Home insurance can be one of the most important things you buy for your home. After all, a good policy can protect you from major financial losses caused by storms, theft, fires and more. That being said, you may not be sure what to look for in homeowners insurance. Bankrate’s insurance editorial team outlines what factors to consider and how to choose home insurance that fits your needs.
How to Choose Home 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, cost of coverage, and third-party ratings of the provider. The following five steps will help you understand how to choose the best homeowners insurance company for your needs:
Consider Your Location
Home insurance rates vary by state, city and zip code and are usually based on common causes of loss in the area. For example, home insurance costs in high-crime neighborhoods are usually more expensive than average rates in a lower-incidence area. Knowing the common causes of loss in your area can help you determine what kind of coverage you need. Here are some things to consider:
Crime rate: If you live in an area with a high rate of home burglary or theft, it is possible that your home insurance premiums may be more expensive. You can even consider an alarm system to protect your home and potentially get a discount from your insurance company.
Weather events: Living in an area with severe weather risks such as hurricanes, tornadoes or hail could have a big impact on your home insurance premiums. Keep in mind that the cost of home insurance in states with a high risk of severe weather is usually more expensive.
Proximity to a fire station: Homes that are within a mile of a fire station are often cheaper to insure. On the other hand, if you live several miles from a fire station, you could end up paying more in premiums because of the longer time it takes for help to arrive. In this case, it may be beneficial to look for a company that offers fire risk mitigation discounts.
Consider the Characteristics of Your Home
Certain factors, such as the square footage of your home, building materials, and safety features, can affect the cost of home insurance. When shopping for insurance companies, it helps to look for providers that offer coverage for these features, as well as related discount options. For example, many home insurance companies will lower your rate for an impact resistant roof or home security system.
To maximize your payout after claiming, consider adding an extended replacement cost value (RCV) clause. It may also be a good idea to look at recommendations that might be suitable based on your home’s features, such as yard and garden coverage or water backup and sump coverage.
Check Reviews from Trusted Third Parties
Many home insurance companies are rated by third-party organizations. When comparing insurance companies, consider their J.D. ratings. Power in terms of overall customer satisfaction, which takes into account real customer feedback on costs, agent interactions and claims handling.
In addition, it may be useful to look at the financial strength ratings of each provider from AM Best and Standard & Poor’s (S&P). A company with strong financial stability has historically demonstrated the ability to pay policyholder claims. Many insurance companies publish these ratings on their websites.
Compare Quotes Based on Coverage
When you buy home insurance, the rate will vary based on a number of factors that are unique to you and your home. In addition, home insurance companies calculate rates differently. Comparing quotes from several providers for the same amount of cover will help you determine which home insurance company is the cheapest for you.
Keep in mind that home insurance can reimburse you for covered personal property losses based on the actual cash value (ACV), which factors depreciation into your paychecks. 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 such as home sharing coverage or planned personal property coverage, your rate will also increase.
Why It Is Important to Choose the Best Home Insurance Company
While the basic types of home insurance are standard across carriers, each home insurance company can offer a different experience to its policyholders. This could be during the shopping, renewal or claims process. For this reason, it may be a priority for some homeowners to consider what kind of experience they want in addition to the amount of coverage they want and the annual premium.
Here are a few factors that can influence your decision when choosing the best home insurance company:
Availability: Consider each company’s customer service capabilities and availability. If you want peace of mind knowing that you can contact an agent at any time, you may want to prefer companies that have 24/7 customer service and claims reporting.
Local Agents: While this may not always be the case, many of the leading national insurance providers have offices across the country with local agents who are experts in your geographic area.
Digital management: If you don’t want to work with an agent, you can 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: See J.D.’s 2024 US Property Claims Satisfaction Study Power to get an idea of the mood around individual companies’ claims handling. Rating J.D. Power takes into account things like settlement, claims service and the home repair process.
Discounts available: Discounts can be a great way to save on your insurance premiums. Before you decide on an insurance provider, it can be helpful to see what discounts they advertise and what discounts you are eligible for. Bundle discounts usually offer the highest savings.
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