How much is homeowner’s insurance and what does it cover?

Homeowner’s insurance can protect you from significant financial loss if a disaster or emergency strikes.


Homeowner’s insurance can prove to be a lifesaver that can save you from devastating financial loss should disaster strike.

What is homeowner’s insurance?

As you can probably guess by the name, homeowner’s insurance is a type of coverage that applies to property you own. Just like auto insurance covers you if something happens to your car or someone in it, a homeowner’s policy is designer to cover your home and the people and property in or around it.

Homeowner’s insurance protects you not from dangers but from financial loss. It cannot eliminate hazards or prevent disasters, but it can help minimize the risk of significant monetary loss should an unforeseen emergency happen.

There is the potential loss of physical property (as in, your home and its contents). There is also financial loss you can occur if someone sues you. This is where the liability portion of the insurance policy comes into play.

Types of coverage in a homeowner’s insurance policy

There are lots of options when it comes to what homeowner’s insurance covers and for how much, and to some degree you can customize your policy to meet your individual needs. Some specific types of coverage commonly found in a homeowners’ policy include:

  • Dwelling:

    This covers the structure itself, and is intended to help you repair or rebuild the home in case of a major disaster such as a hurricane or fire.

  • Liability:

    This helps protect you from financial loss if someone sues you or files any sort of claim resulting from an incident that occurred on your property. Claims can relate to all sorts of incidents—some of the most common are dog bites, falls and slips on ice. This coverage will generally also apply to situations where you damage someone else’s property—such as if you accidentally back your car into your neighbor’s garage door.

  • Personal property:

    This covers the belongings inside your home, such as furniture, electronics, personal items, etc. If you have expensive or rare items in your home such as collectibles, valuable jewelry or artwork, it is a good idea to speak with your insurance agent about a special rider or separate policy to cover those items.

Do you need homeowner’s insurance?

Unlike with auto insurance (which is required in most states), there is no legal requirement forcing you to have homeowner’s insurance. No state or federal law mandates it. If you own your home free and clear, it is your choice whether to have insurance on the property or not. However, while going without insurance might be an option, it is a very risky choice. You could potentially incur considerable financial damages if something should happen to your property—or to someone else while they are on your property.

If you have a mortgage or other loan secured by the property, your lender will require you to have homeowner’s insurance. The specific type of coverage and other details will vary by lender, but at the very least, most will require a coverage amount that’s equal to the current balance of the loan. That way, even if there is a major disaster resulting in total loss of the property, there would be sufficient insurance coverage to restore the property back to its current value.

Depending on your location, lenders may also require specific additional coverage applicable for risks that are a concern in that particular area—for example, flood insurance if you are in a flood zone.

If you are buying a home, you are typically required to show proof that you have obtained insurance coverage at the time of the closing, so it is smart to factor that expense in when planning your closing costs.

Even if you don’t have a mortgage, if you own a condominium or an apartment that’s part of a co-op, the co-op board or homeowners’ association may require you to have insurance.

How much does homeowner’s insurance cost?

It’s difficult to quote any sort of average cost for homeowner’s insurance because there are so many factors that affect the cost for a specific policy. Premiums are impacted by the size and location of the home, age of the home, type of construction materials used in the home, and even the distance from the nearest fire hydrant. There may be special characteristics of your region or neighborhood—such as a high crime rate or a tendency to have severe winter storms—that will be considered. Also, your own personal claims history and possibly your credit history me also play a role.

Among the states with the highest average cost of homeowner’s insurance premiums are Florida, Kansas, Texas and Oklahoma—which isn’t all that surprising, given that these locations tend to get a lot of severe weather and major storms.

A survey by Insurance.com showed an average national cost of $1,228 per year for a policy featuring $200,000 dwelling coverage, $100,000 liability coverage and a $1,000 deductible.

As with any major purchase, it can be helpful to shop around and compare deals on homeowner’s insurance rates. Remember, though, that the bare minimum configurations might be the most budget-friendly option, but that’s usually not recommend or ideal. The minimal coverage limits for a basic policy are modest, and may not be sufficient to cover all expenses you will incur in the event of a major loss or disaster.

As a starting point, you want to make a rough estimate of what it would cost to rebuild your home and replace your personal property. If you have significant assets, you will want to consider additional coverage or look into an umbrella policy which is extra liability insurance that can protect you from sizable claims or major lawsuits.

How to save money on homeowner’s insurance

You may be able to save money on the cost of homeowner’s insurance if you qualify for certain discounts. The availability of discounts will vary depending on the insurance company. Many companies offer a multi-policy discount if you have both homeowner’s and auto insurance policies through the same company. Outfitting your home with security systems and fire alarms may also result in lower premiums.

You can also reduce your premiums by going with a higher deductible, but of course that means you will have to pay more out of pocket before your coverage kicks in.

Before you need homeowner’s insurance, you must first find the perfect home for your family. Trulia can help make that happen.