Homeowners Insurance Review
Why Purchase Homeowners Insurance?
The top performers in our review are USAA, the Gold Award winner; Travelers, the Silver Award winner; and State Farm, the Bronze Award winner. Here’s more on choosing an insurance company to meet your needs, along with detail on how we arrived at our ranking of these 10 insurance companies.
Homeowners and soon-to-be homeowners, we have good news for you: Those who comparison shop for homeowners insurance often are able to find lower premium rates. When buying a home, your mortgage company may recommend an insurance carrier, but you could benefit from shopping around. If you've never purchased a home insurance policy, you should know that rates vary greatly, but the average annual premium you can expect to pay is $1,000, with the lowest states averaging around $600 and the highest over $2,000 per year.
For our review of the best homeowners insurance plans, we compared large, reputable, nationwide companies. Of the 10 we reviewed, you should be able to find a few with agents available in your area. Those companies that have a large market share, such as State Farm, were included. We also considered USAA, which has greatly expanded its coverage to provide access to more citizens connected to the armed forces. We also reviewed AARP since membership is available at 50 years of age and a significant demographic of the U.S. population, baby boomers, are eligible.
Top Ten Reviews seeks, whenever possible, to evaluate all products and services in hands-on tests that simulate as closely as possible the experiences of a typical consumer. In this case, we contacted the insurance companies as a prospective customer multiple times by email and telephone. The companies had no input or influence over our test methodology, nor was the methodology provided to any of them in more detail than is available through reading our reviews. Results of our evaluations were not provided to the companies in advance of publication.
What Affects Homeowners Insurance Rates?
Insurance companies consider many factors when determining your risk and rates. The first is the cost of your home, the cost to rebuild and the cost to build to code. The second major consideration is location. Locations with higher incident rates have the highest premiums. High-incident areas include Florida, Louisiana and Texas. States with lower average rates include Idaho, Oregon and Utah.
Other details that affect your rate include personal information such as your credit rating, past insurance coverage, income and marital status. Additional factors that influence risk include things like owning pets, particularly certain dog breeds, whether you have a pool or hot tub on the property, business activities, and if you have an existing security system.
In addition to our home insurance reviews, you can read articles about homeowners insurance in our learning center.
Obtaining Home Insurance Quotes
To obtain the most accurate home insurance quote, you'll need to submit your personal and home information. If you already have insurance, the information contained in your current policy may include much of the information required. You will be asked to provide your social security number, marital status, employment information and information about other possible residents. You may also be asked about existing or previous coverage (home and auto).
Beyond the basic details of your house, such as location, square feet and year built, you may also be asked about items you have not thought of, such as details about the materials used in your home such as flooring, kitchen finishing, the age of the furnace and roof, the presence and size of decks or detached structures. You may also be asked how far away the nearest fire department is and where the closest fire hydrant is from your home. If you need mobile home insurance or coverage for a prefabricated home, you'll want to ask about this coverage specifically.
Liability issues may be addressed, such as whether you own a dog, what breed it is, if you have a pool or hot tub on the property, if your property is fenced. You will also benefit from telling them if you have a security system in place. It is best to give them as much information up front rather than finding out something will not be covered later.
Since you may be able to obtain lower rates by shopping around, we recommend you obtain at least three quotes. You'll also want to speak with your local agents to see if they will provide the level of customer service you require as well as any additional riders or supplemental insurance you may want to increase your coverage.
Choosing the Best Deductible
Depending on where your property is located, you can choose a flat-rate deductible, such as $500 or $1,000, or you can opt for a percent, such as one or five percent of the dwelling's insured amount.
Some financial advisors argue that it makes financial sense to choose a high deductible and pay for small expenses out-of-pocket to keep your rates low. Conversely, consumers tend to believe it's best to keep your deductible low and have the insurance pay out more, even if it is results in an increased premium.
To help you determine which deductible is best for your situation, consider how much your rates might change by opting for a higher deductible. Our research indicated rates could be as much as a 30 to 40 percent lower with a high-deductible policy.
Consider the following two basic scenarios for $300,000 in home coverage over 10 years, with a median premium of $1,000 annually (the U.S. average) with a variance of 30 percent for high and low options, and a single, $10,000 repair (the average claim is usually less than $10,000):
Low Deductible – $1,000*:
Total Premiums Paid: $13,000
Your Portion of Repair: $1,000
Insurance Company Pays: $9,000
Insurance Company Gain: $4,000
Your Total Out-Of-Pocket: $14,000
* However, your rates may increase.
