How Much Does Homeowners Insurance Cost

| June 7, 2014 | 3 Comments

Cost of Homeowner’s Insurance         

cost-of-homeowners-insuranceHomeowners insurance, also referred to as “hazard insurance”, provides a way for a homeowner to cover their losses if a disaster should cause damage to a home. According to a study produced by the U.S. Department of Housing and Urban Development, a lender sometimes require that a homeowners insurance policy has to be in place before finalizing a mortgage settlement or a refinancing agreement. Many factors can influence the total annual cost of this insurance, including the extent of the coverage and the location of the property, as well as the condition of the property.


Usual Costs

  • According to the Federal Reserve research staff, the average cost of an annual premium for homeowners insurance can be between $300 and $1,000. For most homeowners, there is a method for determining the annual costs for a home owners’ insurance policy. Costs can be estimated by dividing the value of the home by 1,000, then multiplying the result by $3.50.This method is not perfect, but it can provide a reasonably accurate basic number that someone can use as a starting point for further calculations.
  • One factor in the cost of homeowners insurance is what circumstances are covered under a particular policy. Some examples of typical disasters and incidents that are covered under a basic home owners’ insurance policy are fire, vandalism and wind. Costs can vary depending on the location of a property that is vulnerable to flooding or earthquakes.  California is a prime example of this issue because of a large portion of the state’s residential areas falling on or near a major fault line. In this case, homeowners may need to purchase a separate policy for earthquake coverage.

Extra Costs

  • While annual premiums are typically paid in monthly installments, some lenders might require a homeowner to pay the first year’s annual premium in full before completing a mortgage settlement or any other kind of refinancing agreement, according to research conducted by the U.S. Department of Housing and Urban Development.
  • According to published research available through the Federal government, there are several ways for homeowners to reduce the costs of their annual premium on a home owners’ insurance policy. For example, installing a new roof or storm shutters–both of which can protect against natural disasters–may reduce the annual premium for some homeowners. This is especially true in neighborhoods that are considered as “high crime” areas by the US department of Justice and the FBI, or areas that are considered at high risk of violent weather as defined by the National Weather Service. The installation of security alarm systems, dead-bolt locks, storm screens and smoke detectors can also result in discounts of about 5 percent.

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