How to calculate your home insurance costs
Buying a house involves more than just a down payment and your monthly mortgage bill — you also need to budget for recurring homeownership costs like property taxes and homeowners insurance. While the average yearly cost of homeowners insurance in the U.S. is around $1,899, rates can vary greatly depending on where you live and the amount of coverage in your policy.
For an accurate estimate of your coverage needs and costs, use our free homeowners insurance cost calculator.
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How to estimate your home insurance coverage needs
To calculate your homeowners insurance coverages, you’ll need an estimate of your home’s replacement cost and the combined value of everything you own. From there, you’ll have a better idea of how much coverage you need for each of the six coverages in your policy.
How to calculate homeowners insurance
Estimate how much it would cost to rebuild your home
Estimate the value of your personal belongings
Estimate the value of your assets
Determine how much of each coverage you need
1. Estimate how much it would cost to rebuild your home
A standard homeowners insurance policy covers the structure of your home against disasters such as fire, lightning, and severe windstorms. To ensure you’re completely covered in the wake of a catastrophe, you’ll want your policy’s dwelling coverage limit to be high enough to cover the cost of rebuilding your home from the ground up.
Your dwelling coverage limit should be equal to your home’s rebuild cost — or replacement cost — not its current market value or your remaining mortgage balance, says Mark Friedlander, a spokesman for the Insurance Information Institute. "Insurance replacement cost often differs materially from a home's market value, which includes the value of the land and is highly influenced by supply and demand."
Use Policygenius’ home insurance calculator
For a quick and accurate estimate, use our homeowners insurance cost calculator. All you need to do is provide a few brief details about your home — including its address, square footage, and year built — and we’ll send you homeowners insurance estimates from multiple insurance companies.
2. Estimate the value of your personal belongings
You should have enough personal property coverage to cover the value of all of your personal belongings, including your clothes, furniture, electronics, and jewelry. The best way to gauge your personal property coverage needs is to take an inventory of everything you own. Inventories make it easy to categorize and value your personal belongings by room and property type.
3. Estimate the value of your assets
You’ll want enough personal liability coverage to cover the combined value of everything you own — including properties, vehicles, and personal possessions — in the event you’re legally responsible for someone else’s injury or damaged property and sued.
Common liability claims include slip and fall injuries, dog bites, and trampoline-related accidents. Between medical bills and legal fees, lawsuits can be expensive and can put all of your assets at risk.
4. Determine how much of each coverage you need
Once you have an estimate of your home’s replacement cost, the value of your personal belongings, and the value of your assets, you’ll be able to accurately set your home insurance coverage limits.
Dwelling: Pays to repair or rebuild the physical structure of your home after a covered loss. This coverage should be high enough to pay for a full rebuild of your home.
Other structures: Covers other structures not attached to your home, including detached garages, sheds, and fences. This coverage is usually 10% of your dwelling coverage limit.
Personal property: Pays to repair or replace everything inside your home — from furniture and electronics to appliances and clothing — after a covered loss. This coverage is typically set at 50% of your dwelling limit, but some insurers will let you increase your personal property coverage to as high as 70%, depending on your coverage needs.
Loss of use: Covers the cost of hotel stays, dining out, dry cleaning, and other additional living expenses when you’re unable to stay at your house after a covered loss. This coverage is typically set at 20% of your dwelling limit.
Personal liability: Pays for legal and medical expenses if you’re legally responsible for injuring someone or damaging their property. Most insurers offer anywhere from $100,000 to $500,000 in personal liability coverage.
Medical payments: Covers medical expenses if someone is injured at your home — regardless of who is at fault. Most insurers offer anywhere from $1,000 to $5,000 in medical payments coverage.
How much additional living expenses coverage do I need?
It depends on how likely you think you are to file a claim that leaves you unable to live in your home while it’s being repaired or rebuilt. Standard home insurance policies limit additional living expenses (ALE) coverage to 20% of your dwelling coverage limits. However, you might want to increase your ALE coverage if you live in a high-risk disaster area prone to flooding, hurricanes, tornadoes, earthquakes, or wildfires.
How your home insurance rates are calculated
Insurance companies consider multiple factors when calculating your homeowners insurance rates, including:
1. Your home’s location
What does this mean for you? Homes in inner cities, close to the coast, or in wildfire zones are more likely to see higher rates than those in more remote areas free of natural disaster zones.
2. 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.
What does this mean for you? Larger homes or houses with outdated electrical, plumbing, or construction will see higher rates, since there’s a greater chance you’ll have to file a claim. Homes with pools, trampolines, or even dogs will also see higher costs due to the increased risk of an accident happening.
3. The coverage amounts in your policy
Insurance rates will vary depending on the amount of property you’re insuring. That includes your home’s replacement cost, as well as if you have expensive art and electronics to insure, or how much coverage you want for personal liability.
What does this mean for you? The more expensive your home is to rebuild and refurnish, the higher coverage levels you’ll need — meaning higher premiums to match.
4. Your policy deductible
A deductible is the amount you pay out of pocket when you file a claim before the insurance company kicks in to cover the rest.
What does this mean for you? If you choose a high deductible, you’ll pay lower rates, and vice versa.
5. Your credit score and claims history
Insurance companies perceive homeowners with lower credit scores or multiple past claims as a higher risk of filing a claim.
What does this mean for you? Even one claim in the past few years or a credit score below 670 could mean higher home insurance premiums.
What is the formula to calculate homeowners insurance?
You can calculate the approximate cost of homeowners insurance by dividing the value of your home by $1,000 and then multiplying the result by $3.50. For example, a home valued at $400,000 would have a home insurance policy that costs roughly $1,400.
Just keep in mind this isn't a hard-and-fast rule — it's a guesstimate. How much you ultimately pay depends on the location of your home, your credit profile, and the level of coverage you purchase, among other factors.
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Frequently asked questions
Why is my homeowners insurance quote so high?
Your homeowners insurance quote could be high for any number of reasons. Having an old roof, a “dangerous” dog breed, or a recent claim can all result in higher rates. If you’re having trouble finding affordable coverage, consider using a marketplace like Policygenius that can connect you with multiple quotes from different carriers.
How can I lower my homeowners insurance premium?
Does home insurance go up every year?
The average homeowners insurance premium typically increases year over year. Premiums have generally gone up across the board to make up for losses that the industry has experienced. If your premiums increased by more than 10% since your last policy term, consider re-shopping your homeowners insurance for lower rates.
Policygenius home insurance calculator methodology
Our home insurance estimate calculator is based on average rates across ZIP codes in all 50 states and Washington, D.C. to help you estimate your own home insurance premiums.
We analyzed home insurance rates by Quadrant Information Services in March 2022 for a 40-year-old female homeowner with no claim history, good credit, a $1,000 deductible, and the following coverage limits:
Other structures: $30,000
Personal property: $150,000
Loss of use: $60,000
Rates provided are a sample of costs, so your actual quotes may differ.