Purchasing a home is one of the biggest investments you can make. To protect that investment, having homeowners insurance is extremely valuable. While home insurance costs vary based on factors like location, claim history, square footage and coverage limits, the average rate in the U.S. is $1,312 per year for $250,000 in dwelling coverage.
Before you buy home insurance, it is a good idea to do some research. Not all providers offer the same coverage or rates and each homeowner has unique insurance needs, as does every home. If you are wondering how to choose the best home insurance company, several key criteria can 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 home 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 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.
Frequently asked questions
What is the best home insurance company?
The best home insurance company depends on lots of factors, including where you live, how much coverage you need, how much you want to spend and what you value in an insurance carrier. To find the best provider, shop around, compare a few providers and get quotes to find a rate you’re comfortable with.
What does home insurance cover?
A standard HO-3 home insurance policy covers many things, including your home’s physical structure, your personal belongings, liability, medical payments and loss of use. Many insurers sell endorsements that you can purchase for more specific protection.
Is home insurance required?
No. Unlike auto insurance (in most states), home insurance is not legally required by states. But if you have a mortgage, your lender will likely require you to carry home insurance until you fully repay your loan.