How Does Home Insurance Factor into Overall Home Ownership Costs?

Home insurance helps protect one of your most valuable assets. It's also an added expense, so it's helpful to understand how home insurance will factor into the overall cost of owning a home.

For expert insight into home insurance costs and coverages, your best bet is to turn to a New Jersey independent insurance agent. Agents can make sure you have a policy that fits your needs and doesn't have unnecessary coverages that will raise your premiums. Here's how home insurance can factor into your overall cost of home ownership.

How Does Home Insurance Fit into Home Ownership Costs?

For most individuals, home insurance is required when they purchase a home. If you are taking out a loan, the mortgage lender will require you to have insurance. Even if you aren't required to have home insurance, without it, you're left financially exposed for any damage to your home or liability claims that are made against you. 

Several things can impact your home insurance rates. For starters, your lender will require that you purchase enough insurance to cover the amount of your mortgage. Depending on the type of loan you have, you may have additional costs built into your mortgage, such as PMI (private mortgage insurance) or MPI (mortgage protection insurance). However, you should consider purchasing enough insurance to replace your home and everything inside it if there is a total loss. Typically, this rate is between 0.5% and 1% of your home value. 

Once you have this number, you can divide it by 12 for the number of months in a year, which can provide you with an idea of your monthly payment. 

How Do You Find the Right Home Insurance?

It's never been easier to find home insurance. You can shop quotes online or go through an agent. There are two main types of insurance agents: direct, "captive", and independent. 

In our opinion, independent insurance agents are best for several reasons.

• They work for you, not an insurance company, so they're not tied to a specific carrier.
• They will speak with you free of charge.
• They're local and understand the housing and insurance market in your city.
• They'll shop multiple policies and present you with several options to choose from.
• They can answer any questions about coverage, costs, and how insurance works.
• They'll assist you in filing a claim.

Before committing, it's a good idea to shop around to determine what will work for you. It's also usually helpful to speak to family members and friends to help determine the best route for you to find the right home insurance.

How Much Does the Average Home Insurance Cost?

Home insurance varies significantly depending on the type of home you own, where it's located, its value, and various other factors. This makes it challenging to put an average cost on coverage. But if we remove all the variables that can impact home insurance rates, we can come up with some averages. 

• A $250,000 house has a national cost of $1,383 per year for home insurance.
• This year, the most expensive states for home insurance are Oklahoma, Nebraska, and Kansas. The least expensive states are Hawaii, Utah, and Vermont.
• Currently, home insurance rates are rising. This is likely to be due to inflation, increased costs for labor and materials, and supply chain disruptions. 
• The average cost for New Jersey homeowners insurance is $775 per year 

New Jersey's average prices are well below the national average. However, individuals who live near the coast or in high-risk flood zones are likely to have higher insurance rates than those who live inland. A New Jersey independent insurance agent can provide you with insight into what it might cost to insure your home. 

What Are the Biggest Cost Factors with Home Insurance?

Every insurance carrier calculates premiums using their own algorithm, but in general, the most significant factors that impact home insurance include:

• Where you live
• The price of your home and the cost to rebuild it
• The amount of coverage
• Your home’s age and condition
• Home security and safety features
• Your credit history
• Additional types of coverage
• Your deductible
• Bundling other insurance from the same company
• Your choice of insurance provider

How Does Home Insurance Work?

Home insurance can help protect you when unexpected events occur. Whether it's a weather event that damages your home or your dog bites someone on your property, home insurance coverage is there to step in.

Without home insurance, you'd be responsible for anything that happens to your home, and the stuff inside and on your property, out of pocket. If you have insurance, you can file a claim and get some financial assistance if it's a covered event. 

Home insurance can be customized to fit your needs, but policies generally come with four main types of coverages.

• Structural damage: This includes coverage for damage to your house and structures on your property due to water, fire, severe storms, theft, vandalism, and a few other common risks.
• Personal property coverage: This includes coverage for your personal items in the home and property, such as furniture, appliances, electronics, sporting equipment, and similar items. Valuables like jewelry, guns, and fur may require additional insurance protection.
• Standard home liability: This will cover legal expenses if someone is injured or if their personal belongings are damaged while on your property.
• Additional living expenses: This covers temporary living costs if your home is damaged and you need to relocate while it's being repaired. It will pay for hotel expenses, meals, gas mileage for traveling, and other costs.

How Can an Independent Insurance Agent Help?

Before jumping into a home insurance policy, it's good to understand your coverages and how much they'll cost. A New Jersey independent insurance agent can provide you with coverage and cost information before purchasing a policy.

Agents will speak with you, free of charge, to learn about your home and insurance needs. After speaking with several carriers, they'll present you with multiple quotes and guide you in selecting a home insurance policy that fits within your budget.