By Beth Hempton
Home owners insurance reflects one of life's necessities that we only appreciate when we actually utilize it. We certainly don’t want to pay more than necessary for it, but for most of us, our home is our greatest investment. There are a number of factors to consider if you're wondering, "How much should I be paying for home owner's insurance?"
Value of Your Home
If your home burned down and all contents were lost, would your homeowner’s insurance cover complete rebuilding and replacement? Ideally, it would cover the replacement cost of your home and belongings.
Consider these points:
- Basic home owner's insurance plans often do not cover the replacement costs.
- Replacement value is typically less than market value because it does not include your land.
- Contractors and appraisers can provide replacement value estimates.
- Remodeling or home improvements may increase the replacement value of your home and you should adjust your home insurance coverage as you make changes.
Location, Location, Location
Where you live can greatly affect your homeowner's insurance costs. According to the Insurance Information Institute, in 2009 Florida, Texas, Oklahoma and Louisiana homeowners pay some of the highest rates in the nation--with average annual premiums over $1000 ; and Utah, Idaho and Oregon homeowners pay much less with an average under $600 per year. Unpredictable and volatile weather greatly impacts a state's homeowner's insurance average.
Securing Your Home
Homeowners with security systems, including burglar and smoke alarms, commonly receive insurance discounts. Adding security to your home could, depending on your insurer, reduce your insurance costs by 5-20%.
Your credit rating could impact your home insurance payments. Using one company for car, home and other insurance could bring your rates down. Some insurance companies provide a discount for homes near a fire hydrant or fire department.
Understanding Your Deductible
guru Dave Ramsey recommends paying smaller monthly premiums and maintaining a higher home owner's insurance deductible if you have at least three to six months of expenses in a soluble savings account. By doing so, you're opening up immediate avenues of extra money for investing or paying off debt. Obviously, you don't want to get in a position where your deductible is too high for you to comfortably cover it should you need to use your insurance.
Do Your Homework
With so many factors affecting how much you pay in home owner's insurance, consider the following steps to ensure you're paying a fair rate:
- Check out the average rate for your state. The Insurance Information Institute has compiled statistics regarding average insurance rates around the country.*
- Talk with friends and family who live in your area and own homes similar in value to your own. Be sure to ask about any issues or difficulties they have had with their home insurance companies. Paying less may not be worth poor service.
- Contact your current insurance company and ask about ways to lower your rates. You may be missing out on opportunities to pay less. If your rates are higher than your state average, find out why.
The Insurance Information Institute reports that the national average for homeowner's insurance in 2009 was $800. This average included all types of homeowners insurance, from the very minimum to ultra expensive coverage. A little research and time can help you determine whether you're paying too much for the coverage you're receiving.
* Ratemarketplace.com is not affiliated with the Insurance Information Institute, nor does it endorse, approve, sponsor, or make any claims regarding the accuracy of the Insurance Information Institute's website or publications. The information and references in this article are meant for general information purposes only. Consumers are encouraged to independently research rates, terms and coverages before purchasing a policy.