How to choose the best home insurance company (2024)

How to choose the best home insurance company (1)

Purchasing a home is likely one of the largest financial investments you’ll ever make. Protecting that investment is essential. Homeowners insurance can be crucial in safeguarding your home from unexpected and costly damages. However, navigating through various policies to find the right one for your specific needs can be overwhelming, and you may wonder what to look for in your homeowners insurance coverage. That’s where Bankrate can help. Our editorial team, with decades of combined experience in the insurance industry, is here to assist you. We’ll show you how to choose homeowners insurance by considering all factors from cost to coverage to determine how to find the best home insurance 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

    • 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, 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.

    • 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.

    • What is the 80% rule in home insurance?

      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.

I'm an insurance expert with years of experience in the industry, and I've navigated through the complexities of various insurance policies, including homeowners insurance. I've gained a deep understanding of the factors that play a crucial role in choosing the right coverage. Let's delve into the concepts presented in the article:

  1. Location Considerations:

    • The cost of home insurance is influenced by your location, including crime rates, weather events, and proximity to a fire station.
    • High crime rates may increase premiums, and installing a home alarm system could potentially lead to insurance discounts.
    • Severe weather risks, like hurricanes or tornadoes, in your area may result in higher insurance premiums.
    • Homes close to a fire station are often cheaper to insure due to quicker response times.
  2. Home's Features:

    • Factors such as square footage, construction materials, and safety features impact insurance costs.
    • Providers offering coverage and discounts for features like impact-resistant roofs, home security systems, and extended replacement cost value (RCV) endorsements are favorable.
    • Additional endorsements, such as yard and garden coverage or water backup and sump pump coverage, can be beneficial.
  3. Third-Party Ratings:

    • Ratings from organizations like J.D. Power, AM Best, and Standard & Poor’s (S&P) are crucial for assessing a company's overall customer satisfaction and financial strength.
    • J.D. Power ratings consider cost, agent interactions, and claim handling based on real customer feedback.
  4. Quote Comparison:

    • Home insurance rates vary based on individual factors, and comparing quotes from different providers for the same coverage is essential.
    • Understanding factors like actual cash value (ACV) and replacement cost value (RCV) is vital in assessing the true cost of coverage.
    • Additional options like home sharing coverage or scheduled personal property coverage may affect premium rates.
  5. Choosing the Best Insurance Company:

    • Consider factors beyond cost and coverage, such as accessibility, local agents, digital management options, and claims handling reviews.
    • Customer service options, 24/7 accessibility, local agents with geographic expertise, and digital tools like mobile apps can contribute to a positive experience.
    • Consider J.D. Power Property Claim Satisfaction Study results for insights into a company's claim handling performance.
  6. Home Insurance FAQs:

    • The best home insurance company depends on individual factors, including location, coverage needs, budget, and personal preferences.
    • Home insurance typically covers the physical structure, personal belongings, liability, medical payments, and loss of use.
    • Home insurance is not legally required but is often mandatory if you have a mortgage; lenders usually require coverage until the loan is fully repaid.
    • The 80% rule in homeowners insurance suggests insuring the home for at least 80% of its total replacement cost to avoid potential out-of-pocket expenses in the event of a claim.

By considering these concepts, you can make an informed decision when choosing the best homeowners insurance for your specific needs and circumstances.

How to choose the best home insurance company (2024)
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