California's 17% Cheaper Home Insurance Isn't As Affordable As It Looks

TAMPA, Fla., Nov. 14, 2022 /PRNewswire/ -- A recent guide published by ExpertInsuranceReviews.com revealed that California homeowners pay surprisingly low home insurance rates when compared to the rest of the country.

The average monthly premiums in California are $84 compared to $101 nationwide. ExpertInsuranceReviews.com published additional statistics:

• State population – 39,512,223
• Median Home Price – $492,080
• Homeownership Percentage – 54.80%
• Biggest Home Insurance Company – State Farm
• Average Annual Rate $1,008
• Direct Premiums Written Annually – $8,365,295
• Homeowners Insurance Incurred Losses – $56,835,067

Considering California's high cost of housing, this fact may seem shocking. Other factors are involved, though. And in the end, California homeowners often pay more than average.

While that may seem contradictory, some analysis can make that fact easier to understand.

First, insurance rates are based on risk. While a more expensive home presents more risk to an insurer, the value of the buildings in California is comparable to national property values. In California, property values drive home prices. It's not uncommon for lots in desirable neighborhoods to sell for more than a million dollars.

Home insurance providers do not cover the value of the land. Instead, they cover the value of the home. So the insurer's risk doesn't fully reflect the purchase price.

Second, California homes face risks not covered by standard home insurance. While California homeowners pay less for traditional insurance, they often have to add other types of insurance.

Earthquakes are a real risk to California residents, but earthquake damage is not covered by standard home insurance. Many California homeowners must purchase a separate earthquake insurance policy to cover the cost of damages from an earthquake.

Another additional policy many California residents need to purchase is flood insurance. Standard home insurance doesn't pay for flood damage that comes from a weather event. So while they may cover damage from broken pipes, they won't cover damage from a rising river.

Melanie Musson, a nationally recognized home insurance expert with ExpertInsuranceReviews.com, explains, "The benefit of slightly lower home insurance rates for California residents helps offset the extra cost of earthquake insurance and any additional necessary coverage."

In California, home insurance providers must offer their policyholders earthquake insurance yearly.

Read the entire report here: California Home Insurance Guide 2022 (Companies + Rates)

SOURCE ExpertInsuranceReviews.com