How much is homeowners insurance on a million-dollar home?

How much is homeowners insurance on a million-dollar home?

The average annual national cost of homeowners insurance on a million-dollar home is $7,412, based on $1 million in dwelling coverage, $300,000 in liability coverage and a $1,000 deductible. You might have paid $1 million for your home, but that doesn’t mean it’s the right amount of dwelling coverage. In some areas, market values are inflated, leading to homes that cost more than their replacement cost.

“A million-dollar home can be a lot of different things,” says Brenda Powell Wells, director of the Risk Management and Insurance Program at East Carolina University. “In California, it might be a 1,500-square-foot cottage.  In other places, it might be a 4,000-square-foot property.”

Location does impact insurance costs, just not because of real estate prices. Are you in a rural area? A city? An area prone to hurricanes or wildfires? Risky weather patterns mean more expensive homeowners insurance, no matter the value of your home. 

For example, the average cost of homeowners insurance on a $1 million home in Massachusetts is $4,370 a year. Compare this to Florida, where the average is a whopping $17,162. Factors like severe weather, an insurance crisis due to lawsuits, and insurers leaving the state contribute to Florida's high rates.

The cost of homeowners insurance can only be determined after you meet with an insurance professional and discuss the details of your home and how much coverage you need. Online insurance calculators help with estimates. 

Average homeowners insurance on a million-dollar home by state

The table below shows what home insurance might cost state by state. This is an average, and individual prices will depend on your situation. You’ll note there are 19 states and Washington, D.C., where a hurricane/windstorm deductible applies.

What does homeowners insurance on a $1 million home cover? 

Homeowners insurance on a million-dollar home has the same coverage as any other policy, although you may choose to purchase a high-value home insurance policy that adds some extra benefits. The most important part of your homeowners insurance is Coverage A, dwelling coverage. This protects the structure of your home, and this is where replacement cost comes into play. You need to choose enough dwelling coverage to rebuild your home. High-value home insurance policies often include extended or guaranteed replacement cost coverage to extend your protection.

Every homeowners insurance policy includes the following:

• Dwelling coverage. Coverage A on your home policy, this is the portion that covers repairs or rebuilding of the structure of your home.
• Other structures. Coverage B on your policy, this covers detached structures such as fences, garages, and sheds. This is usually set at 10% of the dwelling coverage, but may be higher on a million-dollar policy.
• Personal property. Coverage C covers your belongings, both in and, at a more limited level, out of the house. This usually ranges from 50% to 70% of the dwelling coverage but may be a higher amount on a high-value policy.
• Additional living expenses/Loss of use. Coverage D provides funds for a place to live if your house is being repaired and is uninhabitable due to a covered loss. 
• Liability. Coverage E covers the cost of liability claims and lawsuits when you are held responsible for injuries or damage to someone else.

You may also want to look into flood insurance, as it’s not included in a regular home insurance policy. Additional coverage such as earthquake or windstorm coverage can be added as well.

Homeowners insurance on a million-dollar home by liability level

Take a look at the table below. You’ll see that increasing your liability limits does raise your rates, but not significantly. Most experts recommend purchasing more since the cost isn’t much compared to the benefit. If you own a million-dollar home, you should consider higher limits.

Homeowners insurance on a million-dollar home by credit rating

The average cost of a $1 million policy with excellent credit is $6,228, which jumps to $24,282 with poor credit. 

“Low credit scores are correlated with losses,” Wells says. “While there are exceptions, a low credit score is usually a sign of carelessness and apathy, which may be reflected in homeowner behaviors and attitudes towards risk.” If an insurance company views you as a risk financially or otherwise, your rates will be higher.

How to save on homeowners insurance on a million-dollar home

There are several ways to get lower rates on your home insurance policy:

• Ask about discounts. “Talk to your agent about discounts available, such as for smoke alarms and security systems,” Wells says.
• Raise your deductible. Your rates will be lower throughout the year, but if you file a claim, you will be responsible for that deductible out of pocket. You’d need to plan for that expense.
• Upgrade your home. If you live in a severe-weather state, equipping your home with weather-resistant features like hurricane shutters or siding or fire-retardant stucco can get you a discount.
• Keep your credit score in good shape, as people with good and excellent credit scores pay significantly less for home insurance than those with fair and poor credit scores.

How much coverage do you need to insure a $1 million dollar home?

“You need replacement cost coverage, which is enough insurance to rebuild the home the way it was,” Wells says. “The market value of the home is irrelevant.” 

A simplified way to calculate the replacement cost of your home is to take the square footage of your house and multiply it by the price of labor and materials in your area to get a rough estimate. It’s best to consult your insurance agent, however. 

“I personally feel that you should have your insurer help you estimate the replacement cost of the house,” Wells says. “They have tools to do that.  If you are going to make an error, err on the side of over-insurance rather than under-insuring.  In the event of a loss, you’ll be glad you had more insurance than needed.”

You can usually add an extended or guaranteed replacement cost coverage endorsement, which protects you from gaps in the replacement cost you chose when you bought the policy and the actual cost, which can be affected by inflation and other factors.

Standard policies (HO-3) insure your dwelling and personal belongings at actual cash value (ACV), which only pays out at a depreciated amount. You can add this as an endorsement. High-value home insurance policies (HO-5) usually include replacement cost coverage for your personal property and insure it against all perils rather than named perils.

Factors affecting the cost of homeowners insurance on a $1 million home

A lot of factors affect the cost of a $1 million home insurance policy, including:

• Where you live
• The replacement cost of your home
• Your credit history, in most states
• Your personal claims history and the claims history of the property
• Your deductible
• Other coverage limits, such as liability and personal property

“Weather and climate and topography are definitely important.  A million-dollar beach house in a hurricane-prone area is much harder to insure than one in an area away from the beach,” Wells says.

California has seen an uptick in wildfires, and home insurance is becoming increasingly difficult to obtain—some major carriers have pulled out of the state. In Florida, severe weather, including storms and flooding, is causing an insurance crisis. Each state has its unique challenges.

Helpful home insurance tools and calculators

• Home insurance calculator
• Condo insurance calculator
• Renters insurance calculator
• When to file a home insurance claim