The Home Insurance Divide: Why Do Rates Vary Widely Between States?

A homeowners insurance policy is essential to protecting your assets and satisfying your lender, and while you may know that rates among homes differ depending on the house itself, you may not have realized that the region where you live — as with car insurance — can cause rates to vary greatly from one state to the next.

This was a reality we were reminded of in a recent Reddit post. An agent in Oklahoma noted that his state tops the nation in homeowner’s premiums “due to all of the perils in our state.”

The commenter continued: “This never really resonated with me until I quoted a duplex last week for a guy who lives in Oregon and owns a rental property here in Oklahoma. For $200K in coverage (DP-1) the premium was $1,800 and I thought that was a pretty cheap price. Then I spoke with his Farmers Agent in Oregon who was blown away because he said it would be less than $500 a year there.”

Yes, Oklahoma — cheap cost of living, low real estate prices, yet almost four times what it would cost in Oregon to insure the same property.

While the steep difference may not make sense to you if you’re an average insurance customer, it does present a wonderful opportunity to get better acquainted with how your coverage operates.


How Home Insurance Rates Are Determined

America is a diverse land. There are mountains, deserts, flatlands, beaches, lakes, and streams as well as rural and heavily urbanized areas. It’s part of the country’s charm, but it’s also a major reason why you find yourself asking the question of how one area can be more than three and a half times more expensive than another when it comes to home insurance.

When an insurance company sets rates, it has to keep surroundings in mind along with all the individual risks that go along with them. It also has to factor in the following:

  • The cost to rebuild your home (not what the home is worth)
  • The quality of construction materials (brick or wood?)
  • The distance your home is located to a fire service or water source as well as the quality of your area’s fire services
  • Age and condition of the home (older homes generally more expensive because there is a greater likelihood something will need to be repaired or replaced)
  • Claims history (of the home and the other homes in your area)
  • Coverages
  • Deductibles
  • Whether you have home and auto with the same company
  • Tenure with current insurer (loyalty yes, flightiness no)
  • Credit history
  • Add-ons worthy of consideration (home security devices good, swimming pools bad)


Making Peace With Where You Live

Oklahoma residents may have a tougher time affording home insurance than Oregon residents as referenced above, but there are tradeoffs that make home ownership worthwhile. That aforementioned cost of living, for one. Also:

  • Building equity: your payments go towards personal ownership instead of a landlord.
  • More freedom: fewer neighbors to worry about.
  • Larger living area: apartments in Oklahoma generally don’t go beyond 2 bed, 2 bath, and barely crest 1,000 square feet; homes start around 1,500 square feet by and large and go up from there.
  • Better use for emergencies: as an example, in the event of a tornado, homes make it easier to get to a central location.

The point: while home insurance rates can vary widely, home ownership is an investment that will give back over time no matter where you live.


In Summary

Home insurance rates — high or low — are complex and varied, but they share the commonality of protecting you from life’s unpredictability. Value what they bring to the table. You never know when you might need it.

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