Finding the average cost of home insurance: Factors to consider

If you’re budgeting for a new home, it’s important to incorporate the average cost of home insurance. Insurance rates are composed of many factors, and knowing these factors can help you estimate the potential expense.

Here is a quick guide to the variables determining the average cost of homeowners insurance:

Home location & age

Homeowners insurance cost is partially determined by certain aspects of the home itself. The biggest factors include location, age and condition. If your home is located in an area prone to extreme weather or other potentially damaging conditions, it’s considered a higher risk to the insurer and may incur a higher premium.

Older homes are more likely to need repairs, and those repairs can cost more. Similarly, if your home’s condition is less than ideal, your insurance premium may be higher as a result.

Coverage details

There are several variables in your policy that go into the average homeowners insurance cost. The most important variables are:

  • Deductible amount – Deductible amount affects how much you pay monthly and how much you may need to pay out of pocket for a claim. A higher deductible means a lower premium cost, but a higher out-of-pocket cost if you need to file a claim.
  • Dwelling coverage amount – The portion of your policy that protects the physical structure of your home can vary based on size, condition and age of your home.
  • Personal property coverage amount – Also included in your average insurance cost is protection for the value of your personal belongings, such as clothing, furniture and appliances.

Other factors

There may be other factors that impact the cost of homeowners insurance. Some of these are related to your home and lifestyle, like whether you have a pool, trampoline or aggressive pets. Others might concern your financial history, including credit score and past insurance coverage.

If you want more details about what goes into the average cost of home insurance, consult your insurance provider.

Hazard insurance: Understanding the basics

Hazard insurance and homeowners insurance are often mistaken for the same thing due to the similarities they share. While standard homeowners insurance policies include hazard coverage, standalone hazard insurance serves a different purpose.

How do you know if you need hazard insurance? Here is a guide to help you understand the basics:

Hazard insurance vs. homeowners insurance

Hazard insurance can protect you financially from damage caused by hazards like fire, lighting, wind and other natural events. While homeowners insurance includes protection from a broad range of hazards, certain specific events are excluded.

In certain areas where specific hazards like tornadoes or earthquakes are common, you may be required to get a separate hazard insurance policy. This combined with your regular homeowners insurance coverage means you’re prepared for anything.

Another key point of comparison of what these two types of insurance will pay to replace. Hazard insurance typically refers to coverage for the structure of your home, including the roof and foundation. Homeowners insurance, however, includes coverage for your personal belongings and furnishings.

How to know if you need hazard insurance

Whether you should have additional hazard insurance largely depends on where you live. In regions prone to flooding, for example, your mortgage lender might require you to get a flood insurance policy before approving you for a loan.

Even if not required, having hazard insurance coverage can give you peace of mind. If you have an additional hazard policy, you’ll know you have financial coverage if your home and belongings are damaged in an extreme weather event.

By comparing the hazard insurance cost with the potential cost of replacement and repairs, you can determine whether it makes sense to add it into your budget. Consult your insurance company to find out what options you have and whether a hazard insurance policy is right for you.