Homeowners Insurance in Alabama

Homeowners insurance is a policy designed to protect property owners and mortgage lenders from total loss in the face of disaster. If you live in Alabama, you can expect tornadoes and hurricanes, both of which can devastatingly damage a home. Alabama is one of the few states prone to natural disasters. Since 1953, Alabama has experienced 82 federally declared natural disasters. The state has a rating of 15.94 disasters per 1 million people. On March 21, 1932, Alabama experienced its deadliest tornado, which killed 49 people and traveled 60 miles across Perry, Bibb, Chilton, Shelby, and Coosa counties, destroying dozens of homes and structures.

Along with natural disasters, homeowners experience other issues that can severely damage their homes. Fires, explosions, burst pipes, and aircraft and vehicle damage are just a few examples of things that can cause serious damage in Alabama.

When you purchase a homeowners policy, you must fully understand your needs and what the policy covers. No states in the U.S. require homeowners insurance, but if you have a mortgage or home equity loan, your lender will have very specific requirements. You must have enough insurance to repair or restore the home to pre-disaster condition. Always opt for a "replacement" policy rather than a "cash value policy", or you might not have enough to rebuild.

The national average cost of homeowners insurance is $1,915. In comparison, Alabama homeowners pay considerably more per year, with an average of $3,140, which is 64% higher than the national average. Homeowners with a low credit score will pay even more, for an average of $5,475.

Although every homeowners insurance policy and carrier will have different options, the standard types of coverage in Alabama are:

A typical homeowners insurance carrier in Alabama offers different policies to suit your needs. The most common types within the state are:

• Single-Family Home
• Condo
• Mobile or Manufactured Home
• Seasonal or Vacation Home
• Rental Property
• Older Home

Depending on the insurance provider, you can expect varying degrees of coverage for each type above. The perils covered under Alabama homeowners insurance include:

• Aircraft, Car, or Other Vehicle Damage
• Explosions
• Falling Objects
• Fire and Smoke Damage
• Lightning
• Theft
• Vandalism and Malicious Mischief
• Some Types of Water Damage (e.g., burst pipes).
• The Weight of Ice, Snow, and Sleet
• Windstorms and Hail

Global warming has impacted many industries, including homeowners insurance. As tornadoes, wildfires, windstorms, and hurricanes become more prevalent in Alabama, insurance rates steadily increase due to more frequent claims and payouts. The more severe the weather, the higher the insurance rates.

The increase in frequent natural disasters, combined with a spike in the cost of home building materials, a skilled labor shortage, and legal claims against insurance companies, has resulted in huge premium increases in Alabama. These issues have combined to produce an overall 38% increase since 2022.

The most common natural disasters in Alabama are:

Three of the most damaging hurricanes (Katrina, Rita, and Ivan) have affected Alabama homeowners with devasting floods and wind damage.

FEMA (Federal Emergency Management Agency) manages the National Flood Insurance Program (NFIP) through a network of 50 providers across the U.S.

Since most homeowners insurance does not cover floods, this supplemental coverage can repair damage and replace items after a flood. Depending on the options you choose, it can cover the building and/or your personal belongings. This program is available to homeowners, renters, and businesses. Learn more about the program on FEMA's website.

Where you live matters; if the state you live in is susceptible to natural disasters or other named perils, your homeowners insurance will be higher than if you live in a quiet, moderate-weather area.

Other factors that affect your homeowner's insurance are your credit score, coverage amounts, the age and condition of the house, your claims history, and your deductible amount.

Alabama homeowners insurance is costly, making it crucial to find ways to cut costs. Some tips for saving on homeowners insurance in Alabama include:

Other ways to save are installing a security system, installing automatic water shut-off devices to avoid water damage, upgrading plumbing and electrical systems, and installing smart home devices to monitor things.

Since lenders require homeowners insurance when buying a home in Alabama, you must secure a policy. You can do so by shopping around and talking to different carriers to see what types of policies they offer, compare rates, and explore discounts. You usually must pay the first year's premiums up front, and then every year after that, it will be paid through your escrow account with your mortgage payments. Once you make that first payment, the insurance provider will give you a binder and home insurance policy with all the specifics about your coverage. These policies cover rebuilding or repairing your home or other structures and personal belongings such as furniture, clothing, and other personal possessions. Some types of coverage also handle medical payments and legal claims.

You can shop online for policies and carriers and even try out insurance calculators to determine the right amount. It can be helpful to find an insurance agent you trust to help you make an informed decision.

