Homeowners Insurance Average

Homes are the most valuable asset owned by most Americans, including their savings and retirement account. Because of that, your home should be protected with a homeowners policy.

These policies are a combination of property and liability insurance coverage that protects you and your family in a number of ways.

It may help you to plan and shop for insurance if you are aware of the limits of coverage and perils included in an average homeowners insurance policy. Homeowners policies consist of property coverage and liability coverage, so it is best to consider these types of coverage separately.

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Average Property Damage Coverage

Limits of coverage depend upon your choices and desires. It is sometimes difficult to ascertain the limits of coverage desired because there is such a difference between the purchase price of a home and the necessary insurable, replacement, value.

Because the average homeowners policy requires that a dwelling be insured to 80% of the replacement value, it is necessary to be certain that you comply with this requirement. Failure to do so means that in the event of a loss you may be penalized.

The average homeowners insurance policy covers the replacement cost as set by you and your agent. For help determining this replacement cost, a free calculator may help you. The rest of the coverage follows a formula as follows:

• Other Structures – 10% of the amount of coverage on the dwelling
• Personal Property – 50% of the dwelling coverage amount
• Loss of Use – 20% of the dwelling coverage amount
• Personal Liability – your choice - $100,000 is usually purchased
• Medical Payments – your choice - $5,000 is usually purchased

Deductibles, the amount of a loss you pay, are necessary to keep insurance policies prices within reason. They vary from $500 to $2,000 depending upon the perils. A movement among insurance companies has emerged to supersede this with a percentage deductible. This percentage would be a part of the value of the dwelling.

Perils Insured with the Average Homeowners Policy

Most homeowners insurance policies for newer homes are written under the Special Insurance Form and protect against the following perils:

• Fire – uncontrolled fires
• Smoke – damage from fires that occur within your home
• Windstorm – sudden winds
• Hail - storms
• Lightning – direct hits or power surges
• Explosion – as a result of gas leaks, hot water heaters, and so forth
• Vehicles – vehicular damage from vehicles not belonging to you
• Civil Unrest – riots and disturbances
• Theft, vandalism – occurring within and outside the property
• Trees and other falling objects
• Weight of ice, snow, sleet
• Freezing, rupturing, sudden accidental overflow of a system or appliance
• Most other perils except flood, war, earthquake, and nuclear accident as well as those specifically excluded in the policy.

Note that special deductibles apply to certain of these perils. It is necessary that you, as the purchaser of homeowners insurance must read and understand your policy.

Liability Coverage in the Average Homeowners Policy

The $100,000 personal liability coverage purchased in a homeowners policy covers you for legal liability for bodily injury and property damage coverage that you or your family members negligently cause to other people or their property.

An example of this was an occurrence when an eight-year-old hit another child accidentally in the mouth with a tennis racquet, knocking out the teeth of the other child. The eight-year-old's parent's homeowners insurance company paid the doctor and dentist's charges for rehabilitating the other child's teeth and mouth.

Medical payments coverage for $5,000 covers injury to a friend or neighbor in your home without the necessity of filing a liability claim.

For further information about coverages in a homeowners policy, consult the National Association of Insurance Commissioners (NAIC), an excellent source of information about insurance and statistics applying to insurance.

Average Premiums for Homeowners Policies

The cost of the average homeowners policy in the United States is $978 annually. The price may vary depending upon your state, the construction of your house, access to a fire department and working hydrants, and ease of access for fire-fighters.

Homeowners policies have interesting loss records. The Insurance Services Office (ISO) causes of claims calculated per 100 house-years are as follows:

• Wind and hail – 3.37 per 100 house-years
• Water damage and freezing – 1.97 per 100 house-years
• Other property damage – 1.04 per 100 house-years
• Theft – 0.52 per 100 house-years
• Fire, lightning, and debris – 0.43 per 100 house-years

The Insurance Services Office (ISO) is a service dedicated to providing underwriting and statistical information to the insurance industry. It is accessible to insurance companies and agencies, but not the general public.

Purchasing Homeowners Insurance

To save money or your homeowners insurance, plan to get at least three quotations for your coverage. Before asking for quotes, examine the following:

• Ask friends, neighbors, relatives, and co-workers about their insurance. Find out their experiences with insurance companies, agents, and claims. Request recommendations from these individuals.
• Check the names of the companies with one or more of the following insurance rating services:A.M. Best – rates insurance companies financial stability; Standard & Poors Rating Services
• Examine public complaint ratios with regard to those insurance companies with one or more of the following sites:National Association of Insurance Commissioners (NAIC)
• Your state's insurance website – go to NAIC and click on your state to find the address of that website.
• Go to the website of your local Better Business Bureau for information

Determine the amount of insurance you need to purchase for your home, the deductibles necessary, and the perils you want, then request quotations from insurance companies. Compare policies, premiums, and insurance companies carefully.

Additional Coverage You May Need

• Flood insurance policy – flood is not covered under homeowners insurance and recent disasters have called the nation's attention to the need for this type of insurance. It is sold by local insurance agencies but underwritten by the U.S. government. Go to the FEMA website at FloodSmart.gov
• Earthquake insurance – again, not covered under homeowners insurance. These must be purchased from your local agency.
• Scheduled insurance upon highly valued jewelry, art objects, and antiques. These items are limited in homeowners forms, so additional coverage is necessary by a special attachment to your policy.
• Business insurance – if you have a small business in your home, you need to consider specially insuring your business and the business equipment. A home daycare, in particular, requires additional liability insurance to protect your interests.

Reducing Premiums

Many companies for the following things offer discounts:

• Placing both your homeowners and auto insurance with one company
• Modernizing heating, plumbing, and electrical systems to reduce risks of fire and water damage
• Install smoke detectors, burglar alarms, or dead-bolt locks
• Maintain a good credit record
• Periodically compare prices on your policies – but remember that many companies offer a discount for longevity with the company

Even though most mortgage companies require homeowners insurance, it protects your interests as a property owner and investor. It pays to take the time to examine coverage, insurance companies, and premiums carefully.

Be as diligent in purchasing insurance as you are in purchasing the home you are insuring. Compare quotes instantly with the FREE search tool below!