How to choose the best home insurance company

It is likely that buying a home is one of the largest — if not the largest — financial investments you will make. Having homeowners insurance may help you financially protect your home from unforeseen and expensive damage, but it may be overwhelming to find the right policy that fits your unique needs. That is where Bankrate comes in: our editorial team has decades of combined insurance industry experience to help you on your search for the best home insurance company for you.

How to choose the best home insurance company

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 a home alarm system to protect your home and potentially provide a discount with 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 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, 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 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 adding an extended replacement cost value (RCV) endorsement, which would increase the dwelling coverage. 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, 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 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 an 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.

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: Think about the customer service options and accessibility for each company. 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 spread across the country with local agents who have expertise in your geographic area.
• 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 will allow you to manage your policy and file claims any time, 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.
• 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

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    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.
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    What does home insurance cover?

    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 that you can purchase for more specific protection.
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    Is home insurance required?

    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.
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    What is the 80% rule in home insurance?

    When researching and comparing different home insurance providers, you may have come across something called the 80 percent rule. Many insurers require homeowners to insure their homes for at least 80 percent of its total replacement cost. If you file a claim and your home is insured for less than 80 percent of its replacement cost, your insurance provider may only cover part of your claim, which means you could end up paying more out of pocket.