Forex Articles

$1,034. According to a 2015 study published by the National Association of Insurance Commissioners (NAIC​), that's the size of the average annual homeowners insurance premium in the U.S. in 2012 (the most recent year for which data are available).

And it's likely to increase. With the cost of insurance claims increasing at more than twice the rate of inflation since 1997, homeowners insurance premiums have gone up correspondingly. In the U.S., insurance rates have risen more than 50% over the past 10 years alone.

Of course, the national average premium is likely not the amount you will pay. Insurance premiums vary widely from area to area, not to mention from company to company. To zero in on the cost of homeowners insurance in your neighborhood requires a little more analysis.

(For a brush-up on the basics, check out The Beginner's Guide To Homeowners Insurance.)

Why do homeowners insurance rates vary from state to state? It has to do, mostly, with the weather.

Rates in hurricane-prone states such as Florida can be almost twice the national average. Similar rate swings can be found in other storm-vulnerable states such as Texas, Louisiana and Mississippi.

Oklahoma, with more tornadoes per square mile than another other state, suffers a similar weather-related rate hike fate.

Conversely, states that rarely see large-scale natural disasters or weather events have insurance rates that fall below the average. They include Washington, Oregon, Idaho, Utah and Wisconsin. In Idaho, for example, you could expect to pay rates that are almost half the national average.

Go here and click on the name of your state for more rate information about where you live.

In addition to location (and weather patterns within), there are other factors that help determine homeowners insurance premium rates.

• Buildings: First, there's the value of your home – specifically the cost to rebuild it in the event it is destroyed. To that, add the value of any other structures on your property you wish to insure.
• Personal Property: This refers to the replacement value of the contents of your house and other buildings. If a catastrophic event were to take place and you lost all of your belongings,homeowners insurance is designed to help replace them.
• Deductible: All insurance policies have a deductible. After you file a claim, it's the amount you agree to pay out of pocket before insurance kicks in. Generally speaking, the higher the deductible, the lower the premium. According to the Federal Citizen Information Center, your deductible should be at least $500. Nowadays, $1,000 is more common and can lower your premium as much as 25%.
• Credit Score: Since they're naturally concerned with your ability to pay your premiums, many insurance companies check your credit score and use that as one basis for deciding your rate. Having a high one (see What Is a Good Credit Score?) can help if such is the case with your insurer. The NAIC says not all states allow the use of credit-based insurance scores; check this link to find out if doing so is legal in your state.
• Claims: Finally, the more claims you file, the higher your premium will likely become. Having a high deductible is one way to discourage yourself from filing a small claim that could result in a premium increase of 9% or more, according to CNNMoney. For more on this, see: Will Filing An Insurance Claim Raise Your Rates?

You're not necessarily stuck with the standard premium (or the first one quoted you). Negotiations are possible. For example, Insurance companies offer discounts for security (burglar) alarms, smoke and CO₂ detectors, dead-bolt locks, sprinkler systems and in some cases even weatherproofing.

Another way to earn a discount is by purchasing multiple policies from the same company. This includes homeowners, auto, boat, vacation home and life insurance, to name a few. However, the discount for one-stop-shopping does not always outweigh the advantage of lower rates from different companies, so definitely compare before deciding.

Some companies provide a special discount for seniors, or for people who work from home. The rationale is that both these groups tend to be on premises more often – leaving the house less prone to burglary.

Loyalty often pays, too. The longer you stay with some companies, the lower your premium can become – or the lower your deductible will be.

Knowing the average cost of homeowners insurance in your area can help you plan and budget. Utilizing your knowledge about the various factors that affect rates can help you beat that average.

Different insurers use different algorithms that assign different weights to the various factors involved. For that reason, good old-fashioned comparison-shopping can pay off in the end.

Finally, take into account the amount of coverage you need, the reputation of the company and recommendations from neighbors and friends who have dealt with the insurer you are considering. In the end, peace of mind – at a fair price – is what you seek.