Homeowners Insurance Overview
It is everyone’s dream to have a home of their own. When we finish college, the first thing we think of is to get a good job which pays well so that we save enough money to buy our own home. But there is a common question that everyone keeps asking. How Much Does Homeowners Insurance Cost? The costs of homeowners insurance varies from company to company and from state to state. There are also other factors that are considered by insurance companies when giving you a homeowners insurance quote.
HOW MUCH DOES HOMEOWNERS INSURANCE COST?
In the table below, I have covered average monthly homeowners insurance costs in each state. You will notice that some states have very cheap homeowners insurance rates. You can use the information below as a guide when you are ready to sign up for a home insurance. However, based on my research, the average annual premium is about $978. States like Alabama, Arkansas, Connecticut, D.C, Florida, Kansas, Louisiana, Massachusetts, Minnesota, Mississippi, New York, Oklahoma, Rhode Island, South Carolina and Texas go above the average mark but less than $1,600 per year.
AVERAGE HOME INSURANCE COST BY STATE IN U.S (2014)
Table Source: valuepenguin
FACTORS WHICH DETERMINE HOMEOWNERS INSURANCE AVERAGE COST
- HISTORY: Most home insurance companies will look into your past insurance history to see the number of claims you have previously lodged. If your past history looks good, the insurer will set your premiums at an affordable rate and obviously, those with frequent claims history are more likely to pay higher premiums. Home Insurance companies are profit-making institutions, therefore, they have to weigh down the risk of any applicant before signing them up. WHO IS AT RISK? People who tend to make multiple claims are flagged as risky applicants. In order to minimize their exposure, the insurer will offset their risks by charging those particular high-risk applicants higher premiums.
- DEDUCTIBLES: This is the amount of money a policy-holder is willing to pay towards a coverage loss. Insurers offer plans with either high or low deductibles. When you opt for a plan with high deductibles, your annual premiums will be low compared to a person who selected a plan with low deductibles. WHAT IS THE DOWNSIDE? Both plans have their own advantages and disadvantages. If you apply for low deductibles, you will be paying a high premium to the insurance company; however the advantage of this is that, when you file for a claim, the insurer will pay out a big percentage of the costs.
- VALUE OF HOME: It is evident that the cheaper the value of a house, the cheaper the cost of insuring that house will be and vice-versa. So, before applying for a homeowners insurance coverage, I suggest you engage a property valuer to assess the value of your home. Your homeowners insurance premium will be determined accordingly and as part of the policy, you could also include your home belongings. This will incur some additional costs, but it is worth paying that extra marginal amount to cover your valuables.
- NEIGHBORHOOD: You will surely not be the first person to sign up for a home insurance in your local area. All insurance companies use statistics and information collected over a period of time to determine premiums. When you make a home insurance application, the insurer will delve into the history of your area and make an assessment of the number of claims filed for that area. The insurer will more than likely research the neighborhood area as well to assess the potential risk.
- PERSONAL PROPERTY: These can be any items you have in your house from your furniture to your jewelry, including any special fixtures such as heating or air-conditioning or even a swimming pool. The insurer will need information on those so that these can be included in your home insurance coverage. If you are renting an unfurnished property, and you have furnished the property with your own personal items, you may wish to sign up for a personal property insurance to cover for your personal property. In this case, you will need to advise your insurance agent the value of your personal belongings so that they can calculate a premium and offer you the appropriate coverage.
WHY DO YOU NEED HOMEOWNERS INSURANCE?
Since Mother Nature is ever-changing and has produced some of the worst catastrophic events in the last decade or so, we should err on the cautious side to avoid the risk of losing our homes. This makes homeowners insurance a must have for everyone in the United States of America. However, before signing up for a homeowners insurance, you need to ensure that you have read all the clauses of the policy as well as read the fine-print to understand what is covered and what is not covered; for example, some insurance policies may not cover flooding. You need to be comfortable with what you are signing up for and if you are confused with any detail, please talk to your insurance agent and ask them to shed light on the ambiguous terms or clauses in your policy.
DON’T UNDER INSURE YOUR HOUSE
Since it’s only human nature to look for the cheaper option, you will find that many homeowners opt for the most affordable homeowners coverage. As much as this saves you money in the short-run, it might turn out to be very expensive when you need to lodge an insurance claim for your home. That is why I will emphasize again that you need to read all the insurance clauses including all terms and conditions of your policy before signing up for a homeowners insurance package. If you live in a disaster prone area, ask your insurance agent about a homeowners insurance policy which caters for all things Mother Nature can potentially throw at you and make sure you read the exclusions too!
WHAT IS COVERED UNDER HOME INSURANCE?
This is an open-ended question. Each insurance provider has its own coverages and plans, however in case of damage and a claim being filed, the insurer will generally cover costs related to:
- INTERIOR / EXTERIOR DAMAGES: Interior and exterior damage can be caused by floods, fire disaster or any other natural disaster in your area. If a disaster hits your area, there will be more than one victim. However, during this unfortunate event, the one thing which will comfort you is the fact that your house is covered under a homeowner’s insurance coverage. With this policy in place, the insurer will be the one to cater for the costs of repairing your home. If there has been extensive damage, the insurer will even re-build a new home for you.
- DAMAGE OF PERSONAL ITEMS: In the event that your house has been exposed to a disaster, you may not have been home at the time or simply have not had the chance to rescue all your valuable assets. If the coverage you signed up for caters for personal home items, then you should be reassured that you will be compensated accordingly. Once you need to submit your claim, the insurer will make an assessment and offer you the appropriate compensation. The amount the insurer pays out will be based on the premiums you pay per month / year in accordance with your policy.
- HOUSE RENTAL BILLS: Let’s assume that your house has been affected by a disaster and that it will take three to six months to fix your house. In that case, the insurer will make sure they find an appropriate accommodation (apartment or house) to shelter you and your family whilst they undertake repairs to your home. Remember that there is a limit on how much the insurer will spend on your rental bills. If you want to go above this limit, you will need to foot the bill for the extra-over amount.
Make sure you have your homeowners insurance in place. If you don’t have one already, simply call an insurance agent, ask for a quote and choose a homeowners insurance that addresses your needs and fits your budget.