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How to choose the best home insurance company

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Existing home sales reached a 15-year high in 2021, which means that there are a lot of new homeowners across the nation. But while the home market has been on fire over the last couple of years, it’s important to remember that buying a home is one of the biggest investments you can make. As such, it’s extremely important to protect your home with a homeowners insurance policy, whether you’re a new homeowner or have owned your house for decades.

Before you purchase a policy, though, it’s smart to do some research. Homeowners insurance coverage options can differ significantly from one company to the next, and so do the average rates and other factors. While the average cost of home insurance nationwide is $1,383 per year for a policy with $250,000 in dwelling coverage, your rate will vary depending on numerous factors, including the types of coverage you want or the companies you get quotes with. If you are wondering how to choose the best home insurance company for your needs, the key criteria outlined below may help you make the right decision.

How to choose the best home insurance company

There are dozens of 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, 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 a safer area. 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 opt for more coverage to protect against a potential break-in if your home is in a high-crime area.
  • Weather events: If you live in an area with severe weather risks, like hurricanes, tornadoes or hail, you should look for insurance companies that offer adequate coverage in the event of a major storm. Keep in mind that the cost of home insurance in states with a high risk of severe weather usually have more expensive premiums.
  • 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, a fire could do more damage to your home, meaning you might consider purchasing higher coverage limits.

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 discounts. 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 choosing a replacement cost value (RCV) policy, which will pay to repair or rebuild your home back to its original value without depreciation factored in. It is also 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, look at each provider’s rating from AM Best and Standard & Poor’s (S&P) for financial strength. A company with strong financial stability likely has enough money to repay its policyholders after a claim and is unlikely to go out of business. Many insurance companies publish these ratings on their website.

4. Consider the insurance experience

Some home insurance companies are better than others when it comes to customer experience. However, this largely depends on what you want in an insurance company. Here are some of the factors to consider when evaluating an insurance provider:

  • Accessibility: Think about the customer service options and accessibility for each company. For example, if you prefer to work with an agent in person, look for companies that have offices in your area. 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.
  • Digital management: If you are someone who prefers not to work with an agent, you could look for home insurance companies that have a mobile app and online customer portal that allows you to manage your policy and file claims anytime, anywhere.
  • Claims: Check out the J.D. Power Property Claim Satisfaction Study to get a better sense of each company’s claim handling reviews. J.D. Power ratings account for things like settlements, claim servicing and the home repair process.

5. 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, every home insurance company charges a different rate. 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 most home insurance policies reimburse you based on actual cash value (ACV), which factors depreciation into your payouts. You have the option to upgrade to an RCV policy, but it will be more expensive. If you purchase options like flood insurance, home sharing coverage or scheduled personal property coverage, your rate will also increase.

The last thing to consider is discounts. Most home insurance providers offer discounts to help homeowners get a lower rate. Although the specific discounts vary by company, some of the most common discounts include savings for bundling a home and auto policy, paying your annual premium in full, installing a home security system and having no recent insurance claims.

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

Just because you have a homeowners insurance policy does not necessarily mean you are fully protected. Your policy may have exclusions or exceptions that could limit the protection it offers, so it’s important to ensure that you’re choosing the best home insurance company and policy for your needs. Depending on your needs, the right policy may offer:

  • Adequate coverage amounts: The right homeowners insurance policy will typically include enough coverage to allow you to rebuild or repair your home after a covered event.
  • Adequate protection: Coverage options vary significantly, but standard homeowners insurance policies commonly exclude damages caused by earthquakes, flooding, deferred maintenance, and other types of issues. If you want protection for damage caused by floods or other excluded events, you will typically have to purchase it separately.
  • Optional coverage types or add-ons: Depending on your needs, you may want a homeowners insurance company that offers additional coverage options for valuable items such as jewelry, artwork, and antiques.

Frequently asked questions

Written by
Elizabeth Rivelli
Insurance Contributor
Elizabeth Rivelli is a contributing insurance writer for Bankrate and has years of experience writing for insurance domains such as The Simple Dollar, and NextAdvisor, among others
Edited by
Insurance Editor
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