Budget Home Insurance
Budget Home Insurance
Average home insurance rates can vary a lot, depending on where you live, your deductible amount and the amount of coverage you need. That’s why it’s important to have as much detailed information as possible when planning the home insurance basics for your budget.
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There are many variables to consider when buying homeowner insurance, but you typically start by deciding the coverage amount for the following:
- dwelling
- deductible
- liability
- medical payments
The limits of your coverage for the following are typically a set percentage of your dwelling coverage limit as shown below:
- other structures – 10 percent
- personal property – 50 percent (you choose between replacement value or actual cash value)
- loss of use – 20 percent
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How does your rate compare to the national average?
Here are are the nationwide average annual costs for home insurance for common coverage levels:
| Average rate | Dwelling coverage | Deductible | Liability |
|---|---|---|---|
| $1,228 | $200,000 | $1,000 | $100,000 |
| $1,244 | $200,000 | $1,000 | $300,000 |
| $1,737 | $300,000 | $1,000 | $300,000 |
| $2,252 | $400,000 | $1,000 | $300,000 |
| $2,790 | $500,000 | $1,000 | $300,000 |
| $3,295 | $600,000 | $1,000 | $300,000 |
How much dwelling coverage do I need?
When buying homeowners insurance, you should get enough dwelling coverage to match the full replacement cost of your home. The cost to repair damage to your home or rebuild it completely at equal quality — at current prices – is the replacement cost. Figuring out how to calculate home replacement cost can be a challenging task, but can be done by making a thorough inventory of building materials used for your home, using online calculators, or, you can hire an appraiser to do it for you.
How much liability coverage do I need?
Liability insurance provides a financial safety net for the household. It pays out when you and your family members are legally responsible for others’ injuries or property damage. That’s to say, it covers the medical expenses of people who are hurt while in your home or on your property, as well as damage caused to neighbors’ property. Personal liability also covers legal fees if you are sued, as well as any resulting judgments from a lawsuit, up to your policy limits.
Most home insurance policies come with $100,000 in personal liability insurance but this is rarely enough coverage. The cost to defend a lawsuit or to pay for medical expenses for a serious injury can easily exceed that amount. Most experts recommend upping your limits to at least $300,000.
What is medical payments for others and how much do I need?
Medical payments coverage pays for injuries to guests in your home, regardless of who is at fault. Medical payments differs from liability insurance in significant ways, primarily in that it is for minor incidents and comes in very low limits of $1,000 or $5,000. The latter amount of $5,000 is recommended.
What deductible amount should I choose?
The deductible your share of the repair cost when you file a claim. Your home insurance rate will be lower if you choose a high deductible. If you have a $500 deductible, you're going to pay more on your premiums than if you have a $2,000 deductible.
Going with a higher deductible will save you money. It will also reduce your home insurance claims. That’s why it’s important to know the trade-off you’re making – and be comfortable with it -- when choosing a home insurance deductible.
How home insurance rates are set, and why they vary by location
Home insurance companies assess many factors when setting rates. Rates can fluctuate significantly from state to state, or even neighborhood to neighborhood, depending on how insurers assess the various things they look at to calculate your rate. The biggest factors influencing the cost of homeowners insurance are:
- Your home’s location, which reflects its exposure to hazards, such as storm damage, wild fires, burglaries and so on
- Your home’s value
- The cost to rebuild your home if it were completely destroyed
- Local construction costs, which account for building materials availability and price, building regulations, among other factors.
- Your home’s age
- Risk exposure on your property, for instance, from a swimming pool, trampoline, guest house or aggressive dog breed
- Your neighborhood’s fire protection rating, or, how close your home is to a fire station
- Your personal and neighborhood claims history, as well as the previous homeowner’s claim history
- Your insurance score, which is based, in part, on your credit score (only two states don’t allow this – Maryland and Hawaii)
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