Homeowners Insurance: What You Need to Know

Homeowners insurance is the last “I” in PITI and a required part of virtually every mortgage. Here’s what it covers, what it costs, and how to save on it.

What Homeowners Insurance Covers

A standard homeowners policy (HO-3) covers:

  • Dwelling — Damage to your home’s structure from fire, wind, hail, lightning, and other covered perils
  • Other structures — Detached garage, shed, fence
  • Personal property — Furniture, electronics, clothing (typically 50-70% of dwelling coverage)
  • Liability — If someone is injured on your property
  • Additional living expenses — Hotel and food costs if your home is uninhabitable after a covered event
  • Medical payments — Minor medical costs for guests injured on your property

What It Does NOT Cover

  • Floods — Requires separate flood insurance (FEMA/NFIP)
  • Earthquakes — Requires separate earthquake insurance
  • Normal wear and tear — Maintenance is your responsibility
  • Sewer/drain backup — Usually requires an add-on endorsement
  • High-value items — Jewelry, art, and collectibles may need scheduled coverage

Average Homeowners Insurance Cost by State

Insurance costs vary dramatically by location:

Most Expensive States

State Avg. Annual Premium
Florida $4,200
Louisiana $3,200
Texas $3,200
Oklahoma $2,800
Colorado $2,800

Least Expensive States

State Avg. Annual Premium
Vermont $1,100
Utah $1,200
Hawaii $1,200
Maine $1,200
Wisconsin $1,200

Florida’s insurance crisis has pushed premiums to extraordinary levels, with some homeowners paying $8,000-$15,000+ per year. This significantly affects monthly PITI payments. Check your state’s insurance impact with our local calculators.

How Insurance Affects Your Monthly Payment

On a $400,000 home with 20% down at 6.5%:

Annual Insurance Monthly Insurance Monthly PITI
$1,200 $100 $2,223
$2,400 $200 $2,323
$4,200 $350 $2,473
$6,000 $500 $2,623

The difference between $1,200 and $6,000 annual insurance adds $400/month to your payment.

8 Ways to Lower Your Insurance Premium

1. Shop Around Every 2 Years

Insurance companies constantly adjust pricing. Getting 3-5 quotes can save 20-30%.

2. Bundle Home and Auto

Most insurers offer 10-25% discounts when you bundle policies.

3. Raise Your Deductible

Deductible Typical Savings
$500 → $1,000 10-15%
$1,000 → $2,500 15-20%
$2,500 → $5,000 20-30%

A higher deductible means more out-of-pocket if you file a claim, but significantly lower premiums.

4. Improve Home Security

Alarm systems, deadbolts, smoke detectors, and security cameras can earn 5-15% discounts.

5. Upgrade Your Roof

A new roof (especially impact-resistant materials) can reduce premiums by 10-25% in storm-prone areas.

6. Maintain Good Credit

In most states, insurers use credit-based insurance scores. Better credit = lower premiums.

7. Ask About All Available Discounts

  • Claims-free discount
  • New home discount
  • Loyalty discount
  • Non-smoker discount
  • Gated community discount
  • Work-from-home discount

8. Avoid Small Claims

Filing small claims ($1,000-$2,000) can raise your premium more than the payout is worth. Use insurance for large losses only.

Flood Insurance

If your home is in a FEMA-designated flood zone, your lender will require flood insurance. Even outside flood zones, it’s worth considering — over 25% of flood claims come from outside high-risk areas.

Risk Zone Avg. Annual Premium
High-risk (Zone A/V) $1,500-$4,000+
Moderate-risk (Zone B/X) $400-$800
Preferred risk $200-$400

Calculate Your Full PITI Payment

Use our calculator and enter your annual insurance cost to see exactly how it affects your monthly payment. For state-specific averages, browse our location calculators.

High Insurance States

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