance before they agree to fund your home purchase, protecting their financial investment.
Takeaway: Homeowner insurance protects your home, belongings, and finances. While not legally required, it is almost always required by your mortgage lender.
What are the types of coverage for homeowner insurance?
Below are the most standard types of coverage. The coverage may vary from state to state and company to company. You should always check your homeowner policy to review your coverage limits.
Dwelling Required
Dwelling coverage (home structure coverage) covers the damages to your home and attached structures, such as an attached garage. You will want enough coverage to pay the replacement cost of your house when choosing the amount of dwelling coverage. Homeowner insurance doesn't cover damage to your home from earthquakes or flooding, but it covers other losses such as theft, fire and smoke, wind, vandalism, etc. Your replacement costs will reflect the cost to repair or replace the house, including property upgrades, so it is not the same as market value. Always remember to purchase enough coverage to rebuild your home.
Other Structures Optional
Other structures coverage covers your property detached from your home, such as a fence or a gazebo.
Personal Property Required
The losses are covered if your furniture, clothes, or other personal belongings are destroyed or stolen. Your property coverage will pay the costs of repairing or replacing your belongings. Many insurance companies offer optional coverages to help you further protect your stuff. For example, you may need extended coverage for items that value above your property coverage limits, such as jewelry, furs, and watches.
Liability Required
Liability covers you when someone is injured on your property. The liability coverage helps you pay the resulting legal expenses and medical bills if you are at fault. The coverage also includes your pets. So if your dog accidentally ruins your neighbor's rug or bites your neighbor, your insurer will cover the expenses.
Guest Medical Protection Optional
No matter who is at fault, it covers the medical expenses to treat someone injured on your property. Additionally, it covers when you, your family member, or your pet injures someone elsewhere.
Additional Living Expenses (ALE) Recommended
If you cannot live in your home because of damage from an insured disaster, ALE will cover the additional costs and temporary living expenses while your house is rebuilt.
Takeaway: Replacement cost is the money necessary to repair or rebuild your house. The replacement cost is estimated by the square footage of your home, the house's age, and the house structure.
How to purchase a homeowner insurance policy
So you've decided to purchase homeowner insurance. Now what?
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1
Decide what you want to cover and how much insurance you need
You first have to figure out how much it may take to rebuild your house if it gets destroyed and how much it is to replace your personal belongings. You need to break down several individual costs to estimate the accurate coverage you need. You may need to increase the standard coverage limit recommended by default for your home and belongings, and you may need to consider additional coverages that meet your individual needs.
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2
Get quotes and compare
You should get multiple quotes and compare those quotes. You can go to one-stop online services and type in your information to have a list of companies for comparative quotes. It would be best to analyze the policy options instead of directly choosing the cheapest one. Research the insurance company's background to ensure they are financially stable with positive reviews.
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3
Finalize your policy details
You can finalize the details about the premiums, the deductible, and the effective date.
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4
Work with your mortgage broker or lender
Usually, you will need to update your mortgage broker or lender about your homeowner insurance policy. Sometimes, you can schedule the payment through your mortgage.
Note: Read your policy carefully about coverage limits. If your expensive items exceed the limit, talk to your agent or call customer service to endorse those items.
What affects your homeowner insurance premium?
The information about you, your home, your claim history, and the coverage you choose will be the main factors to determine your homeowner insurance premiums. Although not all insurers use the same risk models, here is a list of some most common factors.
Location
Geographical locations such as the distance to the coast, population density, fire station proximity, or accident-prone areas are considered in your premium.
Size, age & type of your home
Bigger homes cost more to rebuild. Older homes with outdated wiring and plumbing tend to have higher rates. Construction type (e.g., steel vs. wood frame) also matters.
Insurance history
Claim frequency, insurance score, continuous coverage, and credit score all affect your premium. Fewer claims and better credit mean lower rates.
Amount of coverage
Higher limits and more robust coverage raise your premium. Your home's replacement cost, personal belongings value, and liability amounts all factor in.
How much is homeowner insurance?
