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Homeowner’s Insurance Premiums in Alabama

Buying a home for the first time is an exciting milestone in any person’s life. But as you go through the process, you may be surprised to learn that it’s more complicated than you expected. For example, homeowners insurance. Purchasing a policy, filing claims, and paying your premiums all work a little differently than they do for most insurance products. But working through these hurdles is an essential part of protecting yourself and your property from economic ruin.

In the state of Alabama, the most popular type of insurance policy – as in many states – is known as an H-O3 policy (or “form”). It protects against 17 different types of home-damaging catastrophes including fire, windstorms, explosions, plumbing problems, and even volcanic eruptions. It also provides for replacement cost, liability, and medical expense coverage. In Alabama, homeowners have more wiggle room to choose how much coverage to purchase, but the industry standard is to suggest that they purchase enough to cover at least 80% of their property’s total replacement cost. On a $175,000 home, those limits would be:
 

Type of Coverage Coverage Amount
Replacement Cost (Dwelling) $200,000
Replacement Cost (Contents) $100,000
Personal Liability $100,000
Medical Expense $1,000
Deductible $1,000 (suggested)

Again, the numbers above are suggestions. The amount of coverage you actually purchase will vary based on the value of your home, your property, and the likelihood of a peril damaging your house. It will also depend on balancing out your annual premium vs. your deductible. Higher deductibles lower your premium, which can save you money over time. But they can also leave you footing the bill for lower-cost damage to your home.

Average Homeowners Insurance Rates in Alabama Legend: Average Rate Birmingham Huntsville Mobile Montgomery Tuscaloosa 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800 3000 3200 3400 3600 3800 4000 4200 $2182 $1963 $4307 $1962 $2222

 
As you can see, there are some pretty large fluctuations in annual premiums by city. This is due to the extensive amount of coastline in the state of Alabama. In recent years, the surge of hurricane activity has caused millions in property damage, forcing many insurance companies to compensate by charging higher rates. However, you can still save money by shopping around for a better deal. In one of the most expensive cities for homeowners insurance, Mobile, you could lower your annual premium by as much as 50% just by comparing quotes from more than one provider.
 

Highest & Lowest Property Insurance Rates in Alabama Legend: Lowest Estimated Rate Highest Estimated Rate Birmingham Huntsville Mobile Montgomery Tuscaloosa 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800 3000 3200 3400 3600 3800 4000 4200 4400 4600 4800 5000 5200 5400 5600 $1920 $2880 $1727 $2591 $3790 $5685 $1727 $2590 $1955 $2933

Laws and Requirements

You aren’t legally required by any state law to purchase homeowner’s insurance in Alabama. But there is a catch to this: the bank that manages your mortgage may require you to purchase this coverage if they agree to loan you money in order to buy a home. They also make strongly suggest that you take a regular home inventory to make sure that your coverage accurately matches what you would need in order to replace or repair your property in the event of a disaster.

Taking a Home Inventory

In order to get a fair deal on your homeowners insurance policy, you must take a very thorough and very honest inventory of your property and your personal belongings. Overestimating your properties value could result in purchasing too much coverage, which can cost you thousands in the long run. However, it’s also dangerous to underestimate the value of your property. Because in the event of a peril or disaster, you may not have enough money, either from your insurance company or your savings, to replace what was damaged or destroyed.

Choosing What (and How Much) Coverage

The basic HO-3 policy that many Alabama home insurance companies offer is really only the tip of the iceberg. On top of your basic policy, there are many other factors to consider. Such as:

