Ongoing ownership costs
Homeowners insurance, explained
Homeowners insurance is a plan that can help pay to fix your home or replace your things after certain kinds of damage. It can also help pay if someone gets hurt and you are responsible. The price you pay for the plan is called a premium. When you ask the insurance company to pay for covered damage, you may pay a deductible first. A coverage limit is the most the insurance company will pay.
Published and maintained by Kevin Song for Your Home Cost. Last reviewed: . How guides are reviewed.
4 cited sources
Why it changes your estimate
Most mortgage lenders require coverage because the home secures the loan. The premium remains a real ownership cost whether it is paid directly or through escrow. This calculator divides the yearly premium by 12. Homeowners insurance protects property and liability; private mortgage insurance (PMI) protects the lender from borrower default.
What to enter
Enter the total annual premium from written quotes for this address. If separate homeowners, wind, flood, or earthquake policies are required and you want all insurance represented, add their annual premiums together. Compare similar rebuilding coverage, personal-property and liability limits, deductibles, and optional protections. Coverage is usually based mainly on rebuilding the structure, not simply on the sale price.
Good to know
The Census planning benchmark used by the calculator comes from yearly insurance-cost bands reported for mortgaged owner-occupied homes. The app shows the band containing the median household instead of pretending it knows an exact premium. An open-ended top band has no upper limit. The category is broad, may include flood coverage, may fall back from city to state or national data, and says nothing about this home's rebuilding cost, hazards, deductible, or coverage limits—so it is not an insurance quote. Standard homeowners policies generally exclude flood and earthquake damage, and some exclude or limit wind or hail. A condominium master policy may cover common areas while the buyer still needs a unit policy. Premiums can change at renewal even when the mortgage rate is fixed.
Compare quotes on coverage before comparing price
Give insurers the same property details and request quotes with comparable dwelling replacement limits, personal-property and liability limits, deductibles, loss-of-use coverage, and endorsements. Ask how the dwelling limit was estimated and whether roof age, wiring, plumbing, prior claims, vacancy, or planned renovations affect eligibility. A cheaper premium is not a like-for-like saving if it carries a much larger deductible or omits a hazard another quote covers.
Check separate catastrophe needs for the address rather than assuming the standard policy is complete. Review flood, wind, hail, earthquake, sewer-backup, and ordinance-or-law exposure with an insurance professional and the lender. For a condo, obtain the association's master-policy summary and ask what the unit owner must insure. Enter the combined annual premiums in the calculator only after removing any duplicated coverage.
- Request written quotes with matching limits, deductibles, and optional endorsements.
- Verify whether flood, wind, earthquake, or other separate coverage is needed.
- Confirm the lender's coverage requirements and the policy effective date before closing.
Worked example
$2,400 of insurance per year adds about $200 per month. A $2,000 deductible means the owner may pay the first $2,000 of a covered claim, subject to the policy terms.
Sources and citations
These references support the definitions, planning guidance, and program rules above. A citation does not mean its publisher endorses this guide.
Original planning exercise
Separate premium savings from deductible exposure
Two hypothetical written quotes offer otherwise matching coverage. Quote A costs $1,800 annually with a $1,000 deductible. Quote B costs $1,500 annually with a $2,500 deductible. Treat the deductibles as fixed dollar amounts for this exercise.
Illustrative assumptions, not quotes or forecasts. Calculations by Your Home Cost; mortgage payment examples use the calculator's shared fixed-rate formula.
| Option or step | Calculation | Planning result |
|---|---|---|
| Quote A | $1,800 ÷ 12 | $150/month; $1,000 deductible |
| Quote B | $1,500 ÷ 12 | $125/month; $2,500 deductible |
| Tradeoff | $300 annual savings versus $1,500 extra deductible | Five years of premium savings equals the deductible difference |
What the comparison tells you
Five years is a scale comparison, not an expected claim-free period or a recommendation. One covered claim subject to the larger deductible can outweigh several years of premium savings. Exclusions, limits and separate wind or flood deductibles can make these policies unlike the simplified comparison.
Evidence to collect
Compare dwelling limits, replacement-cost terms, exclusions, endorsements and every deductible on the quote documents. Confirm whether a deductible is fixed or a percentage of a stated insured value.
Apply it in the calculator
Enter the full annual premium, including a separate policy if it is part of your chosen insurance budget. Keep deductible cash in your broader reserve plan rather than charging the entire deductible as a recurring premium.
Original planning exercise added . Source-review dates above are maintained separately.