Heres the Average Cost of Homeowner Insurance. Are You Paying Too Much?

Photo:Win Henderson, Wikimedia Commons

There's something that you probably use that's been rising in price faster than inflation lately: homeowners insurance. If you're feeling pinched by the rates you're paying, know that you may be able to secure a less expensive policy.

According to a January 2015 study by the National Association of Insurance Commissioners, the average homeowner insurance premium jumped 7.6% in 2011 and then by 5.7% in 2012. That's enough to push a $1,000 policy to $1,137 in just two years.

Location, location, locationWhere you live makes a big difference in the rates you'll likely pay. The same study listed average rates for each state, with these results:

The five most expensive states:

  • Florida ($2,084)
  • Louisiana (1,742)
  • Texas ($1,661)
  • Oklahoma ($1,501)
  • Mississippi ($1,314)

The five least expensive states:

  • Idaho ($538)
  • Oregon ($567)
  • Utah ($580)
  • Wisconsin ($631)
  • Washington ($648)

Clearly, regions with frequent hurricanes and sinkholes can be costly, when it comes to home insurance.

Insurance in Florida is costly due to sinkholes and other risks. (Photo: John S. Quarterman, Flickr)

How to lower your costWant to lower your homeowner insurance costs? Well, obviously, moving to Idaho should be high on your list. But, OK -- not everyone can or wants to do that. So here are some other suggestions:

  • The best tip is to shop around, as by doing so you may receive different quotes and may be able to save hundreds of dollars per year. Each insurer uses a different algorithm and weighs various factors differently, arriving at different estimates of what you should be charged. Keep in mind that price isn't everything, though. Be sure to compare apples to apples when assessing different quotes. A lower quote might be offering less coverage. Look for insurers with solid reputations, too, and good customer service. Perhaps ask around for recommendations.
  • In most kinds of insurance, including homeowners, raising your deductible will generally lower your cost. Yes, switching from a $500 deductible to a $1,000 one will mean that you might pay $500 more in a year, but in most years, you probably will have no claims, and your premiums will be lower. A premium can fall by about 25% if you raise your deductible from $500 to $1,000.
  • Speaking of claims, it's a harsh reality in the insurance world that the more claims you file, the more your premiums will likely be increased.According to a CNNMoney article, "On average, filing a single claim -- for anything ranging from a stolen bicycle to tornado damage -- will result in your monthly premium being raised by 9%, according to a report released by a second claim and premiums climb by an average of 20%."
  • Be a good customer. Insurers are likely to favor those with solid credit scores, for example, perhaps offering them lower rates because they're likely to be smaller risks. Along the same lines, loyal customers with long relationships with an insurer can result in lower prices. The Insurance Information Institute notes that, "Some insurers will reduce their premiums by 5% if you stay with them for three to five years and by 10% if you remain a policyholder for six years or more."
  • Bundle your insurance. You can get lower rates overall by buying your home insurance from the same company that provides your car insurance -- sometimes by 5%-15%. But you should be sure that the discounted total price is lower than what you could get buying the policies separately from different companies.
  • You may be able to get a small or big discount by reducing the insurer's chances of a big claim -- for example by weatherproofing your home more (such as via storm windows) or installing deadbolt locks and a security system. Ask your insurer what steps will yield discounts. Most desirable for some insurers is a fancy security system that will automatically call the police or fire department if it senses a problem, or a sprinkler system that might keep a fire from getting out of control.
  • Finally, ask about any other discounts. You might get a lower rate if you work at home, for example, because you're around more, leaving the house less vulnerable. Seniors might qualify for some discounts, too.

A good credit score can get you good insurance rates.

More homeowner insurance tipsIt's important to understand your policy well, and to know what it does and doesn't cover. If you're worried about earthquakes, for example, know that most policies don't protect against them unless you add coverage for that, and pay extra.

Be sure you understand what your policy will do in the event of a big catastrophe. For example, don't think that if you bought your house for $200,000 years ago that you're good with a policy that will pay $200,000 if your home burns down. Rebuilding costs change over time, so check your policy now and then, and make sure it meets your needs. Understand also how you'll be compensated for lost property. Will you receive what it will cost to replace the property, or just its depreciated value at the time of loss?

If you're shopping for a new home, know that having a fire hydrant nearby can lower your insurance costs. Think, too, about dangers in the area where you're house-hunting, and factor them into your decision. If it's a flood zone, know that you might need to buy costly flood insurance. In an earthquake region, you might get lower insurance costs by choosing a home that's more able to withstand a disaster, like one with a wood frame.

The average cost of homeowner insurance is on the steep side, but it's necessary. You may be able to pay less for it, though, by taking certain actions.

The article Heres the Average Cost of Homeowner Insurance. Are You Paying Too Much? originally appeared on

Selena Maranjian has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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