  • Fires – Luckily, Alabama is one of the states where a H-O3 policies cover for fire damage. In addition to fire damage, these policies also cover damage caused by smoke, fires caused by lightning, and any damage caused by an accidental electrical discharge.
  • Floods – Unfortunately, Alabama is one of those states where you will have to purchase an extra supplements to your homeowners policy, or additional coverage in order to protect against flooding. Again, this has to do with massive amounts of property damage caused by hurricanes in the last several years.
  • Damage from Winter Storms – Alabama is included on the list of states where your typical homeowner’s policy does protect against damage from winter storms. This includes damage caused by the weight of falling snow, ice, or sleep. It also includes any Plumbing damage that results from freezing pipes.
  • Covering Your Property – As you may have guessed by now, homeowners insurance protect you from much more then getting the outside of your home damaged. It also protects against damage to any property located on the inside of your home. The basic Alabama homeowners policy allows for coverage and benefits which protect against damage to personal belongings such as Electronics, antiques, artwork, and much more.
  • Liability Coverage – Many homeowners insurance policies in many states, Alabama included, account for liability coverage which protects you financially in the event that someone or someone else’s property is damaged while on your land.
  • Umbrella Coverage – Some homeowners insurance companies, especially if you live in a risky area like Mobile, will only provide so much coverage for your home and belongings. If you own an expensive home, and your insurance company won’t provide you the coverage amount that you need, you can always purchase additional protection in the form of umbrella coverage.

Replacement Cost vs. Actual Cash Value

When you take a personal home inventory, that is not the end of your evaluation process. In order to make sure you have the most adequate coverage possible, you will have to update this home inventory on a regular basis. Common wisdom suggests updating it every year, unless you have a major life-changing event that happens to or on your property. This can help protect you from financial expenses incurred as the result of an inaccurate estimate of the coverage you need.

You need this accurate home Inventory due to the fact that insurance companies decide how much to pay out on claims based on one of two principals: replacement cost, or actual cash value. Replacement cost is pretty self-explanatory – the insurance company pays out the amount that it would cost to replace or repair your damaged property up to your coverage limits. Actual cash value, however, is different. It incorporates depreciation into the total value of your property that you are filing a claim on. Therefore, if your property has suffered a lot of devaluation, and your insurance company only pays out the actual cash value, you may have to pay the remaining balance of its replacement cost out of your own pocket. As stated above, if you are purchasing a homeowners insurance policy based on the replacement cost of your property, the best strategy is to make sure you have enough coverage to pay for at least 80% of your replacement cost. This can save you from financial ruin in the event of a disaster that seriously damages depreciated property.

How Your Credit Score May Influence Your Rate

Most homeowners insurance companies don’t calculate your credit score the same way other insurance companies might. What they do is incorporate various details, such as your home inventory, a “soft” check on your credit history, and other important attributes in order to determine how much to charge you for your annual premium. Thankfully, this “soft” check doesn’t necessarily go on your credit report. This can save you from enduring a lower credit score in the event that you get quotes from multiple companies – which is the smartest thing to do when shopping for a major expense such as homeowners insurance.

That’s the good news. However, there is a little bit of bad news. But you probably saw this detail coming: yes, your credit score does affect how much you may be charged for your homeowners insurance. And the table below you can see estimates of what an alabama homeowner might pay with an average credit score versus what their neighbor with excellent credit with pay for their annual homeowners insurance premium.

Alabama Homeowners Insurance Rates by Credit Score Legend: Median Credit Homeowner Excellent Credit Homeowner Birmingham Huntsville Mobile Montgomery Tuscaloosa 200 400 600 800 1000 1200 1400 1600 1800 2000 2200 2400 2600 2800 3000 3200 3400 3600 3800 4000 4200 $2182 $1549 $1963 $1394 $4307 $3058 $1962 $1393 $2222 $1578

Learn More

For more information, feel free to click any of the links you see in this article. They all lead to more detailed information about homeowner’s insurance, specifics on purchasing a policy, and how to find the best deal. You should also contact local resources in your state, such as:

Alabama Department of Insurance

The Official Alabama State Government Website

The Alabama Consumer’s Guide to Homeowner’s Insurance

Or contact them directly through the following resources:

Alabama Department of Insurance
P O Box 303351
Montgomery, AL 36130-3351
Phone: 334-269-3550 | Fax: 334-241-4192
Insdept@insurance.alabama.gov

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