Not sure how to estimate your homeowners insurance rates or coverage needs? Crunch the numbers with our home insurance calculator.
Fabio Faschi - PLCS, SBCS, CLCS
Updated April 23, 2021|7 min read
One of the most important parts of buying a new house is selecting a homeowners insurance policy to protect your home and belongings against the unexpected. When purchasing coverage, it helps to have a firm understanding of your coverage needs and how your rates are calculated. But how much should you expect to pay for coverage? And how do you determine your coverage amounts? To get the answer, start by using our homeowners insurance calculator.
The average cost of homeowners insurance in the U.S. is $1,633 a year, according to a 2020 analysis of Policygenius quotes. But insurance companies will consider multiple factors when setting your homeowners insurance rates, including:
Your home’s location - Your insurance premiums are largely determined by location factors like your ZIP code and how at-risk your home is to being burglarized or damaged by a natural hazard like a hurricane or wildfire
Your home’s characteristics - The age, square footage, number of rooms, and building type of your home, as well as the condition of its electrical and plumbing, and the age of its roof can all affect your insurance rates
The coverage amounts in your policy - Insurance rates will vary depending on the amount of property you're insuring. Your home’s replacement cost, the value of your personal belongings, and your liability coverage amount can will impact your premiums
Your policy deductible - A deductible is the amount you pay out in the event of a covered loss. If you choose a high deductible, you’ll pay lower rates, and vice versa
Your credit and claims history - Insurance companies consider homeowners with low credit scores and prior claims as high-risk, and typically offset that risk by charging higher rates
Along with your ZIP code and deductible amount, your home’s rebuild value, meaning the amount of money it would cost to totally rebuild your home from scratch following a disaster, is one of the driving factors insurers use when setting your policy rate. Below is the average rate for five different coverage ranges, according to an analysis of insurance quotes submitted with Policygenius.
|Coverage amount||Average annual cost|
|Greater than $500,000||$2,830|
The area with the highest average homeowners insurance rate nationwide is the 39553 ZIP code in the Gulf Coast city of Gautier, Mississippi, according to an analysis of insurance quotes submitted with Policygenius. The cheapest homeowners insurance rates nationwide are in the 97203 ZIP code of Portland, Oregon.
The most expensive ZIP codes for homeowners insurance are:
|ZIP code||City||State||Average annual cost|
|76034||Taylor Lake Village||Texas||$4,923|
The least expensive ZIP codes for homeowners insurance are:
When shopping around for homeowners insurance and comparing quotes from multiple companies, make sure the coverage estimates in the quotes you’re getting reflect your actual coverage needs.
To ensure you’re getting an accurate cost comparison, you’ll want to know the replacement cost of your home at today’s construction and labor prices, the value of your personal belongings (excluding vehicles), and the value of your combined assets in the event you’re held liable for an accident and sued.
A replacement cost estimate will inform your policy’s , which is the portion of your policy that protects your house, plumbing and electrical, and built-in systems like your HVAC in the event of a covered loss. Your dwelling coverage limit should be equal to your home’s rebuild cost, not its fair market value or sales price.
There are a few different ways to obtain a replacement cost estimate of your home: by using an online home insurance calculator, by hiring an appraiser that specializes in replacement cost appraisals, or by calculating your home’s rebuild cost yourself. However the simplest method is to just rely on the estimate your home insurer will generate when you apply. However if you want to come up with an estimate on your own, you can:
1. Use a home insurance calculator
For a quick and accurate estimate, take advantage of the Policygenius homeowners insurance calculator above. You’ll simply answer a few questions about your home, like its square footage, the type of heating system you have, whether you have a basement, and more. We’ll then send you an estimate detailing your coverage amounts as well as rates with multiple insurance companies.
2. Estimate your home insurance coverage limits yourself
Here’s a shorthand formula for calculating your home’s replacement cost if you’re looking to obtain a rough estimate:
Home square footage x price-per-square-foot to build in your area ≈ replacement cost
You can find the average price-per-square-foot in your area by contacting a local builder or contractor. They’ll inquire about the construction type of your home and give you a price-per-square-foot estimate based on that. You then multiply the estimated amount by your home’s square footage. That will give you a general idea of how much dwelling coverage you should have in your policy.
