Here’s How to Pick the Right Homeowners Insurance Company for Your Needs
When you decide to purchase a home, and you use a mortgage to pay for the home over time, you are almost certainly going to be required to carry homeowners insurance.
This protects the lender in case anything happens to the home in terms of damage or other loss of value.
Purchasing insurance of any kind can be complicated and problematic, because you want to make the correct choice for your needs and within your budget. One of the problems is that there are many companies to choose from and many decisions to be made in terms of coverage options.
Below, we offer suggestions about companies that offer reliable and affordable home insurance policies. But first, let’s look at what homeowners insurance actually provides, and what it does not provide.
What Does Homeowners Insurance Cover?
Like any other type of insurance, a homeowners policy doesn’t cover everything. But there are some coverages that most basic policies offer.
Fire and smoke damage are covered by most home insurance providers. Other situations usually covered include weather damage (such as windstorms), internal water damage, theft, vandalism, snow and ice damage and explosions.
Homeowners insurance also covers your personal property and can cover the cost of living elsewhere if you need to move out during a home repair or rebuild.
Insurance companies offer additional coverage for natural disasters like floods and earthquakes, but these types of disasters usually aren’t covered by a regular policy. If you live in an area prone to flooding or earthquakes, you may want to opt into this additional coverage.
It will cost you more on your monthly premium, but if you ever need to file a claim, it’ll be worth it when you can repair or rebuild your home rather than losing all the money you’ve put into it.
Choosing the Best Homeowners Insurance
What qualifies as the best homeowners insurance policy for you might not qualify as the best for your sister or your neighbor. Before choosing one, consider what “best” means to you.
For example, if you’re on a tight budget, you might be most concerned with price. If you’ve had bad customer service experiences in the past, you’ll probably put more emphasis on high satisfaction ratings. And if you’re a worrier, you may be most concerned about making sure you have good coverage for a variety of factors.
To determine the best homeowners insurance companies, we used J.D. Power’s U.S. Home Insurance Study, which surveyed 11,630 homeowners and renters.
The J.D. Power ratings examined policies from companies using satisfaction reports on five key characteristics: interaction, policy offerings, price, billing process and policy information, and claims. They completed research among both homeowners and renters.
What follows is a look at all of the companies that received satisfaction scores above average in either homeowner’s (average satisfaction rating of 819/1,000) or renter’s insurance (average rating of 841). Some companies received above average ratings in both categories.
Best Homeowners Insurance
Amica Mutual maintained its position atop the J.D. Power rankings. It was selected the No. 1 company for homeowner satisfaction.
Satisfaction Score: 849/1000
J.D. Power rated USAA but didn’t include it in their final ranking because it’s only available to members of the military, veterans and their immediate families. Nevertheless, USAA’s satisfaction score was even better than Amica Mutual’s, making it a good option for those who are eligible. USAA also scored the highest satisfaction rate for renter’s insurance.
Satisfaction score (homeowners): 884/1,000
Satisfaction score (renters): 886/1,000
American Family Insurance, which goes by AmFam for short, has an annoying familiar jingle as well as a very high satisfaction rating, especially for a company as large (13,500 employees) as it is.
Satisfaction score (homeowners): 842/1,000
One of the largest home insurance companies in the country, The Hartford survives in part because it provides satisfaction to its clients. It was one of three companies to rate above average satisfaction among both homeowners and renters.
Satisfaction score (homeowners): 839/1,000
Satisfaction score (renters): 846/1,000
Automobile Club of California (AAA)
That which we all know as Triple-A, the Automobile Club of California also offers homeowners insurance to the general satisfaction of its customers. Bundling insurance usually saves money and certainly saves time in terms of remembering who your home or auto insurance is with, so AAA might be a good place to look for homeowner’s insurance.
Satisfaction score (homeowners): 838/1,000
Satisfaction score (renters): 852/1,000
COUNTRY Financial is a full-service financial advisor/provider with customers in 19 states. It provides both insurance polices and investment services.
Satisfaction score (homeowners): 830/1,000
Another company with a memorable jingle and a relatively new and very popular ad campaign targeting football fans, State Farm scored highly for satisfaction with homeowner’s insurance but just below average with renters.
Satisfaction score (homeowners): 829/1,000
You may not have heard of it, but the Pennsylvania company is about to celebrate its 100th year in business. It was one of three companies to rate above average satisfaction for both homeowners and renters.
Satisfaction score (homeowners): 827/1,000
Satisfaction score (renters): 851/1,000
Auto-Owners Insurance operates in 26 states and promotes its discounting services.
Satisfaction score: (homeowners): 825/1,000
Best Renters Insurance
Only five companies rated above average satisfaction for renter’s insurance. Besides AAA, Erie and The Hartford, the two other are:
What is it about insurance companies and jingles? Nationwide, based on Columbus, Ohio, is actually a group of insurance and financial services companies. It rated the highest sastisfaction among renters. It rated just below average among homeowners.
Satisfaction score (renters): 859/1,000
Lemonade is a new player in the insurance market, founded in 2015. It also offers insurance to parts of Europe. Americans might like the fact that Lemonade offers pet insurance along with its life insurance policies.
Satisfaction score (renters): 853/1,000
Best Homeowners Insurance Customer Service
Before selecting an insurance company for your home, it’s a good idea to find out how the National Association of Insurance Commissioners scored it for consumer complaints. The search tool can be a little bit complicated to use, but well worth your time to make sure the company you are considering deals with complaints in a timely and ethical manner.
