How much does home insurance cost?

Home insurance seems to be a low priority for new homeowners, but adopting that mindset could be a serious mistake. Why? Because of costs related to home insurance and the reasons homeowners need insurance in the first place. You're going to want to protect yourself and your assets.

Do you think you need home insurance? If so, you're going to want to evaluate your personal finances and determine how to budget for home insurance payments. Before you get out your wallet, here's what you need to know.

How much does home insurance cost?

Price-wise, new home buyers can expect to tack on $1,200 to the cost of a new home, in the form of proper home insurance.

That cost, however, depends on several key factors including:

• Age and price of the home
• Amount of cash put down via a down payment
• State or municipality where the home is located

Since real estate is primarily about location, where you buy your new home largely dictates how deeply you’ll have to dig in your pocket for home insurance payments.

For example, homeowners in Louisiana face the highest home insurance rates in the U.S., at $1,958 (on average) per year. Compare that to $677 in Oregon or $692 in Utah.

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What does a typical homeowners policy cover?

No matter where you live home insurance shares some basic commonalities.

"Good home insurance policies will mainly cover two types of liabilities - loss of personal property as well as liability for any other damages," said Ralph DiBugnara, president at Home Qualified, a digital platform for home buyers, sellers, and investors. "Yet every carrier has some common standards as well as items and scenarios that they deem to be high risk or low risk."

That’s why it’s important a shopper should get at least three quotes because costs and coverages will vary from carrier to carrier. The idea is for shoppers to compare different rates from different companies, and the best way to accomplish that is by going online.

To get the best home insurance policy at the best price, DiBugnara advised asking – and answering – three key questions before signing on the dotted line:

1. How much insurance coverage do you actually need?
2. What exactly does that coverage protect me from happening?
3. How much of a deductible should I take and still be safe?

"Answering these questions correctly can help you avoid major issues in case of disaster or damage to your home," he said.

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What type of home insurance coverage do you need?

Some home insurance experts say homeowners put too much emphasis on monthly payments and not enough on getting the right coverage. In that scenario, costs escalate in the form of high out-of-pocket expenses when a disaster strikes and the house incurs major damage.

"Just like auto insurance, there can be great variance in the cost from one home insurance company to another," said Jeff Zander, founder of Zander Insurance, in Nashville, Tenn. "In many cases, people have paid less attention to their home insurance cost since it is often included in the escrow payment portion of the mortgage."

"For most people, a home is their greatest asset, but the bank is only concerned about getting them their money and not about any of their contents, personal property, or liability risks that arise from owning a home," Zander said.

Homeowners looking for quality home insurance at a decent price also need to make a distinction between covering select risks or covering all risks. Fortunately, home insurance policies have you covered.

"There are really two types of home insurance policies," Zander noted.

1. A "named perils" policy: This lists the perils that are covered. "If the peril is not listed, then it is not covered," he said.
2. An all-risk policy: "This is the most preferred homeowner insurance policy since it lists the exclusions," Zander added. "Basically, if it is not excluded then it is covered. An all-risk policy is a much broader policy form and includes better protection."

The takeaway on getting good home insurance for the best price? Think value and not cost.

"Don’t cut corners when purchasing home insurance," said Orlando Frasca, an insurance specialist at Rogers Insurance Services in Danville, Cal. "Consumers often look at the lowest price as opposed to what they are getting for that price, only to find out certain coverages they thought they have were not included on the policy."