What Is a Homeowners Insurance Premium?
Your annual payment to your insurance provider to maintain the status of your policy is known as a home insurance premium.
A yearly payment you make to an insurance provider is known as a homeowners insurance premium. The insurer agrees to pay you back for certain losses in exchange.
Your annual payment to your insurance provider to maintain the status of your home insurance policy is known as the premium.
Your annual premium can be paid in full upfront or you can include a portion of it in your monthly mortgage payment. Many insurance providers also accept quarterly or semi-annual payments.
According to the Insurance Information Institute, the cost of homeowners insurance was $1,398 on average per year in the United States in 2021. (Triple-I). Triple-I used information gathered by S&P Global Market Intelligence for their study.
Since numerous factors, including geography, and impact rates, the national average cost of homeowners insurance doesn’t tell you much about what you can expect to spend.
For instance, the average homeowner’s insurance in Arizona cost $850 in 2019 while the average coverage in Florida cost $1,988. These figures are from the most recent statistics from the National Association of Insurance Commissioners (NAIC).
Your premiums are based on how likely you are to file a claim and the potential cost of that claim. The main factors that determine your homeowner’s insurance premium include:
Location: The frequency and severity of natural disasters in your area affect your rates. For instance, you may pay higher premiums if you live on a wildfire-prone hillside or hurricane-prone coastline.
Square footage: Larger homes generally cost more to insure.
Age: Older homes generally cost more to insure as well. That’s because old homes are more prone to problems, and they may have historic features that would be expensive to replace.
Construction Type: A home with a more durable build (e.g., steel-framed or solid masonry) may cost less to insure than a less-durable home (e.g., wood-framed).
Claims history: If your home has had a claim in the last three to seven years, you can expect to pay a higher premium.
Insurance score: Insurers use this score to assess how likely you are to file a claim and charge you accordingly. A low insurance score might result in a higher premium.
Deductible amount: You can lower your premiums by taking a higher deductible. Conversely, a lower deductible will result in higher premiums.
Discounts: Features such as deadbolt locks, smoke detectors, a home security system, and a newer electrical system can lower your premiums.
Swimming pools and hot tubs: These “attractive nuisances,” as the insurance industry calls them, create a liability risk. On top of that, they also need coverage against damage.
Dogs: Owning a dog, especially a breed that’s perceived as more likely to bite someone, could increase your premiums.