Just Paying the Average Home Insurance Cost May Not be Enough

The average home insurance cost varies across the country, but with rising home values are you paying too much, too little, or just right?


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We’ve written before about the rise of home equity as component and material costs grow and homes skyrocket in value. The red-hot housing market has been life-changing for some sellers and a significant headache for most buyers. But one factor that is often overlooked by homeowners that are watching equity rise with no plans on tapping into it is protecting that value. Is continuing to pay the average home insurance cost going to protect your home’s value?

The average home insurance cost varies by state but is typically highest in states in the middle of the country like Oklahoma and Kansas which, due to the risk of tornadoes, command annual premiums of $2,500 – $3,500. New Mexico is also in the top five in average home insurance cost as approximately 70% of residential properties are in locations with above-average wildfire risk.

Surprisingly, Hawaii commands the lowest average home insurance cost, coming in just below $400 per year (although Hawaiian insurance policies typically do not cover the biggest risk to homeowners, hurricanes, and most homeowners purchase supplemental insurance coverage).

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Right-Sizing Your Average Home Insurance Cost

If you took out a mortgage when buying your home, you likely took out a policy that covered the value of the structure at the time of construction. Insurance companies typically adjust your insured dwelling coverage upwards as prices appreciate, and you’ll find the average home insurance cost rises as well. However, those insurance company adjustments don’t account for housing markets like this one, and you may be underinsured given the recent spike in home prices.

Also, construction of any outbuildings such as barns, workshops, or additional living spaces is typically limited to 10% of the insured property’s value. If you’ve seen your home’s value rapidly rise or if you’ve made additions (or acquired valuable personal property like jewelry) you may want to double check your insurance coverage to make sure that the policy is adequate.

Lastly, adding something like a pool or spa might prompt you to consider increasing your liability coverage for persons injured on your property, as pool accidents and slips and falls are some of the biggest liability risks for property owners.

Cutting Your Average Home Insurance Cost

If you’ve reviewed your insurance policy and find that your coverage is sufficient to leave you protected, you may want to find ways to save money. There are a handful of ways to reduce the average home insurance cost and these are some of the best:

Bundle policies – Most insurers will offer discounts to homeowners that bundle other insurance policies, like your auto policy, with the home policy. Bundling policies also offers the benefit of a single point of contact should you need to contact the company and various loyalty rewards programs.

Ask for discounts – If you have a good existing relationship with your insurer, they may be inclined to grant discounts if you ask in order to prevent you from finding a new insurer.

Shop around – If you believe you’re paying a higher-than-average home insurance cost and your insurer won’t offer you discounts, shop around. It’s easy to get quotes from most insurers and you can directly compare their coverage options with your current policy. Keep in mind that if you’re using a third-party website for insurance quotes, you may receive unsolicited calls from insurance providers, so it may be worthwhile to go to each insurer directly.

Improve your credit score – This can not only help you cut your insurance costs but is good for your financial health in general. Requesting a free report and disputing any inaccuracies is one easy way to improve your score, but you can also improve it by paying down revolving debt and reducing your credit utilization. If you’re planning on going this route, you should do so before you begin shopping or asking for discounts.

The average home insurance cost varies by state and by property, but in today’s real estate market you need to make sure that you’ve got enough coverage and aren’t overpaying.

Have you double-checked your insurance policy since home values began climbing?

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Navigate the insurance world with ease, with these top tips for ensuring that insurance always works for you—revealed in this FREE report, 5 Tips for Making Insurance Work for You.

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