When buying and financing a house, you will be required to pay homeowners insurance until your loan is paid off. But what many homebuyers don’t always think about prior to putting a contract on a home is how much that homeowners insurance will cost. The cost of your homeowners insurance is usually split up and paid monthly along with your mortgage payment. Therefore, if you didn’t anticipate those extra costs, which could also include your property taxes and perhaps property mortgage insurance (PMI), if you didn’t put 20 percent down, then you might have just priced yourself out of that home because now you can’t afford the monthly payments. It’s extremely important to ask the question “how much is home insurance” before committing to any home.
Once you’ve answered the question “how much is home insurance” and have estimated the approximate property taxes and whether or not you will have to pay PMI, then you will know how much house you can afford. This will help you avoid putting a contract on a house only to find out later that with the added fees you can’t afford the monthly payments. So let’s talk about homeowners insurance, including how much it costs, as well as a few other things you really need to know before you get started.
How Much Is Home Insurance?                                              Â
One thing you need to be aware of before you buy a house is that your homeowners insurance and your property taxes for that matter could increase every year. That means your monthly mortgage payments will increase as well because those fees are paid via your monthly mortgage. Therefore, you will need to make sure your income is enough to pay those yearly increases. And if not, then perhaps you should consider buying less of a house.
The average cost of homeowners insurance currently averages about $950 per year; however, every state has different rates. Additionally, where you live, and whether or not your location is susceptible to large scale natural disasters such as hurricanes or tornadoes, will also factor into the cost of your homeowners insurance. For example, the states with the highest homeowners insurance rates are Florida, Louisiana, Texas, Mississippi and Oklahoma, which makes sense because those states are the most susceptible to hurricanes and tornadoes.
What Are the 10 Most Inexpensive States for Home Insurance?
As we mentioned above, there is a wide spectrum of home insurance prices across the country and the cost of your home insurance is based mainly on whether or not you live in an area that’s susceptible to large scale natural disasters. However, on the lower end of the spectrum there are 10 states that proudly boast the lowest home insurance rates in the country and those states and rates are as follows.
10. Iowa        $735
9. Nevada      $710
8. Delaware     $685
7. Arizona      $695
6. Ohio        $660
5. Washington   $645
4. Wisconsin     $610
3. Utah          $580
2. Oregon      $575
1. Idaho        $535
Why Do I Need Homeowners Insurance and What Does It Cover?
You might be thinking that because you don’t live in an area prone to natural disasters that you don’t need homeowners insurance, besides what are the odds of your house catching fire. Well, first of all, you are required to keep homeowners insurance on your house until the mortgage is paid off. But aside from that there are plenty of other events and maladies that could occur. Â There are losses such as: Fire, lighting, wind, hail, water damage, freezing, theft, debris removal, bodily injury, miscellaneous property damage, medical payments for injuries to others and so on. And here are a few other facts for you. Did you know that approximately one in 15 insured houses has a claim every year? And that approximately one in 30 insured houses experience property damage due to wind and/or hail every year? And did you know that one in 1,000 homeowners have liability related claims due to lawsuits for bodily injury or property damage? So as you can see, homeowners insurance covers more than what most people think it does and is pretty much essential if you own a home.
How Can I Lower My Homeowners Insurance Costs?
There are plenty of things you could do to help lower your homeowners insurance costs.
Comparison Shop. The best way to get the lowest possible insurance rate is to shop around and compare the rates of three or more companies before making any decisions. Just make sure you are receiving apples to apples quotes. That means you will need to  write down the coverage’s you want in the amounts you want so that you are receiving equal bids from each company. For example, you should be comparing the actual cash value costs, replacement value costs, deductibles and any other coverage’s you need.
Raise Your Deductible. Another way to lower your homeowners insurance cost is to raise your deductible. The deductible is the amount you will have to put down prior to your insurance company paying a claim. The higher your deductible, the lower your premiums will be. However, you will need to make sure you have enough money in reserves to pay that deductible should you have to file a claim.
Combine Policies. Generally if you use the same insurance company for several of your insurance needs, you will receive a discount. For example, use one insurance company for both your home and auto insurance.
Home Security. Most insurance companies will give you a discount if you install smoke detectors, an alarm system and deadbolt locks. And some insurance companies offer as much as 15 to 20 percent off your insurance if you have a sprinkler system installed inside your home. Or a fire and burglar alarm that immediately contacts the police or the fire department monitoring station should an event occur. However, not all systems will qualify for a discount; therefore, you should check with your insurance company to confirm what prevention methods they will and won’t give you a discount on.
Good Credit. Many insurers will give you a lower cost insurance policy if you have a good credit record. Therefore, it pays to do everything you can to maintain the health of your credit.
Flood Insurance. If you buy a home that is in a flood zone, you will be required to buy and maintain flood insurance on that home. Flood insurance is not generally covered on your homeowners insurance policy and therefore must be purchased separately. In addition, flood insurance can be extremely costly depending on how close that house is to the water. One way to avoid this expense is to check and see if the home you are considering is in a flood zone or a location that will require flood insurance. If it is, and you can’t afford the flood insurance, then it’s best you find another house. Another thing to remember is that depending on the natural disasters and other events that occur each year, the cost of your flood insurance could increase drastically after an influx of natural disasters. Therefore, you will have to make sure your income can cover those increases should they occur.
2 Point Highlight
1. When buying and financing a house, you will be required to pay homeowners insurance until your loan is paid off.
2. What many homebuyers don’t always think about prior to putting a contract on a home is how much that homeowners insurance will cost.