The national average for homeowner insurance is around $1,175 per year. The premium is determined by factors such as your home, claim history, coverage, etc.; in some states, your credit report is also used to determine your premium. Click any state to see detailed pricing.
| State | Average Annual Premium |
|---|---|
| Alabama | $1,433 |
| Alaska | $959 |
| Arizona | $825 |
| Arkansas | $1,373 |
| California | $1,008 |
| Colorado | $1,495 |
| Connecticut | $1,479 |
| Delaware | $833 |
| District of Columbia | $1,235 |
| Florida | $1,951 |
| Georgia | $1,267 |
| Hawaii | $1,102 |
| Idaho | $730 |
| Illinois | $1,056 |
| Indiana | $1,000 |
| Iowa | $964 |
| Kansas | $1,584 |
| Kentucky | $1,109 |
| Louisiana | $1,968 |
| Maine | $882 |
| Maryland | $1,037 |
| Massachusetts | $1,488 |
| Michigan | $942 |
| Minnesota | $1,348 |
| Mississippi | $1,537 |
| Missouri | $1,285 |
| Montana | $1,174 |
| Nebraska | $1,481 |
| Nevada | $755 |
| New Hampshire | $972 |
| New Jersey | $1,192 |
| New Mexico | $1,017 |
| New York | $1,309 |
| North Carolina | $1,086 |
| North Dakota | $1,253 |
| Ohio | $862 |
| Oklahoma | $1,885 |
| Oregon | $677 |
| Pennsylvania | $931 |
| Rhode Island | $1,551 |
| South Carolina | $1,269 |
| South Dakota | $1,202 |
| Tennessee | $1,196 |
| Texas | $1,893 |
| Utah | $692 |
| Vermont | $918 |
| Virginia | $999 |
| Washington | $854 |
| West Virginia | $940 |
| Wisconsin | $779 |
| Wyoming | $1,156 |
What companies offer homeowner insurance?
Most insurance companies offer various types of insurance, such as GEICO, Farmers, and Liberty Mutual. Additionally, some companies like Hippo and Lemonade mainly sell homeowner insurance. Here's how the two options compare:
Standalone home insurers
Hippo, Lemonade, etc.
- + More brands and price options
- + The company may have a partnership with your lender
Bundle with other policies
Liberty Mutual, GEICO, Farmers, etc.
- + Multi-policy discount
- + Manage all policies in one place
You can also shop around to see what is the best option for you. Start a free quote here to compare multiple companies for your homeowner insurance.
What discounts are available for homeowner insurance?
Not all insurers provide the same discounts; here is a list of some most common discounts.
New home construction
New wiring, plumbing, and roof can mean discounts. Homes less than five years old typically pay less.
Bundle (Multi-policy)
Most insurers offer discounts if you buy more than one insurance policy from one insurer.
Protective devices
Smoke detectors, fire extinguishers, security monitoring, or water leak detectors can lower costs.
Home improvements
Updating your home to be more resistant may get discounts. Some insurers offer discounts for "smart home" devices.
Loyal customer
Many insurers reward long-term, claim-free customers with discounts on premiums.
Good credit score
Maintaining a solid credit history can cut costs. Paying loans on time and reducing debt helps improve your rate.
What is not covered by homeowner insurance?
There are some perils not covered by homeowner insurance. Please refer to your declaration page to find out all the items not covered. Below is a list of risks usually not covered.
Earthquakes and floods
In most states, ground movements such as earthquakes, landslides, and floods are not included. You may need separate earthquake and flood insurance or an add-on to the standard policy.
Maintenance issues
Issues resulting from neglect, such as mold, insect damage, or pest infestation, are excluded. Wear and tear, power outage losses, and damage from agricultural or industrial smoke are also not covered.
Governmental actions
Actions such as condemning your home and taking over the land are excluded from your homeowner insurance policy.
Sewer backups
Growing tree roots, sanitary blockages, torrential downpours, or outdated sewer systems cause sewer backups. Most damage from sewer backups is not covered, and you may need a separate policy.
Dangerous dogs
If you own dogs with certain high-risk and aggressive breeds like German Shepherds, you will need to pay medical expenses or lawsuit costs if your dog bites or harms someone.
Luxury items
Items with a high price tag, such as jewelry, furs, or art collections, are not covered under the standard policy. You will need separate coverage for items exceeding your personal property limits.
References
Our articles are intended for informational purposes and should not be considered legal or financial advice. Our articles are not written or reviewed by insurance agents. Consult your policies with your agent or a professional for details regarding terms, conditions, coverage, exclusions, products, services, and programs.
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