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Dealing with debt can be a very stressful experience and make you feel as if you’ll never be able to pay off what you owe. If you find yourself struggling to manage multiple debts, the snowball method can provide a practical and effective strategy to regain control of your financial situation. This method, popularized by personal finance expert Dave Ramsey, focuses on paying off debts in a specific order to build momentum and motivation.

Read on to learn how the snowball debt payoff method works, including its benefits, plus alternative payoff strategies you may want to consider.

Building the Snowball

With the snowball method you list your debts from smallest to largest based on balance and regardless of interest rates. The goal is to pay off the smallest debt first while making minimum payments on other debts. Once the smallest debt is paid off, you roll the amount you were paying towards it into the next smallest debt, creating a “snowball effect” as you tackle larger debts.

Getting rid of the smallest debt first can give you a psychological boost. If, by contrast, you were to try to pay down the largest debt first, it might feel like throwing a pebble into an ocean, and you might simply give up before you got very far.

A Word About Paying Off High-interest Debt First

From a purely financial perspective, it might make more sense to first tackle the debt that comes with the highest interest rate first, since it means paying less interest over the life of the loans (more on this avalanche approach below).

However, the snowball method focuses on the psychological aspect of debt repayment. By starting with the smallest debt, you experience quick wins and a sense of accomplishment right away. This early success can then motivate you to continue the debt repayment journey. In addition, paying off smaller debts frees up cash flow, allowing you to put more money towards larger debts later.

Recommended: How to Get Out of $10,000 in Credit Card Debt

Making Minimum Payments Doesn’t Equal Minimum Payoff Time

While you may feel like you’re making progress by paying the minimum balance on your debts, this approach can lead to a prolonged payoff timeline. The snowball method encourages you to pay more than the minimum on your smallest debt, accelerating the repayment process. Over time, as you pay off each debt, the amount you can allocate towards the next debt grows, increasing your progress.

The Snowball Plan, Step By Step

Here’s a step-by-step guide to implementing the snowball method.

1. List all debts from smallest to largest. You want to list them by the total amount owed, not the interest rates. If two debts have similar totals, place the debt with the higher interest rate first.

2. Make minimum payments. Continue making at least minimum payments on all debts except the smallest one.

3. Attack the smallest debt. Put any extra money you can towards paying off the smallest debt while still making your payments on others.

4. Roll the snowball. Once the smallest debt is paid off, take the amount you were paying towards it and add it to the minimum payment of the next smallest debt.

5. Repeat and accelerate. Repeat this process, attacking one debt at a time, until all debts are paid off.

A Word About Principal Reduction

It’s a good idea to reach out to your creditors and lenders and find out how they apply extra payments to a debt (they don’t all do it the same way). You’ll want to make sure that any additional payments you make beyond the minimum are applied to the principal balance of the debt. This will help reduce the overall interest you pay and expedite the debt payoff process.

Recommended: Personal Loan Calculator

Perks of the Snowball Method

The snowball method offers several advantages:

•   Motivation and momentum The quick wins and sense of progress provide motivation to continue the debt repayment journey.

•   Simplification Focusing on one debt at a time simplifies the process, making it easier to track and manage.

•   Increased cash flow As each debt is paid off, the money previously allocated to it becomes available to put towards the next debt, accelerating the payoff timeline.

Alternatives to the Snowball Method

While the snowball method has proven effective for many, it’s not the only debt repayment strategy available. Here are three alternative methods you may want to consider.

The Avalanche Method

The avalanche method involves making a list of all your debts in order of interest rate. The first debt on your list should be the one with the highest interest rate. You then pay extra on that first debt, while continuing to pay at least the minimum on all the others. When you fully pay off that first debt, you apply your extra payment to the debt with the next highest interest rate, and so on.

This method can potentially save more on interest payments in the long run. However, it requires discipline and may take longer to see significant progress compared to the snowball method.

The Debt Snowflake Method

The debt snowflake method is a debt repayment method you can use on its own or in conjunction with other approaches (like the snowball or avalanche method). The snowflake approach involves finding extra income through a part-time job or side gig, selling items, and/or cutting expenses and then putting that extra money directly toward debt repayment. While each “snowflake” may not have a significant impact on your debt, they can accumulate over time and help you become free of high-interest debt.

