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How Much Does Home Insurance Cost? Advice To Find the Best Price

October 20, 2020

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If you’re buying a home, you probably know that paying for the property isn’t the only expense you’ll incur. Among other things, you’ll also want to buy home insurance to protect this valuable asset in the event of unforeseen problems, from damaging hailstorms to theft and beyond.

So how much does home insurance cost? In this second installment of our Home Buyer’s Guide to Home Insurance, we’ll walk you through what you should know about home insurance rates, and how to find the best plan and price.

How much does home insurance cost?

The average annual homeowners insurance premium runs about $1,445. However, it can be much higher or lower based on numerous factors. Here’s a full rundown of what can affect homeowners insurance costs.

  • Condition of your home: This plays a big role in your homeowners insurance rate, and can include everything from the roof to the pipes, heating system, electrical wiring, and age. Your insurer may ask you to provide detailed information about your home; it may also gather information from public records and documents filed with your city and county.
  • Price to rebuild: Another big factor is the price per square foot to rebuild in your area, based on current construction rates. For reference, the national average is between $100 to $200 per square foot. Why does this matter? Because if your house is damaged or completely destroyed and you need to rebuild, your insurer will be footing the bill.
  • Natural disasters in your area: The cost of your homeowners insurance also depends heavily on the likelihood of destructive natural disasters or other incidents. In other words, the more known risk there is to your home, the stiffer the homeowners insurance premium. Homeowners in Oklahoma, where tornadoes wreak havoc every summer, pay an average of $2,559 for home insurance each year, the highest in the nation. Texas is not far behind, at $2,451 per year, thanks to its destructive hurricanes and thunderstorms.
  • Personal information: Your credit score, age, and other personal factors also play a role in your home insurance costs. A higher credit score and few or no insurance claims usually result in a lower rate for home insurance. Generally speaking, the older you are, the lower your premiums. Why? Because older people are less risky for insurers to cover—they tend to spend more time at home, particularly if they’re retired, which means they’ll catch a house fire before it gets out of control.
  • High-risk features: Your homeowners insurance company will also factor in high-risk home features, including swimming pools, trampolines, and even your dog. (Certain breeds have a reputation for being more aggressive, which could lead to expensive insurance claims if your dog bites someone.) Similarly, adding safety features such as a home security system or fire sprinklers can help lower your home insurance rates.

How to find the best price on home insurance

To determine how much you’ll pay for home insurance, contact a few insurance companies by calling to chat with an agent or by filling out a form on their website. After you share some information about you and your home, they’ll run this information through their own algorithms to come up with a quote on how much your insurance will cost.

But here’s the thing: Since each insurance company uses its own formulas to determine a property’s risk levels, each may offer different rates. To get the best price and policy, it pays to shop around.

“You won’t know your homeowners insurance cost until you get quotes,” says Amy Danise, chief insurance analyst at Forbes Advisor. “Quotes are free. And it’s best to get quotes from multiple companies so that you can get a sense of what a good rate will be.”

Many homeowners go with the first homeowners insurance policy quote they get in order to cross one more thing off their list during a move or the home-purchasing process. And that could be a big, costly mistake because you may pay more. But the cheapest home insurance option isn’t always the best, either.

“An informed insurance agent that can shop your home with multiple insurance carriers is your best bet at finding a great rate for your home,” says Erin Wenzel, account manager at Michigan’s Provision Insurance Group.

Ask the agent to explain why the homeowners insurance premiums are different and what the trade-offs are in liability coverage and deductibles. And this isn’t just something you should do when you first buy a home. Every year, you should review your homeowners insurance, including your liability coverage, premium, and deductible.

“Make an effort to get a new quote each year, and shop around if you’re not happy with your current rate,” says Wes Taft, co-founder of moveCHECK.

Homeowners insurance companies hungry for new business offer competitive rates on premiums.

Is homeowners insurance included in the mortgage?

In many cases, homeowners insurance will be part of your monthly mortgage payment. Why? Because your mortgage lender wants to make sure your important house-related bills get paid on time and in full.

As such, you’ll have to pay your lender your monthly home insurance premium along with your mortgage. From there, your lender will keep that insurance money in a special account, called an escrow account, and will pay your insurance bills for you when they come due.

