Homeowners insurance is required by mortgage lenders and protects your biggest asset. Here’s everything you need to know to get the right coverage at the right price.
What Homeowners Insurance Covers
A standard HO-3 policy includes six types of coverage:
| Coverage Type | What It Protects | Typical Limit |
|---|---|---|
| Dwelling (Coverage A) | Home’s structure | Full replacement cost |
| Other structures (B) | Garage, shed, fence | 10% of dwelling |
| Personal property (C) | Furniture, electronics, clothes | 50-75% of dwelling |
| Loss of use (D) | Temporary housing if displaced | 20-30% of dwelling |
| Personal liability (E) | Lawsuits from injuries on property | $100K-$500K |
| Medical payments (F) | Minor injury costs for guests | $1,000-$5,000 |
Example: $350K Home
| Coverage | Limit | What It Means |
|---|---|---|
| Dwelling | $350,000 | Full rebuild cost |
| Other structures | $35,000 | Garage, fence |
| Personal property | $175,000-$262,500 | All your belongings |
| Loss of use | $70,000-$105,000 | Hotel + expenses while displaced |
| Liability | $300,000 | Someone injured on your property |
| Medical payments | $5,000 | Guest’s medical bills |
What’s NOT Covered
| Peril | Covered? | Solution |
|---|---|---|
| Fire, lightning | ✅ Yes | — |
| Wind, hail | ✅ Yes | — |
| Theft, vandalism | ✅ Yes | — |
| Falling objects | ✅ Yes | — |
| Snow/ice damage | ✅ Yes | — |
| Flooding | ❌ No | NFIP or private flood insurance |
| Earthquakes | ❌ No | Earthquake endorsement or separate policy |
| Sewer backup | ❌ No | Sewer backup rider ($50-$100/year) |
| Mold (most cases) | ❌ No | Mold endorsement |
| Normal wear & tear | ❌ No | Regular maintenance |
| Pest damage (termites) | ❌ No | Pest service contract |
| Dog bites (some breeds) | ⚠️ Varies | Check breed exclusions |
Average Cost by State
| State | Avg Annual Premium | Monthly |
|---|---|---|
| Vermont | $890 | $74 |
| New Hampshire | $950 | $79 |
| Utah | $1,050 | $88 |
| Oregon | $1,100 | $92 |
| Idaho | $1,150 | $96 |
| Wisconsin | $1,200 | $100 |
| Washington | $1,250 | $104 |
| Pennsylvania | $1,350 | $113 |
| California | $1,500 | $125 |
| Virginia | $1,600 | $133 |
| Michigan | $1,700 | $142 |
| New York | $1,800 | $150 |
| Georgia | $2,000 | $167 |
| North Carolina | $2,100 | $175 |
| South Carolina | $2,300 | $192 |
| Texas | $2,800 | $233 |
| Mississippi | $2,900 | $242 |
| Oklahoma | $3,200 | $267 |
| Colorado | $3,400 | $283 |
| Nebraska | $3,600 | $300 |
| Louisiana | $4,200 | $350 |
| Florida | $4,800 | $400 |
Factors That Determine Your Rate
| Factor | Impact |
|---|---|
| Location (state, zip, proximity to coast/fire) | Highest impact |
| Home age and construction type | Older homes cost 20-40% more |
| Dwelling coverage amount | Higher coverage = higher premium |
| Deductible chosen | Higher deductible = 10-25% lower premium |
| Credit-based insurance score | Poor credit = 40-90% higher rates |
| Claims history | 1+ claims = 10-40% increase |
| Roof age and material | New roof = 10-20% discount |
| Security/safety features | Alarm, smoke detectors = 5-15% discount |
Choosing the Right Deductible
| Deductible | Annual Premium (est.) | You Pay at Claim | Premium Savings vs. $500 |
|---|---|---|---|
| $500 | $2,500 | $500 | — |
| $1,000 | $2,250 | $1,000 | $250/year |
| $1,500 | $2,050 | $1,500 | $450/year |
| $2,500 | $1,900 | $2,500 | $600/year |
| $5,000 | $1,750 | $5,000 | $750/year |
Best strategy: Choose the highest deductible you can comfortably pay out-of-pocket. For most homeowners, $1,000-$2,500 is the sweet spot.
How to Save on Homeowners Insurance
| Strategy | Typical Savings |
|---|---|
| Bundle with auto insurance | 10-25% |
| Increase deductible to $2,500 | 15-25% |
| Install security system | 5-15% |
| New roof | 10-20% |
| Improve credit score | 10-40% |
| Claims-free discount (3-5 years) | 5-10% |
| Shop around every 2-3 years | 10-30% |
| Age 55+ or retiree discount | 5-10% |
Replacement Cost vs. Actual Cash Value
| Type | What You Get | Example ($10K couch, 5 years old) |
|---|---|---|
| Replacement cost | Cost to replace with equivalent new item | $10,000 |
| Actual cash value | Depreciated value | $4,000-$6,000 |
Always choose replacement cost coverage — the difference in premium is typically $50-$100/year but the payout difference can be tens of thousands.
Key Takeaways
- Average homeowners insurance costs $2,200-$2,500/year nationally — but ranges from $890 (VT) to $4,800+ (FL)
- Standard HO-3 policies cover fire, wind, theft, and liability but NOT floods or earthquakes
- Choose replacement cost over actual cash value — pays to replace items at current prices
- Bundling auto + home, raising deductibles, and shopping regularly can save 25-40% on premiums
- Flood and earthquake coverage are separate policies — essential in at-risk areas
- See our average home insurance by state for detailed state cost comparisons