Best Homeowners Insurance for Military Families
If you are an active member of the military, a veteran or a family member of a veteran or active-duty member of the military, you may choose to go with a VA loan to purchase your home. If you do, you’ll find the VA has certain requirements when it comes to your homeowners insurance.
One of these requirements relates to flood insurance. If you live in a FEMA-designated special flood hazard area, you’ll need to get flood insurance in order to qualify for a VA loan.
You can choose any insurance company that offers the coverage required by the VA, but USAA is a popular choice.
USAA scored top marks all around in the J.D. Power study. Its only downside is the fact that it’s only available to military-affiliated families. But if you’re in the military, a veteran or an immediate family member, USAA could be your best option. Here’s a list of who is eligible for USAA membership:
- Active, retired and honorably separated officers and enlisted personnel
- Officer candidates in commissioning programs
- Adult children whose parents were or are USAA members
- Widows or widowers of USAA members
If you opt for a non-military insurance company, make sure you ask about military discounts. Many of the bigger insurance companies, like Progressive and Farmers, offer discounts for active-duty military. Availability varies by state, so your options will be different depending on your location.
Best Home Insurance for First-Time Buyers
There is no single best home insurance company for first-time buyers. But if you’ve never been on the property ladder before, you’ll need to educate yourself on the types of insurance you need to make sure you’re getting the best deal. Look for insurance companies that offer plenty of online resources to help you understand the homebuying process.
Consider Using Allstate’s Resources
Allstate provides resources to help you decide which homeowners coverage to opt into. This includes articles on dwelling insurance, flood and earthquake insurance and quote comparisons.
You can also take an online quiz to see what type of insurance is right for you. All of these resources are available before you’ve even contacted a representative for a quote.
Worst Homeowners Insurance Companies
The following insurance providers scored well below average for overall satisfaction among both homeowners and renters in the J.D. Power study.
Based in St. Paul, Minn., Travelers was the lowest rated company by far for renter’s insurance satisfaction, with a score of 801/1,000. The next lowest score belonged to Farmers (see below) at 831. Traveler’s also had a customer satisfaction rating below 800 among homeowners.
Satisfaction score (homeowners): 794/1,000
Satisfaction score (renters): 801/1,000
Farmer’s Insurance has 48,000 exclusive and independent agents, so it is a company that is easy to find. It is based in Los Angeles.
Satisfaction score (homeowners): 792/1,000
Satisfaction score (renters): 831/1,000
What to Consider When Choosing a Homeowners Insurance Policy
Because your insurance premiums will vary based on your location and credit history, it’s in your best interest to shop around to make sure you’re getting the best deal. Here are some factors to consider when looking for a homeowners insurance policy.
Read online reviews and consumer advocacy organization ratings of different insurance companies to get a feel for how the average customer feels about the company and how it treats customers and handles claims and complaints.
If most customer satisfaction reviews mention bad customer service or skyrocketing premiums, or it is rated poorly by consumer advocate organizations, you might want to scratch that company off your list.
You can also ask your friends and family members for recommendations. They will give you honest reviews based on their personal experiences, and you can trust these recommendations more than those that you read from ranting strangers on the internet.
When getting quotes from your shortlisted insurance companies, make sure you ask about rebuild costs. This is how much your insurance will shell out to repair, rebuild or replace your house if it is destroyed or damaged.
This is important, because, depending on your coverage, you might end up having to pay out of pocket to repair or rebuild your home.
There are typically two ways your insurance company will pay out to repair your home: RCV or ACV
Replacement cost value (RCV) shells out the amount of money it would cost to replace the part of your home that is damaged or destroyed. For example, if your roof is destroyed, RCV coverage will pay to replace the roof.
Actual cash value (ACV) takes depreciation into account, so if your policy has only ACV coverage, and your roof is destroyed, your insurance company will pay only the amount it determines your roof was worth before it was damaged.
It’s important that you understand exactly what kind of coverage you have so you know what to expect after a disaster.
Medical Payments Coverage
If someone is injured on your property, your homeowners insurance will help pay their medical bills if you have medical payments coverage. Your policy will specify a limit, and after that, you will be liable for paying the remainder of the medical bill.
It’s up to you to determine where that limit should be, based on your financial situation and how much risk you want to take.
Before choosing a policy, it’s important to know what kinds of additional coverage you might need. The most obvious is flood insurance, which your lender will likely require if you live in a flood-prone area. (FEMA provides a handy resource where you can enter your address to see if you live in a flood area.)
Earthquakes happen most often in California but sometimes hit other states. You could choose additional insurance if you live in an earthquake-prone area. This type of insurance will cover the cost of rebuilding your home after earthquake damage, and will also cover any personal property inside your home.
Sinkholes can destroy not just your home but also your property. They are extremely costly to repair, and in some cases are irreparable, making your home and property uninhabitable and worthless. If you live in a sinkhole-prone area, you should investigate sinkhole coverage.
According to the Insurance Information Institute, some states require that standard homeowners insurance policies cover sinkholes at no additional cost, while others require that insurers offer optional sinkhole coverage for an additional premium.
If you’re buying an older home, you can purchase insurance designed for that too. Companies usually offer this for historic homes or registered landmarks.
There are a lot of options out there for home insurance, and deciding on the best policy can seem a bit like spinning a roulette wheel and hoping for the best.
But as long as you understand your needs, prioritize your requirements and do your research, you can be confident that your home will be covered in case of accident or disaster.
Kent McDill is a veteran journalist who has specialized in personal finance topics since 2013. He is a contributor to The Penny Hoarder.
Catherine Hiles lives in Ohio with her husband and their two children. By day she manages a team of writers and graphic designers, and catches up on her own writing in her spare time.