Debt Consolidation

If the snowball, avalanche, or snowflake methods seem overwhelming, you might want to consider combining your debts into one simple monthly payment that doesn’t require any strategizing. Known as debt consolidation, you may be able to do this by taking out a personal loan and using it to pay off your debts. You then only have one balance and one payment and, ideally, a lower interest rate, which can help you save money.

Often called debt consolidation loans, these loans provide a lump sum of cash, usually at a fixed interest rate and are repayable in one to seven years.

Recommended: How Refinancing Credit Card Debt Works

The Takeaway

The snowball method offers a practical and motivational approach to paying down debt. By starting with small debts and building momentum, you can gain control of your finances and work towards becoming debt-free. It can be a good way to take action and commit to a debt repayment strategy. If it doesn’t suit you, you might consider the avalanche or snowflake method or a personal loan to consolidate debt.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.

FAQ

What is the snowball method of paying down debt?

With the snowball method of paying down debt, you prioritize paying off the smallest balance first, no matter what its interest rate is. Once that debt is paid off, you prioritize the next smallest debt.

What is the disadvantage of using the debt snowball method?

The disadvantage of the debt snowball method is that, by prioritizing the lowest amount of debt, you may not be paying off the debt with the highest interest rate first. This means your most expensive debt could continue to grow as you pay off smaller debts.

What is the advantage of the debt snowball method?

By tackling the smallest debt first, regardless of interest rate, you can get a psychological boost from successfully paying that off and then build momentum for getting rid of your other debt.

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SOPL-Q225-103

Auto insurance is often one of the biggest costs of car ownership. On average, coverage costs $2,012 annually — up considerably from $1,459 a year ago. With monthly rates soaring, securing lower premiums is an important way you can manage expenses.

Here’s a look at some of the cheapest car insurance companies you may shop with in 2025, as well as some strategies to keep your premiums low.

Top Cheap Car Insurance Companies

As we mentioned, the average annual cost of car insurance is about $2,012, according to a 2025 U.S. News & World Report analysis of cheap car insurance companies. The chart below demonstrates which carrier has the cheapest car insurance rates.

It’s worth noting that many companies in the study offer annual rates well below this average. You can always switch car insurance at any time, so consider shopping around for the best rates.

Recommended: Cheapest Cars to Insure

Cheapest Car Insurance Companies for Young and Teen Drivers

The cost of car insurance varies widely depending on age and gender, among other things. For instance, teens are at significantly higher risk of getting into an accident, so premiums for young drivers can be sky high — especially for male teens. The national average for male teen drivers is $7,321 per year, while the average for female teens is $6,475, according to the 2025 U.S. News & World Report analysis.

A policy with the cheapest insurance providers may save you thousands.

Cheapest Car Insurance Companies for Good Drivers

A driving record free from accidents, traffic violations, and other infractions can help you qualify for lower premiums. The national average for good drivers is $2,012 a year, or $167.66 a month. But the cheapest insurance companies offer policies that may be less. As you’ll see, the rates for good drivers are the same as the overall cheapest rates in the study.

Cheapest Car Insurance Companies for Seniors

Seniors typically enjoy the lowest average car insurance. The average married 60-year-old woman pays $1,724 per year for coverage, while her male counterpart pays an average of $1,765.

Cheapest Car Insurance Companies for High-Risk Drivers

If you get a speeding ticket or are involved in an accident, you may see your insurance premiums go up, as insurers see you as a higher risk. After one speeding ticket, for instance, the national annual premium is $2,571 on average. After an accident, it’s $2,891. That said, you may be able to secure a better deal with one of the companies below.

How to Find the Cheapest Car Insurance for You

Here’s a look at some of the strategies you may consider for how to save on car insurance.

Gather Your Information

Before you apply for auto insurance, gather pertinent information, such as your Social Security number and driver’s license number. You’ll also want a record of your driving history, including any accidents you’ve had, tickets, and driver’s license suspensions.

Pull together information about your car as well, including make, model, year of the vehicle, the mileage, and whether you own, lease, or finance it.

Get Quotes from Multiple Sources

Different insurance companies may offer different prices for the same coverage. And some insurance companies might specialize in different areas, such as roadside assistance. Get car insurance quotes from at least three or four insurance companies, so you can compare prices and coverage options and find the best deal for your needs.

