Average Home Owner Insurance Cost & Terms

When you purchase a home, one of the first things you will need to consider-often before you are even able to close on the home-is insurance, but how much does average home owner insurance cost and how will you be expected to pay for it?

Average Cost of Home Owner Insurance

The cost of your home owner insurance will depend a great deal on what coverage you include. Items that will affect the cost of your insurance include:

  • How much it would cost to replace or rebuild your home
  • Whether you insure the price of the home or the replacement cost
  • How high your deductible is
  • The level of crime in your neighborhood
  • The flood/hurricane/natural disaster risk in your area
  • Your credit rating
  • Extra or specialized coverage
An average home owner policy will cost from a few hundred to more than a thousand dollars depending on some of the variables listed above. A good rule of thumb to remember is that the more you have to insure, the more it will cost you to insure it. For example, a home that would only cost $50,000 to rebuild would be much less expensive to insure than a home that would cost $250,000 to rebuild.

To reduce the cost of your insurance, set your deductible at the highest possible amount you can afford. You can reduce the cost of your insurance by taking measures to reduce risks as well. If you live in an area with high crime, install an alarm system and motion sensitive lighting. If you live in an area with flood or storm risks, improve the drainage and reinforce windows and doors.

Insurance Terms

When you first purchase your home, you will normally be required to show proof of insurance before you close. To obtain your insurance binder, it is often necessary to pay for an entire year's premiums up front. Subsequent premiums can be built into the escrow account of your mortgage. Check with your mortgage lender; in some instances, this will be required to make sure the insurance on the home does not lapse.

Be sure to shop around to find the best possible cost. You can do very quick comparisons of different companies online. Choosing the least expensive insurance may not always be wise; make sure whichever insurance you choose has the coverage you need. Watch for exclusions that would leave you vulnerable. Your home is a big investment and one of the largest purchases you will ever make. It is worth taking the time and effort to find the right insurance to meet your needs.

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