The average U.S. homeowners’ insurance rate is nearly $3,000 per year, according to a recent report by insurance marketplace The Zebra [1].
But that’s just the average — residents in some states pay much more.
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According to the report, the three most expensive states for homeowners insurance are:
- Nebraska: $7,920
- Oklahoma: $7,426
- Kansas: $5,303
The three least expensive states for homeowners’ insurance are:
- Hawaii: $721
- Vermont: $1,159
- Delaware: $1,225
The rising cost of homeowners’ insurance is another financial burden on American consumers. So what’s behind the rise?
Why are insurance rates rising so much?
The steady climb in homeowners’ insurance isn’t just about inflation. According to an analysis by the Insurance Information Institute [2], replacement costs for home repairs jumped more than 55% between 2020 and 2022. This was primarily attributed to higher prices for building materials, costs that may be passed directly onto policyholders.
Severe weather events are occurring more often and causing greater damage. Insurers must not only pay out more claims but also buy more reinsurance (essentially insurance for insurance companies) and build up capital reserves to protect against catastrophic losses, reports the Brookings Institution [3]. That makes their business more expensive, which in turn can make your policy more expensive.
Insurers have also begun to use more advanced risk modeling techniques, per Brookings. Instead of spreading costs evenly across broad regions, these models may be able to pinpoint which homes are considered high-risk and result in customized pricing.
In some areas, private insurance companies have stopped writing policies and even dropped existing ones, citing an increased cost of doing business. This has driven many homeowners toward “last resort” state-backed plans, which often provide more limited coverage at a higher cost.
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Here’s how you can save
While you can’t stop a tornado or move your property to a safer location, you can take steps to keep your homeowners’ insurance rates in check. Here are a few strategies to save money.
Get comparison quotes
Rates can vary drastically between insurance providers. Get quotes from several companies to make sure you’re not overpaying. Independent insurance agents may be able to help you find a cheaper policy than you can find on your own.
Ask about discounts
Some carriers offer discounts for things like paying bundling it with your car insurance or having a claim-free history. Call to ask about the discounts you might be eligible for.
Look for ways to repair or remediate risks
Some providers offer a discount if you reduce your risk by installing storm shutters, reinforcing your roof, adding fire-resistant siding or installing a home security system. Some states even mandate discounts for eligible safety upgrades, so research the laws in your area.
Raise your deductible
If you can afford it, consider a request to raise your deductible or the amount you must pay before insurance kicks in. Doing so can lower your premium — just make sure you’re able to pay more for repairs when problems crop up.
Improve your credit score
In many cases, insurers factor credit into home insurance pricing. A NerdWallet analysis [4] found that a person with a poor credit score could end up paying significantly more than someone with excellent credit. Paying down debt and consistently paying off credit cards can help you qualify for better rates.
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[1]. The Zebra. “The Average American Is Now Paying Over $2,800 for Home Insurance”
[2]. Insurance Information Institute. “Rising Homeowners Insurance Costs Since Pandemic Driven by Persistent Inflation, Replacement Cost Increases, Prolonged Supply Chain Issues, and Legal System Abuse”
[3]. Brookings Institution. “How is climate change impacting home insurance markets?”
[4]. NerdWallet. “How Your Credit Score Affects Homeowners Insurance”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.