Ensure Apples-to-Apples Coverage Comparison

Variables such as coverage type, limit, and deductible can all have an impact on the price of an insurance policy. So, when comparing online auto insurance policies, make sure these variables are the same across the board so you are getting a true side-by-side comparison.

How to Save on Car Insurance

In addition to comparison shopping, there are several other important ways to save on car insurance.

First and foremost, maintain a good driving record. Insurance companies typically charge lower rates for drivers who have no speeding tickets and haven’t been involved in at-fault accidents.

Ask about possible discounts for having two or more vehicles on a policy, having safety equipment like airbags, paperless billing, or bundling auto insurance with other policies.

Consider raising your deductible, which can lower your monthly premium. However, be aware that doing so may mean you pay more out of pocket if you need to use your insurance.

Finally, regularly review your policy and update as needed. You may need to update your policy if you add or remove a driver, increase or decrease the mileage you drive each year, or add or remove a vehicle from your policy.

Recommended: Compare Coverage Types

The Takeaway

Finding the cheapest insurance for your car doesn’t have to be overwhelming. Compare quotes, understand your coverage needs, and take advantage of discounts to lower your premiums without sacrificing protection. As you review your options, remember that the best deal isn’t necessarily the lowest cost. Rather, it provides a balance between cost and the coverage that’s right for you.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

Do cheaper companies offer lower-quality service?

While cheaper companies may offer lower premiums, this does not always mean that they will offer lower-quality services.

Are smaller or regional companies cheaper?

It’s possible that small or regional companies may be cheaper than national companies, but there’s no guarantee. The best thing to do is get quotes from insurers of different sizes to find a policy that meets your needs.

How much do quotes vary between companies for the same driver?

Quotes for the same driver can vary substantially between different insurance companies. That’s why it’s important to seek quotes from multiple companies.

Does bundling home and auto always result in the cheapest overall insurance cost?

Bundling home and auto doesn’t guarantee the cheapest overall insurance cost. However, many insurance companies will offer discounts if you choose to bundle policies.

How easy is it to switch car insurance companies?

Switching car insurance companies is usually relatively easy. It generally involves finding a new company and insurance policy and calling your old company to cancel. If you are financing your car, let your lender know that you have switched insurance companies.

Photo credit: iStock/FG Trade Latin

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q225-034

Monthly car insurance premiums are one of the biggest expenses necessary for maintaining a car. Most states require you to have some form of car insurance. Only one — New Hampshire — doesn’t require it at all, though you will need to prove you can cover the cost of an accident.

Even if it’s not required by law, it is highly recommended to have insurance coverage for your car. Here’s a closer look at factors that can influence what you pay for insurance and what you can do to manage the cost.

Average Cost of Car Insurance in the U.S.

A big question on a driver’s mind when they shop for coverage: How much is car insurance per month? The average annual cost of car insurance premiums is $2,068, or about $172.33 per month, according to a 2025 study by U.S. News & World Report. That said, auto insurance quotes will depend largely on your individual situation, so the premium you’re offered may vary widely from the average.

💡 Recommended: Average Cost of Car Insurance in California

Factors That Affect Car Insurance Rates

Insurers consider a number of different factors when setting rates for their customers. Doing so helps them determine the amount of risk they’re taking on and what they are likely to have to pay should they get in an accident. In other words, they are trying to predict how likely you are to make a claim and what the cost of that claim may be.

Age of Driver

Statistically, age plays a big role in how likely an insurance customer is to make a claim. Young, inexperienced drivers, for instance, are at higher risk of being in an automobile accident. Consider this sobering fact from the Insurance Institute for Highway Safety: Teenagers aged 16 to 19 are three times more likely to be in a fatal car accident than drivers aged 20 and older.

As a result, insurance costs for young drivers tend to be much higher than for older adults. Premium prices due to age typically level out after about age 25.

Type of Vehicle

Vehicle type has a big effect on insurance costs for comprehensive and collision coverage. The more expensive your car, the more an insurance company will have to pay to replace or repair it.

