Homeowners Insurance Premiums

Homeowners insurance premiums represent the fee charged for insurance protection of your home and its contents. These premiums generally cost between $1,300 to $1,500 per year, on average.

What Is a Homeowners Insurance Premium?

Homeowners insurance premiums are the costs associated with covering your home.[1] The specific amount will vary depending on factors such as the value and location of the home, the coverage type chosen, and personal needs. 

Not all insurance policies are created equal and neither are premiums. Low premiums aren’t necessarily better if they don’t offer the same amount of protection in the event of loss. 

Finding the right coverage from the right insurer will ensure that the premiums not only fit your budget but also your coverage needs. 

Key Information About Homeowners Insurance Premiums

How Are Homeowners Insurance Premiums Calculated?

Homeowners insurance premiums are calculated based on several key variables, including these:

• Home value: The replacement cost of your home is a significant factor in calculating your premium.[2] For example, a larger home will generally have a higher premium as will a home that is made with high-end materials.

• Location: The geographic area of your home influences your premium. Areas prone to natural disasters or with high crime rates usually have higher premiums. For example, owners of homes in hurricane-prone regions or neighborhoods with frequent burglaries will usually pay higher premiums for insurance.

• Coverage type: The type and amount of coverage you choose will impact your premium. Comprehensive coverage with higher limits will cost more than basic coverage.

• Deductible: The deductible is the amount you pay out of pocket before your insurance starts providing coverage. A higher deductible usually leads to a lower premium, and vice versa.

• Home features: Depending on how old your home is, the type of materials used to construct the home and their cost, as well as the existence (or absence) of safety features, your rates will vary. 

Understanding Changes to a Homeowners Insurance Premium

Though there is no single standard formula that all homeowners insurance providers use to determine rates, there are some common factors that are often weighted to some degree in a company’s formula when determining how much they will require a homeowner to pay in the form of a premium. 

Use the following table as a guide to help you identify issues that may be impacting your premiums with different companies.

What Is the Average Cost of Home Insurance Premiums?

The cost of the premium for a homeowners insurance policy could be anywhere between $1,300 and $1,500 each year on average. But keep in mind that this is just an estimate. Your premium could be much higher or much lower depending on the specific characteristics of the home in question.

For example, if you live in a state or area that commonly experiences hurricanes, tornadoes, or flooding, it is likely that your premiums will be higher than someone who does not. The higher the risk that the insurance company will have to pay out on a claim, the higher the premium will be, and vice versa.

How Are Homeowners Insurance Premiums Paid?

In most cases, you will have the ability to choose exactly how you want to pay your homeowner’s insurance premiums. However, there are cases where this isn’t true. 

In general, you can expect that most companies will require you to choose one of the following options: 

Paying Through an Escrow Account

Perhaps the most common way that most homeowners pay their premium is through their mortgage lender. The lender will add the cost of the premium to the cost of the mortgage and create an escrow account to hold those funds until they are due to be paid.[5] When that time comes, they will automatically pay it on your behalf.

This is often the preferred way to handle premiums for everyone involved, including the homeowner, the insurance provider, and the mortgage lender. Here’s why:

• Your insurer provider can work with the mortgage company if there is an issue with payment.
  
• The homeowner has one less bill to manage and can rest assured that all deadlines will be met with one monthly payment.
  
• Once a year, your lender usually does a review to make sure the escrow account matches any changes in your insurance premiums. They’ll update the amounts if needed.
  
  This means that your monthly payment could increase a bit, so you don’t take the hit all at once. Or it could mean that you get an unexpected refund if you inadvertently overpay. 

Paying the Insurance Provider Directly

Alternatively, you can choose to pay your homeowners insurance premium directly to the insurance company. Here’s how it works:

• You take full responsibility for paying the insurance premium on time and directly to the insurance provider. Your mortgage lender will not be involved.

• You have more control over your insurance payments and can choose how often you pay (such as monthly, quarterly, or annually). If you prefer a lower monthly mortgage payment and paying off your homeowners insurance premium in one lump sum, this may be preferable to you.

• With this option, you won’t have an escrow account for insurance, so you will need to budget and make timely payments in order to avoid coverage lapses.

Homeowners Insurance Premium FAQs

We’ve gathered the most frequently asked questions about homeowners insurance premiums here.

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Reviewed by Kristopher Kane

Kristopher Kane is a career freelance writer with over 15 years of experience and a broad portfolio encompassing various topics within the insurance industry. He has written for both B2B communication and consumer-level customer engagement.