How Much Is Home Insurance? The Answer May Surprise You.

By: Keith J. Signoriello

Keith Signoriello is the owner and principal of C&S Insurance, along with co-owner Ben Cavallo.

questions about home insurance cost and coverageIf you’re searching online for “how much is home insurance?” you’re asking the wrong question… and possibly getting answers from the wrong places. Thank goodness you landed here!

When it comes to pricing, home insurance can be bargain-basement cheap, but then again, so can a used car (the kind that breaks down every other month, ultimately costing you more than a decent one), which is why you need to be really careful where and how you shop…

More important than price, you should be asking:

  • What are the different things I’m trying to protect?
  • What types of loss events could set me back financially?
  • Am I covered against all of them? Most of them?

By now you are probably rolling your eyes. This is an insurance blog after all. Of course we’re going to advocate for “extra” home insurance coverages, right? But hear us out. There are some legit misconceptions about home insurance needs and pricing—including the idea that anyone can find the best quote/option just by typing a few facts into website.

This isn’t true.

To illustrate our point, we used a popular online home insurance calculator to look up the annual premium for a home valued at $250,000. We typed in an actual Massachusetts home address and the calculator quoted us a baseline price of $800 per year, with a $1,000 deductible. Terrific! But would this rate fully protect our made-up home and its contents?

Before we answer that, let’s take a step back to review what a standard homeowner’s policy covers. Because let’s face it: most people have no idea what is and isn’t on the list. In fact, according to Consumer Reports and MetLife:

  • 72% of homeowners think they would be reimbursed for the full cost to replace personal belongings after a natural disaster or fire.
  • 56% assume flood insurance is included in their standard policy
  • 64% think their home insurance will cover water damage resulting from sewer back-up, sump pump, or drains. (Most standard homeowners’ policies exclude this type of damage.)

So clearly, lots of people are wrong. A homeowner’s policy generally covers (*please note: this does not apply to every policy), the actual cash value of your home’s physical structure and the ACV of your personal belongings—up to a certain limit. (*Actual cash value or ACV equals replacement cost minus depreciation. So if your $1,000 television gets stolen or burned in a fire when its five-years-old, you may only get a few hundred dollars back from your insurance company.) The actual cash value of your home itself may be significantly less than what it would cost to rebuild, which is why many homeowners opt to pay more (roughly 10%) for replacement cost coverage. (See below.)

All told, consumer analysts say 60% of U.S. homes are underinsured by an average of 20 percent. Yikes.

Given the limitations above, you might want to start shopping for home insurance with at least a few policy enhancements in mind. For starters:

Contents & Dwelling

If you’re serious about replacing all your stuff after a burglary or fire (i.e. having enough money to go out and buy it all over again), you may want to insure your home and possessions for “replacement cost value” or even guaranteed/extended replacement cost. After you make a home inventory, you should work with an agent to be sure you understand the terms and limits.

Scheduled Jewelry, Antiques, or Other Valuables

If you are fortunate enough to own precious heirlooms, antiques, jewelry, or art, you’ll want to be careful that these items are highlighted (“scheduled”) in your homeowner’s policy. For not a lot more money, you can be sure that valuables are covered individually (above and beyond the property limit that most policies have). You can also be sure that these items are covered against different types of loss events. Unfortunately, many people assume that insurance will replace a Persian rug whether it’s stolen, burned, chewed up by the dog, or stained during a rowdy New Year’s Eve party. Not true. Scheduling your items ensures you understand different loss scenarios.

Ordinance or Law Coverage

Here’s another interesting situation—especially if you own an older home or business property. Let’s say there’s a fire in your kitchen that damages half your house: your appliances, drywall, roof and siding. The necessary repairs seem straightforward, and your insurance carrier cuts you a check for appliances, drywall, roof and siding work. But guess what?

Many towns maintain building ordinances that say if a structure is damaged to a certain extent (usually 50 percent), it must be demolished and rebuilt according to current building codes. And it turns out that your home’s 1950’s plumbing/electrical system is not up to code. This means the check you have to repair the roof, drywall and siding probably isn’t enough anymore. Not even close. By purchasing building ordinance insurance (a.k.a. Ordinance or Law Coverage), you can be covered for this type of mandatory repair.

Service Line Coverage

Did you know that you’re responsible for underground service and utility lines on your property? Even the section of the sewage pipe that extends from the public line to your home is considered private. Tree roots, calcification, shifting land: all of these factors can damage or break service lines. If you need to repair or replace damaged lines, gas or water pipes, the cost can be substantial.  And it isn’t covered by a standard homeowner’s policy.

Earthquake, Flood, Sump Coverage, Etc.

If you live in Massachusetts you probably can’t remember experiencing an earthquake in your home, but that doesn’t mean tectonic plates never shift deep beneath our properties. They do, and they can cause home damage—especially in certain communities around Boston, built atop artificial fill. Experts say our region can expect a 4 to 5 magnitude quake every decade, a 5 to 6 every century, and a magnitude 6 or above every thousand years.

The good news is that the rarity and mild nature of New England earthquakes means you can add this coverage for a fraction of what homeowners pay in California. While you’re at it, you may want to look into flood coverage and protection against other types of water damage.

Now, finally, getting back to that online insurance calculator… When we asked the website, “how much is home insurance?” it told us $800. But when we added some additional coverages, like:

  • $5,000 in water back-up/sump discharge
  • Mold/rot/bacteria
  • Enhanced personal property coverage

…all of a sudden our quote jumped to over $1,000. Assuming we were average shoppers, not smarty-pants insurance agents, we still wouldn’t know if we had enough coverage in all the different areas. And we wouldn’t have any idea about liability insurance (for someone getting hurt on our property) or identity theft insurance

So the moral of the story is this: please don’t Google “how much is home insurance?” any more. Please don’t rely on online calculators or websites that spit out policy quotes in a matter of seconds. Your home and your financial future are worth a longer conversation. When you’re ready to have it, please call our expert team: 508-339-2951.