Again, this represents a greater risk for your insurance company, which they compensate for with higher rates. So if you drive a 2024 Honda Civic sedan, for example, you can expect to pay less in car insurance than you might if you drive a luxury vehicle, like a Lexus or Audi sedan.

Driving Record and Claim History

Age and vehicle type can only tell insurers so much. They will also look at your driving record to gain insight into your past driving behavior. In fact, it’s one of the most influential factors that affect insurance rates.

If you have a clean driving record, without accidents, violations, or other infractions, insurers may see you as less risky and offer you lower rates. If you have caused an accident or have moving violations, your insurance rates will likely be higher. A major infraction, like a DUI, can cause your insurance rates to skyrocket by 50% to 100% or more.

💡 Recommended: Average Cost of Car Insurance in Florida

How to Lower the Cost of Car Insurance

Luckily, car insurance premiums are not set in stone. There are steps you can take to keep costs low. Let’s look at some common strategies.

Bundle Insurance Types

When you bundle insurance, you purchase multiple types of insurance from the same provider at the same time. For instance, you might bundle homeowners insurance with your auto insurance. Bundling helps streamline insurance providers’ operational costs, and it incentivizes customer loyalty. As a result, a lot of providers will offer steep discounts from 10% to 25%, depending on the coverage you choose and other factors such as where you live.

Check Insurance Coverage Needs

It pays to consider carefully how much auto insurance you really need. If you purchase more than necessary, you might not be getting much value for the extra money you spend.

You will need to purchase enough coverage to meet your state’s insurance requirements as well as requirements mandated by your loan or lease agreement if these apply.

However, consider factors such as the value of your vehicle when purchasing a policy. For example, older vehicles tend to be less valuable than newer ones. Weigh the cost of collision coverage and whether it’s worth the payout you are likely to receive if you were in an accident. If the payout is relatively low, you may be able to reduce your collision coverage.

Shop Yearly for Quotes

As the variables in your life change, so too will your insurance needs and costs. What’s more, insurance rates are always in flux due to factors such as industry trends and inflation. That’s why it’s a good idea to shop for car insurance quotes at least once a year.

Insurers set new rates for the upcoming year in December, so this may be a good time to look for the cheapest auto insurance companies. However, you can switch carriers at any time.

💡 Recommended: Average Cost of Car Insurance in New York

Understanding Different Types of Car Insurance Coverage

Generally speaking, there are six types of car insurance coverage.

•   Liability coverage: This coverage is mandatory in most states, and you are usually required to have a minimum amount that varies depending on where you live. It helps pay for the cost of injury to another person and the damage you cause to another person’s property.

•   Collision coverage: If you hit another car, or an object like a fence or a tree, collision coverage can help pay for the cost to replace or repair your vehicle.

•   Comprehensive coverage: This helps cover the cost of damage to your car by things like fire, hail, theft, and vandalism. There’s usually a deductible associated with comprehensive coverage, which you’ll have to pay yourself before the coverage kicks in.

•   Uninsured and underinsured motorist coverage: Unfortunately, not all drivers carry insurance. If you’re hit by an uninsured driver, uninsured and underinsured motorist coverage can help pay for the cost of your medical care and sometimes help repair your car.

•   Medical payments coverage: If you or your passengers are injured in an accident, this can help cover the cost of medical care.

•   Personal injury protection: Only available in some states, personal injury protection can help pay for medical expenses after an accident as well as related expenses incurred because you were injured, such as lost income.

The Takeaway

The cost of car insurance depends on a lot of factors, including the coverage you need, your driving history, your age, and the type of vehicle you drive. With so many variables, it pays to shop around for the best deals. Get quotes from several providers, and consider doing it at least once a year.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

FAQ

Is $200 per month a lot for car insurance?

A monthly premium of $200 per month is more than average for car insurance. However, price depends on a lot of factors. Depending on your circumstances, $200 per month may be appropriate.

Is $500 per month a lot for car insurance?

A monthly premium of $500 per month is quite expensive, generally speaking. It is more than twice the national average.

How much should insurance for a car be per month?

Average monthly car insurance premiums are about $172.33 per month. You may pay more or less depending on your circumstances.

How much should car insurance be per year?

Average annual car insurance premiums are $2,068, though costs will vary depending on a variety of factors.

How much is car insurance for a 16-year-old?

