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Ask an Advisor: How Much Is Homeowners Insurance? Comments

  • By Jocelyn Black Hodes, DailyWorth’s Resident Financial Advisor
  • November 26, 2013

homeowners insurance cost

How much is homeowners insurance?

This is one of the first questions you should ask when preparing to buy a new home. That’s because you need to have a good idea of your total potential housing expenses when determining how much house you can afford. And while the question is straightforward, the answer is: It depends.

One key factor in how much your homeowners insurance will cost is the deductible. You have a choice of a low-deductible or high-deductible plan. Your annual premium will be lower if you go with a high-deductible plan, but the catch is that you’ll have to pay more out of pocket in the event you have to submit a claim for home repairs. With a low-deductible plan you have the opposite scenario.

How much coverage you need is another major factor affecting the cost of homeowners insurance. If you're buying a policy to cover a home that's worth $500,000, you're obviously going to pay more than covering a home worth half as much. You need to get an accurate appraisal of your home’s worth in order to help you figure out the right amount of coverage. You also need to consider the added value of your personal belongings that will be inside the home, as homeowners insurance typically covers personal property up to a certain amount. You likely would want to get a policy that will cover the cost of your home and most of your stuff in the case disaster strikes. 

A third big influence on the price of homeowners insurance is your past insurance claim history. The more claims you’ve had in the past the more you will pay moving forward. That’s because all insurers have to weigh the risk of their policyholders to the company and determine premiums based on the likelihood of having to pay claims in the future. 

Other factors that can affect your homeowners insurance cost include the age of your home (newer homes tend to be cheaper to insure), the crime rate in the area of your home and the presence of a swimming pool or owning an aggressive-breed dog (which can drive up price because of the risk of accidents and injury).

If you are thinking of buying a new home or just want to reevaluate your current coverage, shop around for homeowners insurance quotes, consult an agent from at least two companies for personalized guidance and remember to consider all of these factors when determining how much coverage you need and how much to prepare to pay. 

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