There are so many differences between renting and owning a home, and for new homebuyers there are a lot of particular and often unanticipated components to not only buying a home but starting out as a new homeowner.
Home insurance is certainly one major and often overlooked component to homeownership. Although renters insurance does exist, roughly half of renters in the US utilize it, according to SafeHome.org. Home insurance, however, is often required for anyone with a mortgage, and over 9 out of 10 homes are insured, according to the Consumer Federation of America.
That means that most new homebuyers are likely to be encountering this monthly premium for the first time, and it’s important for first time buyers to anticipate this monthly cost because it usually isn’t included in your mortgage payment or escrow.
With a rising trend in the cost for home insurance premiums, I thought this month would be a good time to talk about what’s going on with home insurance and different factors that can lead to increases in monthly costs.
First, I think it’s important to fully understand what home insurance often provides for homeowners. Renters insurance usually covers belongings and valuables inside your house, but home insurance is much more comprehensive.
After all, your home is an appreciating asset and an investment, and for many homeowners it’s their largest single contribution to their overall financial worth. Protecting such an asset is vital.
Home insurance coverage can vary widely and usually protections are based on your preference with some minimum coverage requirements based on your lender, if your home is financed.
But basic protections include covering repairs and rebuilding costs if your home is damaged by a fire, storms or other catastrophes. Like renters insurance, home insurance can cover costs for personal items lost to such events too.
Another protection is liability coverage. This coverage can help cover costs associated with someone getting injured on your property. Policies can often help cover medical bills or legal fees for the injured.
Home insurance, though often required for anyone financing their home with a mortgage, has its obvious benefits. Of course, these benefits come at a cost, and lately we’ve been seeing increasing costs on home insurance premiums.
In 2023 and 2024, home insurance costs rose by 14% each year, and projected costs for 2025 show another 10% increase, according to ResiClub and Cotality.
Though the projected numbers for 2026 and 2027 show a slowing down for increased costs (down to only 8% for each year), these increases are pretty dramatic.
What’s causing these rises? As you can probably guess, rising costs for goods and services play a role. With more severe weather events and natural disasters comes increases in claims, and with rising costs for materials and specialty labor one can expect more expensive claims.
This combination has helped fuel this spike in premium costs over the last several years, leading to higher monthly premiums for all homeowners.
It’s not all doom and gloom, however. The good news for homeowners is that mortgage interest rates are coming down slowly, which will help keep monthly mortgage payments lower, hopefully helping to offset any increased costs associated with home insurance premiums.
In the northeast, and especially in New England, we’re well below the national average for yearly premium costs. According to Bankrate, Maine homes average a yearly cost around $1,219 for home insurance, New Hampshire homes are as low as $1,039 per year and Massachusetts homes are $1,733.
To give you a little more perspective, the national average is well above $2,000 per year.
At the high end, homeowners are spending around $150 per month on their premiums. Keep in mind that these are averages but can serve as a good ballpark figure for potential homeowners doing their due diligence to better understand the true monthly costs of owning a home.
Home insurance is one of those costs that might feel like a waste, but any homeowner who’s had to utilize their coverage knows it’s worth the monthly deduction.
If you have any questions or would like to know more about what other costs go into owning a home, feel free to reach out to me with your questions and concerns. And, in the meantime, have a happy Valentine’s Day!