It can be quite expensive to insure a 16-year-old driver. On average, it costs $2,735 a year to add a 16-year-old to their parents’ policy. But it costs $8,765 per year on average for that 16-year-old to have their policy.

Photo credit: iStock/stanciuc

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q225-035

If you own a home, you should have homeowners insurance. (And in some cases, your mortgage lender may even require it.) That’s because this type of coverage can help you pay for losses and damage to your home and belongings if the unexpected occurs, such as a fire, wind, hail, or theft.

Homeowners insurance includes property and liability coverage. But it doesn’t cover every situation, so it’s important to read your policy’s fine print. Let’s dive in.

Property Coverage Explained

Most homeowners insurance policies include two categories of coverage: property coverage and liability coverage. Four types of property coverage include dwelling, other structures, personal property, and loss of use. Here’s a closer look at each.

Coverage A: Dwelling

Dwelling coverage covers your house structure. This includes things like walls, floors, roof, windows, attached garages, and attached porches. It also includes built-in components like furnaces or fireplaces.

Coverage B: Other Structures

Other stand-alone structures of your home, like sheds, detached garages, or fences, are also covered. If one of these structures is damaged from things like fire, snow, wind or hail, the insurance company would pay to repair it, minus your deductible.

Tip: Homeowners insurance involves a lot of terms, so check out a homeowners insurance glossary if you are confused.

Coverage C: Personal Property

Your personal property, which includes your personal belongings like furniture, clothes, art, jewelry, and sports equipment, is covered under homeowners insurance if items are stolen or destroyed by fire, hurricane, or other insured disasters. The coverage for personal property is generally 50 to 70 percent of the insurance you have on the structure of the house, according to the Insurance Information Institute.

Your homeowners insurance may even cover personal belongings that are stored outside of the home. However, there may be a limit for this coverage. Expensive personal items like art, jewelry, collectibles and other household items are often covered, but there is usually a dollar limit if they are stolen. Taking inventory of your belongings can help you determine how much insurance you need.

In most homeowners insurance policies, personal property coverage works differently than other types of coverage. A policy typically only covers personal property damage from disasters that are listed, instead of from any cause that isn’t excluded.

These disasters are called “perils” and may include an array of events or occurrences — from smoke, fire, and lightning to vandalism, theft, and damage from aircraft or vehicles. Ask your insurance company for a list of perils.

Coverage D: Loss of Use

Loss of use coverage helps pay temporary additional living expenses while your home is being repaired due to damage from a covered claim. Loss of use coverage could pay for things like hotel stays, food, or other expenses incurred in the event your home is deemed uninhabitable after a covered disaster. However, if your home is damaged from a disaster that is not covered under your homeowners insurance, like a flood, then your insurance won’t pay for loss of use.

Liability Coverage Explained

The other type of homeowners insurance coverage is liability coverage. Liability coverage includes personal liability and medical payments to others.

Coverage E: Personal Liability

Personal liability coverage helps if you or your family member are responsible for injuring someone else or damaging their property. This coverage also extends to damage done by your pets, like if your dog bites someone.

Personal liability coverage pays for the cost of defending you or your family member in court and for any damages a court rules that you must pay. Liability insurance doesn’t have a deductible like other types of coverage. And it won’t cover damages due to certain things, criminal acts, harm that is caused on purpose, or injuries or damage from a car accident.

Coverage F: Medical Payments to Others

Medical payments coverage pays if you cause physical harm to someone outside your home. For example, if someone receives a minor injury on your property, medical payments to others would cover the costs.

Typically, you will not receive coverage for exclusions like car accidents or intentional acts of harm.

What Does Homeowners Insurance Typically Not Cover

If you’re buying homeowners insurance, you’ll want to double-check what your policy will and will not cover. In many cases, you’ll get protection for damages due to fire, lightning, wind, and hail. But oftentimes, insurance companies won’t cover damages due to floods and earthquakes, wear and tear, maintenance issues, intentional acts, or war.

Flood and Earthquake Damage

Homeowners insurance does not cover damage due to floods or earthquakes, though you can purchase separate flood insurance or earthquake insurance.

If you live in an area that experiences floods, hurricanes, earthquakes or other natural disasters, you may want to look into additional homeowners insurance options. Be sure to do your research to find out what flood insurance covers when selecting policies.