Lenders will often show you a breakdown on their statements of how much of your payment is going to your mortgage (principal and interest) as well as what’s going toward homeowners insurance and any other fees (such as property taxes or homeowners association dues).

In certain situations, you can pay your home insurance company directly, without having to send this money to your lender first, but this isn’t common. Some lenders may offer some flexibility, such as if you made a 20% (or higher) down payment—it just depends on the lender. Also, if you paid for your house in cash or you’ve paid off your mortgage in full, then you’ll need to pay your insurance company directly.

Is homeowners insurance tax-deductible?

No, the money you spend on home insurance is not tax-deductible. The one exception is if it’s for a rental property, in which case home insurance can get deducted from your taxable income.

In addition to shopping around for the best price on insurance, you should make sure you get the right amount and type. That’s what we’ll explore in our next installment: How much insurance do you need?

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Paradise Found: These 5 Tips for Buying a Home on an Island Will Take You There

July 25, 2019


Quick question: How many times a day do you dream about quitting your job and moving to some idyllic island with turquoise blue water and a delicious umbrella drink in your hand? If you’re anything like us, it’s in the double digits (sorry, boss!).

It might seem out of reach as you sit, eyes glazed, in front of your computer. But here’s the truth: People move to islands all the time! Whether it’s Maui, the Bahamas, or Bora Bora, you, too, can buy a home on an island.

Before you sell your home and all of your stuff to afford your island venture, there are just a few details to consider. Here’s what you should think about before buying a home on an island, according to real estate experts who deal with island markets every day.

1. Consider all areas of the island—even the ones you don’t know about

Sure, everyone wants to live right on the water. But on many islands that can be very expensive. That’s why you might want to target the entire island, versus limiting yourself to a single area you know or have in mind, says Keith Gillispie, a real estate professional who buys and sells homes on Oahu, HI.

“Here, real estate is generally more expensive, lesser quality, smaller, more densely populated, and very competitive,” he says. “Even one island valley over from where you want to live could mean the difference of $200,000 in the price of your house.”

2. Be prepared for a whole new world of pests

You aren’t in Kansas anymore—literally. When moving to an island, think about the environment there and whether you’re willing to hack it with all of the native flora and fauna.

“Most islands have their own ecosystem that is different from city living in larger countries and areas,” says Tamika Todd, a real estate broker at Platinum Realty in Bermuda. “Within that ecosystem, you may find certain small or large creatures that reside near dwellings.”

And unless you want those critters to become your island roommates, you might have to shell out additional cash to seal your home. Think: screens, shutters, and regular pest control services, Todd says.

3. Visit—and stay a while

We know—twist your arm, right? But the only way you’ll really know if island living is for you is if you spend an extended amount of time there.

What’s more, your island might not have all of the amenities you’re used to at home. Some of you might think it’s worth it, but others could get fed up with the lack of available products—and the premium you’ll pay for what is available.

“Are you able to live without access to Starbucks, McDonald’s, and the local Ikea?” asks Odest T. Riley Jr., president of WLM Financial, who works with real estate on the island of Santa Catalina, CA. “Plus, things that we take for granted may cost 10 times as much to have shipped in to an isolated Island.”

4. Stay smart about your insurance policy

You’ll want to make sure your little piece of paradise is covered in the event of extreme weather, which is, unfortunately, often a reality of island life.

Depending on where you live, you might need to purchase homeowners insurance with supplemental hurricane coverage. And don’t forget about separate windstorm and flood policies. We know—all of that insurance can be costly. But you’ll consider it money well-spent when disaster strikes.

5. Factor in cost of living—and be prepared to downsize

Even if you can afford your dream island home, don’t forget to factor in all of the other costs of island living. It can vary widely, depending on where you’re buying your home. But a general rule of thumb: “The cost of living is much more expensive on an island as compared to the mainland,” Gillispie says.

That means property taxes, utilities, HOA fees, insurance, and even a gallon of milk could be more than what you’re used to.

“Because of the high cost of living and the huge expense of buying a house, families usually have to downsize significantly in order to save money on expenses,” Gillispie warns.

“Getting bunk beds or a bed that folds up along the wall during the day are pretty normal here. You may even need to be prepared to give up the den or the office you used to have, and plan to not have a garage or huge yard—both significantly drive up the cost of the home and are hard to find.”

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