Knowing how your home insurance premium is calculated — and what a fair rate looks like — are key to finding a cheap homeowners policy.
Homeowners insurance is designed to protect you and your assets — your home, personal property, your liability, and more — from certain perils that can leave you financially underwater. It’s an extremely important safeguard to have even if you do not live in an area that’s susceptible to natural disasters. Accidents can happen at the most unexpected of times; understanding your coverage and knowing how to get it at an affordable price is integral in protecting one of the biggest investments you’ll make in your life.
To help you in your search for cheap homeowners insurance, we surveyed some of the top insurers across the nation using a standard homeowner profile: $250,000 replacement cost for the dwelling and a $1,000 deductible.
Learn more about our rating methodology here and see the results in the chart below.
|Insurance Company||Average Annual Premium|
With an average monthly rate of $116, Allstate was the cheapest home insurance company in our study. Liberty Mutual was the second-cheapest, offering monthly insurance premiums just a dollar more expensive than Allstate’s rate.
While we recommend starting your search with these insurance companies, keep in mind our homeowner profile likely doesn't match yours precisely. Because myriad rating factors are taken into account when insurers calculate premiums, there is no “one size fits all” option for home insurance.
Curious about what your homeowners rate will be? Enter your ZIP code below and we can help you compare personalized homeowners insurance rates side-by-side. For more information on other important rating factors and how they affect premiums, along with the cheapest companies, continue reading below.
The replacement cost of your home, i.e., the amount of money required to rebuild to match its former state if it’s destroyed or damaged, is one of the most important factors used by insurance companies to price your premium. This is because dwelling coverage is the pillar of any homeowners policy, as it protects the structure of your home.
Your home's replacement cost also dictates coverage limits for other parts of your home insurance policy. Generally, these are percentages of your replacement cost:
So if your home is insured for $250,000, you have $25,000 for other structures, $125,000 for personal property, and $50,000 for loss for use.
This is another reason why it’s important to calculate replacement value as accurately as possible, including the cost of labor and materials at current market values. Your premium will be commensurate to your home’s replacement cost. This relationship is illustrated below, including the cheapest companies based on differing replacement costs.
The cheapest home insurance companies by replacement cost amount:
If you live in a high-value home that surpasses these dwelling coverage amounts, expect even higher rates. Learn more about insurance for high-value homes.
The deductible you choose for your homeowners insurance policy also has quite a bit of sway in what you pay in premium. While it doesn’t have as much weight as replacement cost, it remains an important rating factor.
As with auto insurance deductibles, your premium and deductible carry an inverse relationship: lower deductibles raise your premium while higher deductibles lower your rate. This is because of the amount of financial responsibility you assume when you select your deductible amount. If your deductible is high, it means your claim payout will be less than had you chosen a low deductible. Insurance companies will charge cheaper premiums if you voluntarily opt to take a larger slice of financial responsibility in the event you need to file a claim.
The table below shows how deductibles directly correlate to home insurance rates. A $5,000 deductible results in the lowest premiums, no matter what company.
The cheapest home insurance companies by deductible amount:
First and foremost, insurance companies are risk-averse. The number of claims that are filed directly affects their bottom line via claims payouts. If a client’s rating factors indicate that they are more likely to file a claim, insurance companies make up for this likelihood by charging a higher premium.
The quality of the primary asset you are insuring — your home — definitely matters to your insurer. Depending on the level of disrepair or quality of materials, insurance companies may even deny coverage. This is because a home that hasn’t been maintained over the years is far more susceptible to damage.
Here are some examples of home conditions, materials, and age that concern insurance companies:
See the below tables to see how construction type and roof materials can affect your rate.
If you live in a wood frame home, expect to pay an extra $160 in premium per year to account for the flammability of your home's construction materials. The same idea holds true for wood roofs, which costs an extra $85 a year to insure over slate roofs:
The cheapest insurance company no matter the construction or roof type of your home was Nationwide.
Regular maintenance and upkeep of the structure of your home is a great way to put insurance companies at ease. In general, newer home constructions are cheaper to insure.
In fact, for homes older than 30 years old, the average rate is about 60% higher than that of new constructions.
|Insurance Company||New Construction||10 Years Old||20 Years Old||30 Years Old|
The cheapest home insurance companies by home age:
In the auto insurance world, you may have trouble finding an insurance company willing to insure you if you’ve racked up too many claims in the past. The same concept also applies to homeowners insurance. See the below table to see how an average fire or weather claim can affect your rate with some of the top homeowners insurance companies:
|Insurance Company||No Claims||Fire Claim||Weather Claim|
The cheapest insurance company based on claims history was State Farm, where the average increase after a fire or weather claim was just 5%. Compared to Nationwide's 39% increase after a fire, and Travelers' 19% rate hike post-weather claim, State Farm could provide the most savings whether or not you've had a past claim.