Wear and Tear/Maintenance Issues

Damages or issues due to wear and tear, neglect, or not properly maintaining your home are not covered under most homeowners insurance policies. For example, homeowners insurance covers roof leaks if the leak is due to things like storms or a falling tree. But it generally won’t cover a roof leak due to typical wear and tear or lack of maintenance.

Certain Other Perils

Certain other perils, like intentional acts, nuclear hazard or government actions like war, are also not covered under typical homeowners insurance policies.

The Takeaway

If you own a home, homeowners insurance is important to have. But don’t assume that it will cover all damages. If your home is damaged from an event that’s not covered, such as a flood, earthquake, or war, you will likely have to pay for the repairs and other associated costs yourself (unless you have supplemental insurance).

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

FAQs

What are the main parts of a homeowners policy?

The main parts of a homeowners policy include dwelling, other structures, personal property, loss of use, personal liability, and medical payments to others.

Does home insurance cover other buildings on my property?

Home insurance covers other stand-alone structures of your property, like sheds, detached garages or fences. Attached garages are also covered.

How are my belongings covered differently from my house?

Personal belongings like furniture, clothes and art are covered under homeowners insurance if they are stolen or destroyed by disasters that are listed. Personal belongings that are stored outside of the home may also be covered, but there may be a limit. The coverage for personal property is generally 50 to 70 percent of the insurance you have on the structure of the house.

What liability protection does home insurance provide?

Homeowners insurance includes liability coverage for personal liability and medical payments to others. Personal liability coverage helps if you or your family member are responsible for injuring someone else or damaging their property. Medical payments coverage kicks in if you cause physical harm to someone outside your home.

Are natural disasters like floods or earthquakes covered?

Homeowners insurance often does not cover natural disasters like floods or earthquakes. If you live in an area that experiences floods, hurricanes, earthquakes or other natural disasters, you may want to look into additional homeowners insurance options.

Photo credit: iStock/Anchiy

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOPRO-Q225-039

Termites can be a homeowner’s nightmare because they can wreak havoc on your home. Consider this: Every year, the insects damage around 600,000 homes in the U.S., costing homeowners an estimated $5 billion in control and repair costs, according to Orkin.

And unfortunately, most homeowners’ insurance policies don’t cover termite damage or the cost to get rid of the bugs. This means if termites start chewing away at your home, you’ll likely be on the hook for the repairs and treatment.

When Homeowners Insurance Might Cover Termite Damage

As we mentioned, termite damage usually isn’t covered by homeowners insurance. However, in some rare cases, there may be exceptions — especially if the damage is caused by something your policy already covers, such as a fire.

For example, if termites chew through wiring and that leads to a fire, or if part of your home suddenly collapses because of hidden termite damage, your insurance might help pay for it. It’s a good idea to read your policy carefully so you know exactly what is (and isn’t) covered.

New to insurance? A homeowners insurance glossary can help you make sense of unfamiliar terms.

Why Homeowners Insurance Almost Always Excludes Termite Damage

Most home insurance policies don’t cover termite damage because insurance companies see it as something you can prevent. Termites usually work slowly over time, so it doesn’t count as an unexpected event.

One smart way to protect your home from potentially devastating damage is to schedule regular termite inspections.

Can You Get Termite Insurance?

Insurance providers typically don’t offer extra coverage options for termite damage. But there are still options.

Some certified pest control companies offer something called a termite bond or termite warranty. This type of service contract often includes an initial termite treatment, regular inspections, and, in some cases, will even cover the cost of repairs if termites cause damage. While costs can vary, most termite bonds range from $500 to $2,500.

You may want to think about getting a termite bond if:

•   You’re selling your home.

•   You recently found termites and are worried they’ll come back.

•   You live in an area where termites are common.

It’s worth noting that some home warranty plans might cover certain pest control services, like inspections. Check your plan details to see if termite coverage is included.

Recommended: Home Insurance Costs Explained

Preventing Termite Damage in Your Home

Here are some simple tips to make your home less inviting to these pests:

•   Get regular termite inspections. Consider scheduling yearly inspections if you live in a high-risk area, like someplace hot and humid. If you live in a place where termite infestations are less likely — such as cooler or drier regions — an inspection every two to three years may be enough.