Although, we must stress that the above formula is very much a ballpark estimate. There are several other factors that influence your home’s rebuild estimate, including the style of your cabinetry and countertops, flooring, foundation and roof type, and more.
3. Use the coverage limits from a prior policy
If you’ve previously insured your home with a different company, you could also transfer the information in that policy to your current insurer, provided all the information in the old policy is up-to-date and correct. (Your dwelling coverage amount should be updated every year to reflect any increases/decreases in the cost of construction material). If you go that route, the insurance agent will likely ask for your old policy’s declarations page to verify the information is correct.
4. Consider hiring an appraiser
If you’re into playing it safe, you could also hire an appraiser that specializes in replacement cost appraisals to get an up-to-date rebuild cost valuation. An appraisal that factors your home’s curb appeal into its RC valuation isn’t a proper replacement cost appraisal. What you’re looking for is an estimate of how much it’d cost just to rebuild the home based on current construction materials and labor.
Talk to your insurance agent or a local builder for local appraiser recommendations. The appraiser will conduct a component-by-component analysis of the home from the ground up.
You’ll want to make sure you have enough to cover all of your personal belongings, such as clothes, furniture, electronics and jewelry. Although your personal property coverage limit is typically set at 50% of your dwelling coverage limit by default, most insurers will give you the option to increase your limit, upgrade your loss settlement terms to replacement cost instead of actual cash value, or modify your payout limits for expensive valuables with typically lower sublimits, such as jewelry, art, and fine furs.
To ensure your personal belongings are fully covered, consider the following:
Take a home inventory
The best way to gauge your personal property coverage needs is to take a proper inventory of everything you own. Inventories make it easy to categorize and value your personal belongings by room and property type. The type of items you’ll want to include in your inventory include, but aren’t limited to:
Camp and sports equipment
Consider raising coverage limits on certain valuables
Most insurance companies have reimbursement limits, or sublimits on rare and expensive types of personal property. A sublimit is the most an insurer will pay out in the event of a covered loss. Jewelry, art, fine furs, expensive electronics, and rare and vintage instruments typically have sublimits in the range of $1,000 to $2,500. To increase reimbursement limits on your most expensive valuables, consider adding a scheduled personal property coverage add-on to your policy.
Personal liability coverage is the part of your policy that covers your assets in the event you’re held legally responsible for injuring someone or damaging their property. Common liability insurance claims involve “slip and falls” inside or outside the home, dog bites, and trampoline accidents. Between legal fees and the court settlement, lawsuits are expensive and can put all of your assets as risk.
Most insurers offer personal liability limits between $100,000 and $500,000 in $100,000 increments. So how much liability coverage should you get? It depends largely on two factors:
How much liability-related risk is associated with your property
What your total assets amount to
Keep in mind that personal liability coverage in homeowners insurance is general liability; it doesn’t just cover your liability if someone is injured on your property, it also protects you if you accidentally injure someone or damage their property away from your home.
If you injure somebody and they sue, they can go after all of your assets in a lawsuit, not simply assets related to the insured property. If you own two homes with a combined value of $400,000, that’s $400,000 in assets alone that you should protect with liability coverage.
You should also consider the liability risk attached to your home. If you have a pool, a trampoline, a treehouse, or any other “attractive nuisances”, that should all be taken into account when deciding on a liability coverage amount.
Interested in comparing quotes from top-rated insurance companies? Apply for multiple policies at once with Policygenius.
The 80% rule refers to how you’re paid out for claims involving the structure of your home. If your home is insured for less than 80% of its true replacement value, your insurer will only pay out for its actual cash value (replacement cost minus depreciation).
Your homeowners insurance quote could be high for any number of reasons. Having an old roof, a dangerous dog breed, or a frequent claims history can all result in heightened rates. If you’re having trouble finding affordable coverage, consider shopping with an independent agency that works with multiple companies.
Increasing your policy deductible, bundling your home and auto insurance with a single company, and adding protective devices to your home like storm shutters and security systems can all result in lower premiums.
The average homeowners insurance premium has been increasing year-over-year for some time now. Premiums have generally gone up across the board (not necessarily in just the high-risk areas) to make up for historic losses that the industry has experienced in recent years. If your premiums increased by more than 10% since your last policy term, consider re-shopping your homeowners insurance for lower rates.
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