Home much should home insurance cost?

Home insurance, ideally, should not cost a great deal, but the average cost of it in the mainland United States is around $1,000 a year. This amount varies depending upon many factors.

The cost of insurance is dependent upon a great many things. Insurance companies base their rates partially upon their own expenses in the area.

finding best home insurance ratesEach company collects data about losses incurred against the home insurance policies written by that particular insurance company. These losses are added to the costs of administrating paperwork, claims, sales, and reserves required to be held for future claims.

Statistical accountants for the insurance companies take all this information and balance it to determine the profits and losses, and then determine the rates that will be charged for that year.

This is the reason it is a wise thing to check rates at each anniversary date.

An insurance company, particularly in hurricane, tornado, or storm-plagued areas, can sustain amazingly large losses in a year’s time. This could cause increases in insurance premiums as a result.

You may access the insurance website for your state by searching for insurance in the state, or you can go to the website for the National Association of Insurance Commissioners (NAIC) and click on your state for a link to your state.

Each state has a group of statistical accountants that review the rates for insurance companies and make certain that their profit/loss ratios are in line with the rates they charge.

States will often give some of these statistics on their website.

Use the FREE quote comparison tool at the top of this page to start your search!

Ways Home Insurance Premiums Are Figured

Home insurance premiums are based upon the possibility that a loss may occur at your home. The premiums take into consideration the following possibilities:

  • Loss by fire, explosion, lightning – evidenced by the fact that frame (wood) buildings cost more to insure than brick ones
  • Age of the home – the older a home is, the more likely the underlying systems composing the home such as plumbing, heating, electricity, and cooling may be – leading to their possible sudden failure, triggering a loss under the home policy
  • Local fire protection – if there’s a working hydrant within fire hose length of the building, enough water pressure, and a well-trained fire department servicing your area, it costs less to insure your home than if you live in the middle of an arid field, depending upon inexperienced volunteers and bringing tankers to put out a fire.
  • The amount of coverage – what you purchase to cover your property makes a difference in premiums
  • Deductibles, the amount that you are responsible for in the event of a loss, can make a difference in your premium because the more risk you are willing to accept, the lower your premium may be
  • Savings on Your Personal Home Insurance

Insurance companies take into consideration variations in the families of the people they insure to figure rates.

Some things that affect rates are:

  • Your personal credit rating because individuals who need money are likely to use their home policy as a maintenance policy rather than a way of protecting against catastrophic losses
  • Losses incurred upon on the house in the past – A previous owner may have replaced a roof or haphazardly remodeled a bathroom without benefit of a contractor. This can affect the insurability of the home.
  • Purchasing home insurance and car insurance with the same insurance company to take advantage of credits
  • Upgrading of heating, electrical, and plumbing systems to meet current codes, preventing accidental losses. For example, a home built in 1920 could very like have had ‘knob-and-tube’ wiring.
  • ‘Knob-and-tube’ wiring is when cloth-covered wire was strung to light bulbs using porcelain knobs to keep it away from flammables. A new owner must upgrade this wiring to prevent fires.

Getting Representative Insurance Quotes for Home Insurance

cheap home insurance companiesThe most reliable way of saving money is to obtain at least three quotations (estimates) on what your home insurance will cost.

Consistently following this practice from year to year will inevitably save money.

Insurance companies vary a great deal in service, reliability, and solvency as well as premiums. Examine these criteria by asking your neighbors, checking your state insurance department, and linking to one of these sites:

  1. NAIC (National Association of Insurance Commissioners)
  2. A.M. Best
  3. Standard and Poor’s

 Know the Policy Amounts that You Need

Building value depends upon the replacement cost of the actual building, not the lot or amenities that go with the lot. Estimate the replacement cost by taking into consideration the structure of the home and its area.

Your insurance agency will have schedules to help you with these figures, or you may go to Building-Cost.net to figure it out.

  1. The remainder of the amounts of coverage may be figured by using a percentage of the building cost. For example:
  2. Building cost – determined by you
  3. Fences, separate garages, and other structures – 20% of building cost
  4. Personal property – contents of the house – 50% of the building cost
  5. Loss of use – additional costs if you have to move from the house temporarily due to a named peril – 20% of building cost

Personal liability coverage is chosen by you, but $100,000 to $300,000 is recommended. Medical payments coverage to pay for injury to individuals on your property should be set from $1,000 to $5,000.

This varies from liability coverage because a formal claim does not have to be filed on medical payments.

Perils Covered

Perils are the causes of loss upon which you may collect.

Carefully read your policy to determine the perils covered and your responsibilities should something happens.

A brief idea of the perils is as follows:

  • Fire and lightning
  • Vandalism and theft
  • Storms
  • Freezing or breaking of pipes
  • Sudden bursting and overflow of appliances

Flood coverage and earthquake coverage is not provided by a home insurance policy.

Flood insurance is subsidized by a Federal program and can be obtained from your insurance agent. Earthquake insurance, too, must be acquired separately through your insurance agent.

Examine Quotations Carefully

Assess the information you have obtained for both the least expensive and the best insurance available.

Read carefully, and file the information away for next year because it will be necessary to do this again, then. Please do not become complacent about insurance because it is a vital way of protecting your family and your assets.

Use the FREE quote comparison tool below to get started!