•   Fix leaks. Termites love damp spaces. So, make sure to quickly repair leaky taps, toilets, and appliances. Also, check that water from AC units and hot water systems drains away from your home, and ventilate attics to reduce humidity.

•   Trim trees and bushes. Overgrown branches and plants can give termites a direct path to your home, so keep your yard and lawn nicely trimmed and maintained.

•   Keep porch and garden lights off when termites are active. Termites are attracted to lights. Turning off outdoor lights can help keep them away.

•   Seal cracks and cover crawl spaces. Use caulk to fill gaps in your home’s exterior and cover crawl spaces with plastic to block entry points.

•   Store firewood away from your house. Keep firewood and untreated wood off the ground and away from your home. Any wood you use for your home should be treated appropriately since termites thrive on untreated wood.

•   Keep water from pooling around your foundation. Make sure to fix drainage issues and regularly clean gutters and downspouts.

How to Spot Termite Damage

Termite damage can show up in all kinds of places, like ceilings, bathrooms, fireplaces, and walls. These pests eat wood from the inside out, which can cause moisture to build up. That can lead to warped floors and sticky doors.

Some early signs of termites include:

•   Flying or crawling termites inside your home

•   Mud tubes along walls or foundations (termites use these to travel safely)

•   Small piles of wings near windows or doors

•   Droppings that look like tiny pellets

•   Floors that feel soft, uneven, or saggy

•   Doors and windows that suddenly stick or won’t open easily

•   Paint that bubbles or peels, even if there’s no water leak

•   Wood that feels empty or thin when you tap it

What to Do If You Find Termite Damage

If you spot any of these signs of termite damage, the best thing to do is contact a pest professional right away. They’ll inspect your home to see if termites are still active and make sure there’s no ongoing risk of another infestation.

Once your home is in the clear, the expert can walk you through the damage and explain what needs to be repaired. They may also suggest treatment options and give you tips to help prevent termites from coming back.

You’ll want to make sure the infestation is fully taken care of before starting any repairs. Fixing the root of the problem first can help you avoid even more costly damage later on. Remember, since home insurance doesn’t cover termite damage, you’ll have to pay out of pocket for any repairs.

Recommended: Condo vs. Homeowners Insurance

The Takeaway

Does homeowners’ insurance cover termite damage? Unfortunately, many policies do not — and the cost of repairs and treatments can add up quickly. That’s why it’s important to help keep the pests out of your home in the first place. Scheduling regular inspections, controlling moisture, and staying up to date on basic home maintenance can all make a big difference. And if you live in a high-risk area, a termite bond might be worth exploring for extra protection.

If you’re a new homebuyer, SoFi Protect can help you look into your insurance options. SoFi and Lemonade offer homeowners insurance that requires no brokers and no paperwork. Secure the coverage that works best for you and your home.

FAQ

How much does termite treatment and repair typically cost?

The cost of termite treatment and repairs can vary depending on how bad the infestation is and the type of treatment needed. But on average, you can expect to pay around $1,000 for treatment and anywhere from $1,000 to $10,000 or higher for repairs.

Does insurance cover termite inspections or prevention plans?

Most home insurance policies won’t pay for termite damage. However, some pest control companies offer service plans — called termite bonds — that can help. These plans often include treatments, inspections, and sometimes even repair coverage. Remember that plan types and costs can vary, so it’s a good idea to look at your options and see if a termite bond is the right fit for your home.

Does homeowners insurance cover damage from other pests, like rodents or ants?

No, homeowners insurance usually doesn’t cover damage caused by pests like ants, mice, rats, or other critters.

What is a termite bond and how does it differ from insurance?

A termite bond, also known as a termite warranty, is a service plan from a certified pest control company that covers termite treatments and regular inspections. Sometimes, it may even help pay for repairs if termites cause damage after your home has been treated. Unlike homeowners insurance, it isn’t offered by your insurer and only covers termite damage.

Does renters’ or condo insurance typically cover termite damage?

Just like homeowners insurance, renters and condo insurance policies usually don’t cover termite damage. In most cases, you or your landlord would be responsible for the cost of treatment, removal, and any repairs caused by termites.

Photo credit: iStock/Aleksandar Pirgic

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