How Much Does Hazard Insurance Cost?

The cost of hazard insurance, also called homeowners' insurance, can depend on the type of policy purchased, the amount of coverage, location, and replacement cost for possessions and rebuilding a home. Homeowners purchasing a new home can expect to pay approximately 0.3 percent to 1.0 percent of the amount borrowed. The cost of a home can also determine the price of hazard insurance, with more expensive homes requiring a higher premium price than lower priced homes.


Types of Policies

Insurance companies determine premium pricing according to the number of perils covered by a policy. Perils can include fire, wind, theft, explosion and vandalism. An HO-1 policy offers basic coverage against 10 perils and pays for possessions and the home. The HO-2 policy offers broader coverage, against up to 16 perils. An HO-3 policy pays for all perils covered by an insurance company, with the exception of hazards excluded in the policy terms. HO-4 policies offer coverage for renters against 16 perils, paying for possessions only, with no coverage for the home structure. HO-6 coverage protects condominiums and co-op properties and can work in conjunction with owners' association policies. Homeowners with older houses can purchase an HO-8 policy, which covers 16 perils, but only pays repair costs, not replacement of a home.


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Home Aspects

The year a home was constructed, location, size and materials can influence the price of insurance. For example, a wood home can cost more to insure than a brick home because it poses a higher risk for fire damage. A home built on the beach cost more to insure because of water damage risks. A home with a fire hydrant on the property can cost less to insure than a home in a rural area with no water source available for firefighting.


Insurance companies often offer discounts for homeowners who make safety improvements to a home, such as installing smoke detectors, deadbolt locks or burglar alarm systems. Homeowners over 55 years of age might receive a discount and people who have other policies with an insurance company, such as automobile coverage, can often receive a lower price. Upgrading electrical systems, plumbing or heating systems in older homes can often reduce hazard insurance premiums.



Hazard insurance policies have a deductible, the amount homeowners must pay out of their own pockets when perils strike. Choosing a higher deductible can reduce the cost of an insurance premium, but requires more money from the homeowner when filing a claim. For example, a hazard insurance policy with a $5,000 deductible can offer a lower premium than a policy with a $1,000 deductible.

Replacement Cost and Market Value

Insurance companies issue hazard insurance policies based on the replacement cost or market value of a home. A replacement cost policy pays for replacing a home when completely destroyed, while a market value policy pays a homeowner based on the market value of the home. Replacement cost policies typically pay a higher claim amount but have a higher premium than a market value policy.


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