breaks down the average cost of home insurance in every state,Homeowners insurance rates by state,Factors that impact homeowners insurance premiums,How to reduce your home insurance rates.
Owning a home undoubtedly brings a host of expenses, and homeowners insurance is a significant one. Mortgage lenders require homeowners insurance, which offers financial protection for your property and belongings in the event of damage caused by common perils.
As of 2020, the average homeowners insurance premium across the nation stood at $1,311, based on the latest data from the National Association of Insurance Commissioners (NAIC). Nevertheless, the average premium paid by homeowners can vary widely from one state to another.
Terrence McLean, the co-founder and CEO of SageSure, an insurance company specializing in coverage for coastal property owners in high-risk states, explains, “Insurance premiums are a reflection of the perceived risk that insurers face, combined with other expenses, particularly reinsurance costs. Many states with a high exposure to natural disasters, such as hurricanes in Louisiana and wildfires in California, have experienced significant premium increases in recent years due to an increased perception of catastrophe risk.
click here – 8 Reasons Your Credit Card Was Declined (And What To Do About It)
Homeowners insurance rates by state
Curious about homeowners insurance costs across the country? This map provides a state-by-state breakdown of the average annual premium, using data from the NAIC. The rates are calculated based on H-03 policies, which are the most commonly written insurance packages.
Factors that impact homeowners insurance premiums
Home insurance policies are influenced by numerous factors that affect their pricing. However, several key categories play a significant role in determining the cost of these policies.
Where the property is located
As evident from the map, the location of a property can significantly impact the cost of homeowners insurance. Weather conditions, in particular, serve as a prominent location-based risk factor. According to George Hosfield, Senior Director of Home Insurance at LexisNexis Risk Solutions, “Specific areas may be more or less susceptible to wind, hail, rainfall, wildfires, heavy snowfall, floods, earthquakes, and more.” These location-related risks are typically factored into the territory rating used by insurers.
Hosfield also emphasizes that the state in which an insurer operates plays a crucial role not only in pricing but also in determining the coverage provided as part of the policy. This is due to the fact that insurance is regulated at the state level in the United States. “Departments of insurance must strike a balance between consumer needs, insurance availability, and the financial stability of the insurer,” he explains. Prices tend to rise in states where more extensive coverage is mandated, and some states impose restrictions on rate increases and certain underwriting criteria.
click here – How can I log in to my Discover account online?
Type of structure and its features
The replacement cost of a home, which represents the expense of rebuilding the home from the ground up, is another pivotal factor in determining home insurance pricing. A larger and more elaborate home will have a higher replacement cost, making it generally more expensive to insure.
Furthermore, certain features or characteristics of a house can elevate the property’s risk profile, thus influencing insurance costs, as noted by George Hosfield. For instance, having a swimming pool can increase the risk of a liability claim, impacting insurance rates.
In addition, older homes may be at a higher risk of claims due to aging components such as the roof, wiring, plumbing, and other factors. “Very old homes may be challenging to restore to their original condition, further raising the potential cost of insurance,” adds Hosfield.
click here – 5 best cash back credit cards of October 2023
Filed claim history
George Hosfield points out that a history of past claim filings can lead to higher insurance premiums. Essentially, homeowners with a track record of filing claims are considered more likely to file claims in the future. The precise number of claims that could affect the cost varies depending on the state and the insurer.
Most insurance companies obtain your claims history through the Comprehensive Loss Underwriting Exchange (CLUE), allowing them to access information about past home insurance claims, even if those claims were made with a different insurer.
It’s worth noting that insurance companies are not allowed to charge you more for certain types of claims. These exceptions include claims that the insurer ultimately did not pay out on, or claims related to damage caused by natural disasters.
Homeowner’s credit profile
Many insurance companies utilize credit information to determine the pricing of homeowners insurance policies, with some exceptions in certain states. George Hosfield explains that these insurance scores, which have been in use within the industry for over 30 years, rely on data from credit reports to forecast future insurance claim behavior. Generally, the higher your credit score, the lower your insurance premium. It’s essential to understand that while insurance scores draw data from your credit reports, they differ from the scores used by lenders to assess loan applications.
Contents within your home
Homeowners insurance typically provides coverage for valuable possessions you own. According to George Hosfield, policyholders with significant and high-value assets like art collections, fur items, jewelry, firearms, musical instruments, and the like can expect higher insurance premiums due to the added cost of insuring these valuable possessions.
How to reduce your home insurance rates
Insurify predicts a 9% increase in home insurance costs in 2023, primarily driven by various factors:
- Severe Weather: Climate change is leading to more severe weather events.
- Fire Damage: Modern home construction and furniture materials are contributing to fire risks.
- Water Damage: Homeowners are increasingly locating washing machines upstairs, posing water damage risks.
- Supply Chain Delays: Lumber, roofing, piping, and more are affected by supply chain disruptions.
- High Material and Labor Costs: Inflation is causing an increase in the cost of materials and labor.
While it’s crucial to have adequate insurance for home protection, there are strategies to lower insurance costs without compromising quality:
- Shop Around: Compare prices from various insurance companies to find the best deal.
- Bundle Policies: Many insurers offer discounts when you combine different types of insurance, such as homeowners, auto, and life insurance.
- Raise Your Deductible: Increasing your deductible amount can reduce your monthly premium, but ensure you have savings to cover it in emergencies.
- Disaster-Resistant Home: In disaster-prone areas, fortify your home to lower risks, which can lead to premium reductions. Measures include reinforcing roofs, installing storm shutters, and modernizing systems to prevent fire or water damage.
- Maintain Good Credit: A good insurance credit score can influence your rate, so pay bills on time, manage credit card balances, and avoid excessive credit applications.
- Annual Policy Review: Regularly assess your policy to adjust coverage for depreciated items, potentially reducing your premium.
- Ask About Discounts: Inquire about available discounts, which insurers offer for various reasons, from being a non-smoker to senior citizen status.
- Loyalty Discounts: Some insurers reward long-term customers, but it’s wise to compare prices with other insurers periodically.
click here – Best Credit Cards for Students in October 2023