How the Downturn in Real Estate Affects Home Insurance Premiums


Many people assume that the downturn in the real estate markets across the country has caused homeowner’s insurance premiums to decrease significantly. After all, a house that is worth less should cost less to insure, right? In some cases, that’s true. However, for most states in the US, little change has been seen. In fact, only five states have seen appreciable decreases at all. They are:

  • Mississippi -5.1 %
  • District of Columbia -4.7 %
  • Delaware -4.5 %
  • New Hampshire -3.1 %
  • Vermont -2.6 %

Other states have actually seen increases in homeowner’s insurance premium costs. They include:

  • Maine 7.0 %
  • Connecticut 3.5 %
  • South Carolina 3.4 %
  • Arkansas 3.0 %
  • Montana 2.1 %

The rest of the states in the country have seen changes in homeowner insurance premium cost of less than 1% in either direction. So what exactly determines the premium rates charged for homeowners insurance policies?

Besides the value of your home and what it costs to repair or replace, the following factors also apply to determining your rates:

  • High risk areas;
  • Your gender;
  • Your age;
  • Your marital status;
  • Your credit score;

You see, homeowners insurance premiums are not determined solely by the value of your home. So, in a downturned real estate market situation, we will not necessarily see decreases in homeowner insurance premiums.

What can you do to decrease your home insurance premiums?

  • Combine your auto insurance policy with your homeowner’s insurance policy. In many cases, this act alone can save you as much as 20%.
  • Raise your homeowner’s insurance deductible. The more you are willing to pay out, the less the insurance company has to. And the less they have to, the less they will charge you for the coverage.
  • Install a home security system. Just like installing a lo-jack device on your vehicle, this will qualify you for a discount on your homeowners insurance.
  • Make necessary repairs to your credit report. Whether or not it’s fair, insurance companies reward individuals for having high credit ratings.

How much homeowner’s insurance do you need? 

The obvious answer is that more is better. However, realistically you should at least insure your home for the total amount that it would cost to replace it. What would it cost to rebuild your home from the ground up if it was completely wiped out? Think about the following costs to make an accurate determination:

  • Contractors and construction crews;
  • Square footage of living space;
  • Custom features that you require or desire;
  • Additional living expenses including possible relocation;
  • Replacement of your personal property;
  • Don’t forget to subtract the amount that your land is worth when considering what it would cost to replace your home. Even if your home is completely wiped out by a hurricane, the land will still remain. (By the way, hurricane insurance is additional.)

The factors that affect your homeowner’s insurance premium costs are numerous. And while the value of homes across the United States have decreased significantly, other factors have remained pretty much the same. Depending on the state in which you live, you can expect to pay anywhere between $650 and $1000 per year for your home insurance policy. So don’t count on the real estate market conditions to a lower your costs. Instead, consider more creative ways to lower the amount that you pay for homeowners insurance.

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