Homeowners insurance might be one of the most important things you purchase for your home. After all, a good policy can protect you from major financial losses caused by storms, theft, fire and more. That being said, you might feel unsure of what to look for in homeowners insurance coverage. Bankrate’s insurance editorial team breaks down what factors to consider and how to choose home insurance that suits your needs.

How to choose homeowners insurance

There are many home insurance companies on the market, so comparing providers can help narrow down your options. Some of the most important things to consider are your location, the cost of coverage and the provider’s third-party ratings. The following five steps will help you understand how to choose the best homeowners insurance company for your needs:

1. Consider your location

Home insurance rates vary by state, city and ZIP code and are typically based on common causes of loss in the area. For example, the cost of home insurance in high-crime neighborhoods is typically more expensive than the average rates in an area with a lower incident rate. Knowing the common causes of loss in your location can help determine what kind of coverage you need. Here are some things to consider:

  • Crime rates: If you live in an area with a high rate of home break-ins or theft, it is possible that your home insurance premium could be more expensive. You may even consider an alarm system to protect your home and potentially earn a discount from your insurance company.
  • Weather events: Living in an area with severe weather risks, like hurricanes, tornadoes or hail, could have a major impact on your home insurance premium. Keep in mind that the cost of home insurance in states with a high risk of severe weather is typically more expensive.
  • Proximity to fire station: Homes that are located within one mile of a fire station are often cheaper to insure. On the other hand, if you live several miles away from a fire station, you could pay more in premiums due to the increased time it would take for help to arrive. In this case, it may be beneficial to look for a company that offers discounts for fire risk mitigation.

2. Factor in your home’s features

Certain factors, like your home’s square footage, construction materials and safety features can influence the cost of home insurance. When shopping for insurance companies, it helps to look for providers that offer coverage for those features, as well as related discount opportunities. For instance, many home insurance companies will lower your rate for having an impact-resistant roof or a home security system.

To maximize your payout after a claim, consider adding an extended replacement cost value (RCV) endorsement. It might also be a good idea to look at endorsements that could come in handy based on your home’s features, like yard and garden coverage or water backup and sump pump coverage.

3. Check trusted third-party ratings

Many home insurance companies are rated by third-party organizations. When comparing insurers, consider looking at their J.D. Power ratings for overall customer satisfaction, which takes into account real customer feedback around cost, agent interactions and claim handling.

Additionally, it can be helpful to look at each provider’s rating from AM Best and Standard & Poor’s (S&P) for financial strength. A company with strong financial stability has historically demonstrated the ability to pay policyholders’ claims.  Many insurance companies publish these ratings on their website.

4. Compare quotes based on coverage

When you purchase a home insurance policy, the rate will vary based on a number of factors that are unique to you and your home. Additionally, home insurance companies calculate rates differently. Comparing quotes from a few providers for the same amount of coverage will help you determine which home insurance company is the cheapest for you.

Keep in mind that home insurance policies may reimburse you for covered personal property losses based on actual cash value (ACV), which factors depreciation into your payouts. If your policy defaults to ACV on personal property, you have the option to upgrade to RCV, but it will be more expensive. If you purchase options like home sharing coverage or scheduled personal property coverage, your rate will also increase.

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Why it’s important to choose the best home insurance company

While the basic home insurance coverage types are standard across carriers, each home insurance company may offer a different experience to its policyholders. This could be during policy shopping, renewal or the claims process. Because of this, it may be a priority for some homeowners to also consider the experience they want in addition to their desired coverage amount and annual premium.

Here are some factors that could influence your decision when picking the best home insurance company:

  • Accessibility: Consider each company’s customer service options and accessibility. If you want peace of mind knowing that you can reach an agent at any time, you may want to prioritize companies that have 24/7 customer service and claim reporting.
  • Local agents: Although it may not always be the case, many top national insurance providers have offices across the country with local agents who are experts in your geographic area.
  • Digital management: If you prefer not to work with an agent, you could look for home insurance companies that have a mobile app or online customer portal that allows you to manage your policy and file claims anytime, anywhere.
  • Claims: Check out J.D. Power’s 2024 U.S. Property Claims Satisfaction Study to get a sense of the sentiment surrounding each company’s claims handling. J.D. Power ratings account for things like settlements, claim servicing and the home repair process.
  • Available discounts: Discounts can be a great way to save on your premium. Before deciding on an insurance provider, it can be helpful to see which discounts they advertise and which ones you qualify for. Bundling discounts tend to offer the highest savings.

Frequently asked questions

  • What to look for in homeowners insurance depends on several factors specific to you and your home. The best home insurance for you will vary based on where you live, how much coverage you need, how much you want to spend and what you value in an insurance carrier. To begin, decide what you’re looking for from an insurance company. For instance, you might prioritize companies that offer the cheapest rate or insurers with local agents. Once you know what you’re looking for, shop around and compare rates from a few providers. When requesting quotes, be sure to specify the same coverage types and amounts (or as close as possible) for a fair comparison.
  • A standard HO-3 home insurance policy covers many things, including your home’s physical structure, as well as other structures like a swimming pool or detached garage, your personal belongings, liability, medical payments and loss of use. Many insurers sell endorsements or separate policies that you can purchase for more added financial protection. For example, if you live in an area prone to flooding, you might consider buying flood insurance since damage caused by flooding is not covered by a standard home policy.
  • Unlike auto insurance, which is required in most states, home insurance is not legally required in any state in the nation. That said, if you have a mortgage on your home, your lender will likely require you to carry home insurance until you fully repay your loan. Even if your home is paid for, though, a homeowner’s insurance policy is a good way to protect your investment in your home in the event of a covered loss.
  • In homeowners insurance, the 80 percent rule refers to the fact that most insurance companies require homeowners to insure their home for at least 80 percent of its total replacement cost. If you choose to insure your home for less than 80 percent of its replacement cost, it is possible that your insurer will not fulfill the full amount of your claim. That means you may end up responsible for paying more out of pocket for repairs.