The Homeowner Insurance Guide for 2021

Looking for homeowner insurance? The average homeowner insurance premium in the US is around $1,175 per year. This guide provides the essential information to help you make smarter decisions when you buy homeowner insurance.

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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 commonly “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 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 require you to have homeowner insurance coverage. 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 certain risks.


What are the types of coverage for homeowner insurance?

The most standard types of coverage are described below. The coverage may vary from state to state and company to company. You should always check your own homeowner policy to review the limits of your coverage.

  • Dwelling
    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. Mostly, homeowner insurance doesn’t cover damage to your house 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.
  • Collision
    It is a type of coverage that pays for the repairs to your car. If your car is damaged in an accident involving a collision with objects such as another car, tree, mailbox, fence, pothole, or other objects, and single-car accidents that involve rolling or falling over, the policy helps pay the expenses of repairing or replacing your vehicle. Even though collision insurance is not required by any state law, drivers with paid-off cars should consider purchasing the insurance to protect their finances.
  • Other structures
    Other structures coverage covers your property detached from your property, such as a fence or a gazebo.
  • Personal property
    If your furniture, clothes or other personal belongings are destroyed or stolen, the losses are covered. Your personal property coverage will pay the costs for 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 values above your personal property coverage limits such as jewelry, furs, and watches.
  • Liability
    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 bit your neighbor, your insurer will cover the expenses.
  • Guest medical protection
    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 even your pet injures someone elsewhere.
  • Additional living expenses coverage (ALE)
    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 rebuilding.
💡Tips: Replacement cost is the amount of money necessary to repair or rebuild your house. The replacement cost is estimated by the square footage of your house, the house’s age, and the house structure.

What are the steps for purchasing an homeowner insurance policy?

So you’ve decided to purchase homeowner insurance. Now what?

  • Decide what you want to cover and how much homeowner insurance you need
    First thing you have to do is to figure out how much it may take to rebuild your house if it is 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. Standard homeowner insurance may be insufficient for your home and belongings, and you may need to consider additional coverages that meet your individual needs. Always find out what is and is not covered by your policy helps you find the personalized coverage.
  • Get quotes and compare your homeowner insurance quotes
    You should get multiple quotes and compare those quotes. You can go to online one-stop services and type in your information to have a list of companies for comparative quotes pretty quickly. You should analyze the policy options instead of directly choosing the cheapest policy. You may also want to research the insurance company’s background to make sure they are financially stable with positive reviews.
  • Finalize your policy details
    You may want to finalize the details about the premiums, the deductible, and the effective date.
  • Work with your mortgage broker or lender if needed
    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.

How do insurance companies determine homeowner insurance premiums?

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. Not all the insurers use the same factors, here is the list of some most common factors.

Location

Geographical locations such as the distance to the coast, population density, the proximity to a fire station, or the proximity to car accident-prone intersections are taken into consideration about your homeowner insurance premium.

The size, age, and type of your home

The rate of living in a bigger home may be higher than the rate of living in a smaller home because bigger homes typically need more money to rebuild. Older homes are regarded as risker to maintain. Older homes tend to have obsolete materials like older wiring and plumbing, and the rate may be higher because of these materials. Your home’s construction type may affect your rate as well. A steel-beamed home will be firmer than a wooden-frame home when it comes to fire damage.

Your insurance history

Your premium and types of coverage you can purchase are affected by your insurance history, including frequency of claims, insurance score, and continuous coverage. Your credit score will be checked by insurers to measure your premium. If your credit score is higher, your homeowner insurance premium will be lower. In addition, you will get higher premiums if you have filed claims or you lived in a place with a large number of insurance claims.

Amount of your coverage

Your premium will be higher if your limits are higher and have a robust coverage. Your home’s replacement expense, your personal belongings, and the amount of your liability coverage will impact your premium.

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 you, your home, your claim history, and your coverage, etc., In some states, your credit report is also used to determine your premium. Below is a report of the average homeowner insurance price in the US. You can click any state to learn more details.

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
💡Note: Click the state to view more details.

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What companies offer homeowner insurance?

Most insurance companies who offer various types of insurance such as GEICO, Farmers, Liberty Mutual. Additionally, there are some companies like Hippo, Lemonade who mainly sell homeowner insurance. Below is a comparison between those two options.

Standalone Bundle with other insurance
Hippo, Lemonade, etc. Liberty Mutual, GEICO, Farmers, etc.,
• More brands and price options
• The company may have a partnership with your lender
• Get a multi-policy discount
• Manage multi-policies at the same place

You can also shop around to see what is the best option for you. Click here to start a free quote to compare multiple companies for your homeowner insurance.


What discounts are available for homeowner insurance?

Not all the insurers provide the same discounts, here is the list of some most common discounts.

  • New home construction Usually, you will get discounts if your house is with new wiring, new plumbing, and a new roof. It is generally cheaper to rebuild a new home than an old home with old features, so if the age of your home is less than five years, you may pay less on your premiums.
  • Bundle (Multi-policy) Most insurers offer discounts if you buy more than one insurance policy from one insurer.
  • Protective devices Installing devices which can help you reduce the risks of damage and injuries, such as smoke detectors, fire extinguishers, security monitoring, or water leak detectors, can lower homeowner insurance costs.
  • Home improvements If you make modifications to your home and update your home to be more resistant, you may get discounts. Some insurers like Hippo offer discounts for homes with “smart home” devices.
  • Loyal discounts Many insurers reward long-term customers with discounts. If you are a good policyholder and remain claim free, insurance companies will reduce the cost of your premiums.
  • Your credit score Maintaining a solid credit history can cut your insurance costs. Mostly, insurance companies use your credit information to decide your homeowner insurance policy. Your credit score is determined by the type and the amount of your debt and the timeliness of your payment, etc. paying your loans on time and paying off your revolving debt will help you improve your credit and eventually get you better rates.

What are not covered by homeowner insurance?

There are some perils not covered by homeowner insurance. In order to find out all the items not covered, please refer to your declaration page. Below is a list of risks usually not covered by homeowner insurance.

  • Earthquakes and floods
    In most states, ground movements such as earthquakes and landslides, and floods are not included in homeowner insurance. You may need separate earthquake insurance and flood insurance or an add-on to the standard homeowner insurance policy.
  • Maintenance issues
    Maintenance and repair are excluded. If the issues result from neglecting to properly maintain your property such as mold, insect damage, pest infestation, your standard homeowner insurance policy won’t cover the losses. Wear and tear is not covered because you are expected to maintain your house. Loss from power outages such as food spoilage, damage caused by smog or smoke from agricultural and industrial operations, and nuclear hazard or war are also excluded.
  • Governmental actions
    Governmental actions such as condemning your home and taking over the land are excluded from your homeowner insurance policy.
  • Sewer backups
    According to the III, growing tree roots, sanitary main blockages, torrential downpours, or outdated sewer systems are reasons why sewer backups occur. Most damaged caused sewer backups are not covered under your policy, and you may need to purchase a separate policy for protection.
  • Dangerous dogs
    If you own dogs with certain high-risk and aggressive breeds like German Shepherd, you will need to pay medical expenses or the cost of a lawsuit if your dog bites or harms someone.
  • Luxury items
    Usually items with a high price tag such as high-priced jewelry and furs or art collections are not covered under your standard insurance policy. There are limits to your home insurance personal property coverage, and you will need a separate coverage for items exceeding those limits.

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    Disclaimer
    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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