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Written by Laura Berry
Former Insurance Agent Laura Berry

Joshua is a copywriter at Obrella who for more than 10 years has been creating content about insurance, health care, and more. He helps companies explain complex insurance subjects in simple ways so that customers can make smart buying decisions. He spends way too much time binge-watching Netflix, loves the outdoors and has a cat who tolerates him.

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Reviewed by Joshua Adamson
Joshua Adamson

UPDATED: Jul 22, 2021

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Is Homeowners Insurance Really Worth It?

home insurance

If you’ve been reading our blog for a while, you can probably guess what our advice is about homeowners insurance: to absolutely, positively, buy it and never let it lapse. We understand there are some skeptics out there that still need convincing though. If you don’t see the point in buying homeowners insurance or are comfortable settling for a cheaper plan with less coverage, behold our facts and figures.

Homeowners insurance claims outweigh premiums by a ton!

  • The average U.S. homeowners insurance policy in 2015 costs about $970 annually. Keep in mind, this can vary widely between states, cities, and insurance companies. If your home has a recent claim, even if you weren’t the one who filed it, this can have a significant impact on your rates. The rising cost leaves some people wondering if home insurance is worth having. While premiums have seen a growth over the past few years, this still pales in comparison to the average claim amount and home values.
  • Between 2009 and 2013, the average claim for fire or lightning damage was $37,153.
  • So you can see the value, it would take you 39 years of paying the annual homeowners insurance premium in the U.S. to add up to the amount you’d owe on an average fire or lightning claim.
  • The second lowest, average claim for medical expenses was $2,560 between 2009 and 2013 which is more than double the average annual premium for homeowners insurance.

In the worst case scenario, if your home has to be completely rebuilt, you could be talking about hundreds of thousands of dollars at once. If you have a mortgage, your lender may require you to carry replacement cost coverage for your home.

How Much of A Risk Does Your Home Face?

One of the most common reasons people don’t get insurance or don’t get enough is simple: they don’t think it will happen to them. They see standard insurance and additional coverage, and they can see the difference between premiums and how much protection they’d get in a major claim. They just assume that happens to someone else. What do the statistics show?

  • 1 in 15, or 7% of homeowners will need to file a claim every year.
  • Almost 1 in 30 homeowners will file a claim due to hail or wind each year (this is not counting other natural disasters).
  • Approximately 1 in 55 suffers water damage or frozen pipe damage every year and needs to file a claim.
  • Your odds of needing to file a property damage claim annually due to theft is 1 in 200.
  • 1 in 250 homes will suffer losses due to fire and lightning every year—which averaged over $35,000 in damages.
  • 4.8% of households filed a claim for property damage in 2013.

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How Much Personal Property Coverage Do You Need?

Cheaper homeowners insurance plans often come that way because of higher deductibles. While some people recommend raising your deductible by thousands of dollars, are you really prepared to spend $10,000 to $100,000 out-of-pocket if you need to file a claim? 

Your insurance agent or insurance company will generate a replacement cost estimate. This will tell insurers how much they’d have to spend to rebuild your home. Insurance costs cover much more in terms of liability, personal property, etc. Something like $10,000-$20,000 may seem like a lot of coverage for personal property. Once you add up all your furniture, clothing, electronics, books, and more, most people find their belongings quickly exceed those modest limits.

An insurance provider will generate numbers for personal property, other structures, etc. based on the replacement cost of your home. You can add up what you think all your belongings are worth, but many homeowners do better by consulting with an insurance agent.

How Can You Lower Your Homeowners Insurance Premium?

  • Insure your home at what it would cost to rebuild, not it’s market value.
  • Only add one what you need (i.e., coverage for expensive jewelry and works of art).
  • Limit the number of claims you file so your rate doesn’t go up.
  • Maintain your home with regular inspections for pests or leaks so you don’t fall victim to an uninsured disaster.

Going without homeowners insurance is like forgoing health or auto insurance. You never know if you’re going to need it, but if and when you do, it will save you hundreds to thousands of dollars.

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