Most expensive states to insure your home

By Sara Clemence

updated 1:48 p.m. ET March 8, 2005

Texas is tops — at least when it comes to homeowners' insurance costs.

You might guess that California, where houses go skidding down mountains, are torched by wildfires or get rattled by earthquakes, would be the most expensive place to insure a house. Or Florida, which was hammered by no fewer than four major hurricanes last year.

But in Florida, the most recent data available from the National Association of Insurance Commissioners (NAIC) shows that the average homeowners' premium was $786 in 2002. The average in Texas was 58 percent higher. California didn't even make the top ten.

The hitch? In those damage- and destruction-prone states, earthquake, hurricane and flood insurance policies are sold separately, and not factored into the ranking. Yet in other states, more mundane weather events can create actuarial nightmares.

Several years ago, when Bob Hunter left Northern Virginia to become Commissioner of Insurance in Texas, he found that his insurance bill had doubled even though he'd bought a similar home.

"Since I was commissioner, I asked [the company] to produce the data underlying the rates," Hunter says. "The thing that was really different was hail and wind. The risk of natural disaster was much greater. That caused maybe 90 percent of the difference in the rates, between Northern Virginia and Austin."

Major factors
Weather is a major factor in determining the cost — and cost range — of homeowners' insurance, says Don Griffin, a vice president at Property Casualty Insurers Association of America (PCI), a trade association whose members write about 40 percent of the property and casualty insurance policies in the United States.

"Insurance is really based on looking at the past," says Griffin. When determining premiums, insurers look at claim trends on a broad basis, such as state and regional levels, and as closely as a ZIP code or even a street. Companies then begin with an average price for premiums, depending on how expensive it has been to fill claims in a location.

If you have a wood-framed house in an area without fire coverage, you will pay more than someone who lives in a brick house next to the fire station, Griffin explains. But, brick doesn't respond well to earthquakes, tending to crack and crumble, so near the San Andreas Fault the potential damage would be greater.

The cost of real estate and rebuilding are also taken into account, which is one reason insurance is more expensive in cities than in rural areas (though that probably doesn't hold true if you live on a barrier island).

"If building material is in short supply or there isn't an abundance of skilled labor, that's going to factor in," says Kip Diggs, spokesman for Bloomington, Ill.-based State Farm Insurance, the largest home insurance underwriter in the country.

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