A longer-than-average claims history is a red flag to insurers. Historical data indicate that policyholders who have filed at least one claim are more likely to file another one. Thus, home insurance companies will charge higher premiums if you’ve had a covered loss in the past. Depending on the company, they may even refuse coverage for having more than one claim within a specific range of time — usually three years. Home and car insurance claims stay on the national property claim database for five to seven years.
This is a crucial reason why knowing when and when not to file a homeowners claim is important if you’re looking for cheap home insurance.
Insurance companies keep track of the number of claims that are filed in your area. This number correlates to how much risk a certain area represents. If the location of your home has had a history of claims — such as hurricane-related losses or a high degree of burglaries — insurers will charge higher premiums in that ZIP code to anticipate for more claims filed in the future.
The same applies to your location’s fire protection rating. This measures the distance between your home and the nearest water source and fire department. For instance, if you live in a rural area susceptible to wildfires, and the closest fire station is miles away in the next town, this will unsettle insurance companies enough to charge you a higher rate. Sometimes, they will deny coverage altogether to avoid the risk.
In insurance-speak, outdoor features like pools, hot tubs, playgrounds, and trampolines are called attractive nuisances. While these are nice to have on your property, these can pose serious liabilities. Having attractive nuisances makes it more likely that someone can injure themselves, thereby increasing the likelihood of having your insurance company step in to defend your liability. Having any of these features will increase your rate to account for the elevated risk.
Credit score is one of the risk indicators insurance companies use to calculate your premium. While credit score isn’t rated as heavily as it is in auto insurance, it’s still a factor insurers consider as part of your risk profile. Past data tells them that those with lower credit scores are more likely to file claims, so insurance companies will impose higher premiums to cushion the financial impact of potential losses.
Even our furry friends can pose a risk. If you own a dog, insurance companies will want to know if it’s a breed considered “aggressive” or “restricted.” Keep in mind this is very company-specific, and some are more dog-friendly than others. Some companies care less about the breed, and more about bite histories.
Our data suggest that owning an aggressive breed does not move the needle all that much in terms of your premium — nationally, the difference was only about 1%. Below is a snapshot of average premiums from popular insurance companies with a restricted breed as a rating factor.
|Insurance Company||Average Annual Premium|
The cheapest home insurance company with an aggressive dog in your household is Allstate, with an average monthly rate of about $116. Learn more about pets and homeowners insurance.
Shopping for homeowners insurance quotes? Use our tool to compare rates instantly. Enter your ZIP code below to get started, or continue reading to explore our tips on how to save.
While homeowners insurance isn’t legally required, your mortgage lender usually mandates it as a condition of the loan. Finding ways to save money on insurance costs after making a significant property purchase doesn’t have to be complicated. Here are our tips on how to lower your rate.
As mentioned previously, the replacement cost of your home significantly impacts your rate. Every few years, have your insurer assess its replacement value to ensure you’re not paying for insurance coverage you don’t need. In addition, this will help you reevaluate your needs so you can get rid of unnecessary coverage options and add-ons.
If you accept a larger portion of financial responsibility, that’s less money your insurance company will need to pay out for if you need to file a claim, and this will result in a lower premium. Learn more about how to choose a deductible.
Even having one recent claim on your record sets off warning signals to insurance companies. Knowing what kinds of losses are worth insurance company involvement will save you money, time, and hassle in the future.
If you already have an auto insurance policy with one company, consider bundling it with your homeowners insurance. Most companies offer a multi-policy discount for enrolling in more than one line of insurance through the same provider.
Discounts vary from company to company. Whichever company you choose for homeowners insurance, make sure to always inquire about discounts. Here are some of the most common cost-cutting measures to be aware of:
With all things insurance, certain rating factors are considered more indicative of your risk profile than others. In homeowners insurance, it’s of the utmost importance to choose your replacement cost and deductible wisely. In addition, it’s prudent to practice good habits that ensure your home holds its value: maintain the structural integrity of your home by making upgrades, improve your credit score, and understand your coverage to avoid filing claims that may end up hurting you in the future.
It’s also beneficial to do your research into specific companies before paying for your policy. Look for customer satisfaction and financial strength ratings from J.D. Power and A.M. Best to get a sense of how insurers treat their policyholders — especially during the claims process — and to ensure they have the financial stability to pay out for losses. To see The Zebra’s reviews of insurance companies across the nation, see more here.
Ultimately, the best way to save money and find the cheapest home insurance coverage is by shopping around with as many insurers as you can. Every company weighs these factors differently. The Zebra can help you compare home insurance quotes from insurers across the United States seamlessly and easily — simply enter your ZIP code below to start comparison shopping.