Homeowners insurance, also referred to as hazard insurance, provides a way to get a homeowner to cover her losses when a catastrophe should lead to damage to her home. As stated by the U.S. Department of Housing and Urban Development, a creditor often requires that a homeowners insurance policy be set up before finalizing a mortgage reimbursement. Many factors affect the entire annual cost of the insurance, including the extent of the coverage and the location of their property.
Estimates
As stated by the Federal Reserve Bureau, the average cost of an annual premium for homeowners insurance is between $300 and $1,000. For many homeowners, the annual costs to get a homeowners insurance policy could be estimated by dividing the value of the house by 1,000, then multiplying the result by $3.50.
Types
1 factor in the cost of homeowners insurance is what conditions are covered under a particular policy. A few examples of common disasters and events which are covered under a basic homeowners insurance policy are fire, vandalism and end, claims that the Federal Reserve Board.
Geography
The location of a house directly influences which types of disasters are covered on a homeowners insurance policy, CNN Money describes. There are additional conditions which might not be covered as a result of the house being located in a high-risk place for this type of disaster. California is a prime example of this issue because of a massive section of the country’s residential places falling on or near a significant fault line. In cases like this, homeowners might have to purchase another policy for earthquake policy.
Considerations
While annual premiums are typically paid in monthly installments, some lenders might require a homeowner to cover the first year’s annual premium in full before finishing a mortgage settlement,” says that the U.S. Department of Housing and Urban Development.
Pro Insight
As stated by the Federal Citizen Information Center, there are several ways for homeowners to reduce the costs of the annual premium on a homeowners insurance policy. For example, installing a new roof or storm shutters–both of which can protect against natural disasters–may reduce the annual premium for a number of homeowners. The setup of security alarm systems, dead-bolt locks and smoke sensors can also lead to reductions of about 5 percent.