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Homeowners Insurance Costs on New vs Old Homes

Homeowners insurance is not a legal requirement of home ownership, however, lenders require insurance as a means of protecting their investment. Insurance costs are rising. Insurance companies reported a 55% increase in replacement and rebuilding costs between 2019 and 2022. Florida, California, and Louisiana are three states experiencing significant increases in insurance costs. Hurricane risks are part of the cost issue in Florida, as well as fraudulent insurance claims. So if you’re a homeowner in Florida, what are your options?

Homeowners insurance on new homes is 53% cheaper on a new home versus a 10-year-old home. A 30-year-old home will cost 75% more to insurance than a new home. Understandably, older homes carry more risk. For example, an older roof may be more prone to leaks which could impact your home’s contents. New homes, with new materials, new construction, and zero wear and tear, carry less risk for an insurance company. The upfront cost of a home purchase for a new construction home versus an older home may be higher. However, the availability and affordability of homeowners insurance are of concern.

Insurance costs are generally rolled into a monthly mortgage payment. Taxes and insurance funds are placed in escrow. An escrow account is a separate account where your lender will take your payments for taxes and insurance. Rolling these expenses into your monthly mortgage payment is a convenient way to pay. However, if your insurance costs increase, your mortgage payment will also increase.

To tackle rising costs, talk to your insurance company about ways to save. Bundling insurance for home, auto, and life insurance may provide savings. Discounts may be offered for going paperless or having security or fire prevention services installed in your home. If you borrow money from a lender to purchase your home, homeowners insurance is required.


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