Some of the most common home insurance discounts include:

Common Rates Offer by Homeowners Insurance Firms

The average homeowners insurance rate is $3,140 per year for most homeowners. However, that figure could be higher if the owner has poor credit. The insurance firm you choose also factors in; some may offer better discounts and lower rates than others. A new construction home will earn lower rates than older properties. Some carriers also offer discounts for military personnel or veterans.

The top insurance firms in Alabama with the best discounts for new homeowners are as follows:

Home renovations can drastically impact your insurance premiums and could require additional coverage. For example, upgrading your kitchen, building a swimming pool, and adding square footage can increase your rates and liability. Replacing your roof, wiring, electrical, or plumbing systems could reduce your rates. Adding safety features or strengthening your house with reinforced materials will increase the value of your home, potentially increasing your rates. It will also make the home safer with less risk and potentially lower your rates. Examples of these improvements would be storm-strong shutters, new siding, and a wind-resistant roof.

Some home repairs are not typically covered by homeowners insurance. Things like termites, insect or rodent damage, bird damage, rust, mold, rot, and wear and tear are regular maintenance items for which you cannot file a claim and get reimbursed. Insurance will pay for repairs if a pipe bursts, damaging your home. But if you decide to upgrade your kitchen cabinets or countertops, insurance will not pay for that.

Whenever you upgrade your home or make any significant changes, you should also increase your coverage, or you may be unable to restore it to the same condition as before the disaster.

It's strongly recommended that you speak with a local insurance agent before renovating. Ask questions about how it will impact your coverage, deductible options, and premiums. Some renovations will reduce your risk, and others could increase it.

People who rent houses, condos, and apartments can also get insurance coverage. However, renters insurance is slightly different from homeowners insurance. This insurance protects you against unexpected perils and events that affect your living situation. It replaces or repairs your personal items if damaged, destroyed, or stolen. You can also opt for liability, medical payments, and loss of use coverage options.

Some covered perils include:

Renters insurance typically does not pay for earthquake and flood damage or damage to the structure. The owner's policy would cover that.

Claims cover furniture, clothing, electronics, bedding, and sports equipment. Loss of use coverage kicks in if you must leave the house while it is rebuilt or repaired. It pays for lodging, food, laundry, and pet boarding expenses.

Renters insurance is priced based on a few factors like the location (safe or unsafe neighborhoods), coverage limits (how much you want to cover), and the number of units in your building (more units, the lower the price).

Renters insurance is relatively inexpensive, costing as little as $5/month. Policyholders in urban areas will pay more due to the increased risk of vandalism and theft, but suburban areas are considered safer and will be less expensive. Average renters in Alabama pay $15/month or $183 a year for insurance.

Condo insurance differs greatly from homeowners insurance because of how condo developments are structured. The condo association holds a "master policy" that covers all the dwellings and exterior structures. In the event of a disaster, that policy will pay to restore each unit to its original condition. However, if a homeowner has upgraded and improved things like cabinets, countertops, and new appliances, they must have their own HO-6 policy to restore the interior to its most recent condition. Condo insurance is often referred to as "walls-in". It also covers personal belongings, liability, and loss of use.

Unlike renters insurance, condo insurance replaces fixtures, materials, and structural items along with personal belongings. It protects anything that your master policy does not. Condo insurance picks up where it leaves off and provides comprehensive protection for the entire interior of your home.

Condo insurance covers your personal belongings (furniture, clothing, jewelry, electronics, appliances, fixtures, counters, etc.). It also covers you if someone gets hurt on your property (personal liability coverage). If you must leave your home due to fire, your "loss of use" coverage will pay for lodging, food, laundry, and other expenses until you can return to your home.

The average cost of condo insurance in Alabama is $47/month. You can save on condo insurance by shopping around and comparing carriers, installing a security system, and bundling your condo insurance with your auto and other policies.

The current state of homeowners insurance in Alabama is dismal. Insurance companies have been unprofitable for the past four years due to frequent storms and damage claims. Many residents are limiting their coverage or leaving the state altogether.

Frequent flooding, hurricanes, and tornados in Alabama have severely strained the homeowners insurance market, limiting carriers who want to do business within the state.

There is no federal agency in charge of regulating insurance companies. Instead, they are regulated by state agencies, which ensure that they operate fairly within the law. If an insurance carrier fails to conduct business professionally according to state laws, this agency can take action against it. In Alabama, that agency is the Department of Insurance, located at 201 Monroe Street, Suite 1700, in Montgomery, AL 36104.