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How To Calculate Home Insurance Costs

While you may know that you need homeowners insurance to stay protected from the unexpected, you may not know how to calculate exactly how much home insurance you need.

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Homeowners Quick Cost Estimate

What is the Average Cost of Home Insurance?

The answer is: It depends. Many factors go into figuring out what your home insurance will cost, here are just a few things that are considered:

  • Your location.
  • The value of your home. This is the cost for you to rebuild it.
  • The value of your belongings. Not sure how much you have? Create a home inventory.
  • Your coverages & coverage limits.
  • Your deductibles.
  • Details of your home (age, style, construction, and custom features to name a few)

Calculating Your Home Insurance Needs

Consider Your Zip Code

Simply providing your zip code can offer a lot of information about the potential cost of your home insurance. Your location helps insurance companies gather information about things like the average value of homes in your area, building costs, as well as how many claims are placed in that zip code — each of which helps them better determine the cost of your home insurance.

Determine How Much It Would Cost to Rebuild Your Home

Having homeowners insurance helps cover costs from damage due to things like fire, lightning, hail, windstorms — among other events. And if you live in an area that has a high risk of flooding or earthquakes, you’ll want to make sure you have insurance for those, too.

Basically, to estimate how much homeowners insurance you need, consider the cost to rebuild your home. A number of factors will impact the cost to rebuild: Things like the style of your home (e.g. ranch, colonial), type of materials used to build the structure (e.g. brick, stone, frame), type of roof, and other special features of the home (e.g. fireplaces, exterior trim) can all impact the cost to rebuild your home — which may make it different than the original price you paid, the fair market price or the home’s assessed value. Connect with your insurance agent — they’ll help you calculate how much coverage you’ll need to rebuild your home.

Estimate Your Total Property Replacement Value

How much would it cost to help replace your belongings? All of the things inside your home are what make it uniquely yours. And when you start to add up your possessions, from your pots and pans to your closet full of clothes, it probably amounts to quite a bit.

Taking a detailed home inventory of your belongings will not only help you estimate how much property insurance coverage you need for your personal possessions, but it’s a great record of all the things you own.

Keep in mind, there are limits to the personal property coverage offered with your base policy — make sure you ask about those limits and add them to your property insurance estimate so you’re sufficiently covered. Knowing your limits will help you understand if you need to itemize certain valuables and ask for increased special limits.

Decide How Much Liability Insurance You Need

The liability portion of your homeowners insurance doesn’t protect your stuff — instead it protects you against lawsuits brought against you for things like bodily injury or property damage that you, a family member or even a pet cause. This coverage may cover court costs and damages awarded, up to your policy limits. If you’re looking for even more protection for your home, you can check out our umbrella liability insurance to safeguard your hard-earned dreams. Your agent can help you understand if you need more coverage based on the value of your property, savings and other investments.

Your liability insurance also includes medical payments coverage to pay expenses for those who are accidentally injured in your home.

Frequently Asked Questions About Home Insurance Costs

  1. The cost of homeowners insurance varies greatly by state and a number of other factors. Here’s a great resource to help you determine the cost of home insurance based on your location.

  2. The price of a homeowners policy is based on many factors, but the amount your home is insured for is an important one. When you have replacement cost coverage, the limit of insurance on your home reflects the cost to rebuild your home if it were to be totally destroyed. This cost can be significantly different than the market value of your home.

  3. There are a variety of ways to pay your insurance premium. If you have a mortgage, your lender may require that you escrow your insurance premium with them each month, and they pay your annual premium once a year out of those funds. If you don’t have a mortgage, or your lender doesn’t require you to escrow your premium, most companies have a variety of payment plans that allow you to pay in monthly, quarterly or semi-annual installments, or to pay in full once a year. Sometimes you can get a discount for paying in full for the whole year or setting up automatic monthly withdrawals from your bank.

  4. Homeowners insurance premiums reflect the cost the insurance company pays out each year in claims. As building costs increase, so do insurance premiums. While homeowners premiums don’t always go up each year, in general they will follow the same pattern as most other costs-of-living do, gradually rising over time.

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Ways to Save on Home Insurance

Additional Homeowners Insurance Resources

From smart home technology to bundling your insurance products, check out the many ways you can save with our homeowners insurance discounts.