High Deductible, 5 percent, – $15,000*:
Total Premiums Paid: $7,000
Your Portion of Repair: $10,000
Insurance Company Pays: $0
Insurance Company Gain: $7,000
Your Total Out-Of-Pocket: $17,000
* Since you don’t have to file a claim rates shouldn't increase.
But what about rate increases for filing a claim? How would that change your low-deductible plan? Let's say you experience a one-time, 20-percent rate increase after the first year:
With a Rate Increase:
Total Premiums Paid: $15,340
Your Portion of Repair: $1,000
Insurance Company Pays: $9,000
Insurance Company Gain: $6,340
Your Total Out-Of-Pocket: $16,340
As you can see, as your premium rises, your out-of-pocket portion moves closer to that of the high-deductible plan. And this is with only one relevantly small home repair.
You'll need to figure out what works best for your budget, but if you own a newly built home in a low-incident area, such as Wisconsin, you may be able to enjoy the low premiums of a high-deductible policy and never have to pay the high deductible.
However, if you live in an older home in a high-incident area, such as Florida, there is an increased chance that you'll need to be prepared to pay the deductible at some point. If you are interested in how your state compares to other states, the Insurance Information Institute publishes insurance statistics online.
Supplemental Insurance Options to Consider
Homeowners insurance does not cover every type of situation and may not provide sufficient coverage as a standalone policy. Your insurance agent should be able to help you determine which type of supplemental insurance benefits your specific situation. You don't want to fall short of the coverage you need should a major incident occur. Here are a few scenarios to consider:
If your home is in a high-risk area, you'll likely need to obtain flood coverage via the National Flood Insurance Program (NFIP). The NFIP offers flood insurance to homeowners, renters and business owners in high-risk areas. According to its website, the average flood insurance policy costs $700 per year.
Scheduled Personal Property
Most home insurance policies limits coverage for personal items such as jewelry, electronics, furniture, household items and clothing. If you own these types of high-value items, your insurance may give you the option of choosing from standard, actual cash value or replacement cost coverage. If you have unique items, such as artwork or antiques, you'll want to discuss with your insurance agent how to best document and insure those items.
Dealing with sewer backup is nasty business to say the least and a potential health hazard. You may need to add a specific rider to your policy. Sewer backup, regardless of the cause, is usually not covered by most policies. You can add this protection for an added cost of $40 to $50 per year.
Most areas of the U.S. are prone to some type of natural disaster, floods, mudslides, earthquakes and fire. Not all homeowner's insurance policies protect your home from all types of peril. Rare occurrences, such as volcanoes, lightning strikes or damage from falling objects, are often covered, but events such as sinkholes, earthquakes or landslides are not.
Umbrella is a type of insurance that provides additional coverage above your homeowners, auto or boat policies. Unlike most types of insurances, it can also help with legal challenges, such as libel, false arrest or slander. Some use umbrella insurance to help protect them against costs stemming from liability or other associated lawsuits. If something unfortunate happens on your property and you end up owing $600,000 in liability but only have $300,000 covered by your homeowners insurance, personal umbrella insurance might cover the other $300,000.
Many insurances policies limit how much is allowed for debris removal, such as asbestos removal or the removal of charred material after a home fire. Many general homeowners insurance policies fall short if something major happens to your property.
Code coverage provides additional funds for repairing or rebuilding property to current building code standards. This type of coverage may be especially applicable if you own an older home. This additional cost may be above and beyond what your standard policy will provide. Some insurance policies offer up to 30 percent or so of the total payout toward code upgrades. You'll want to carefully review your policy to see what is covered exactly.
Full Replacement Cost Coverage
Imagine a house fire that damages your home and will cost $250,000 to restore, but you only receive $150,000 worth of assistance. Full replacement cost coverage can help close gaps between what the insurance is willing to pay compared to the actual cost of repairs. If you own an upgraded, historic or older home you'll want to consider adding this type of coverage. This type of coverage is also available for personal property.
Common Home Insurance Discounts
Insurance companies typically offer multiple discounts to lower the cost of your premium. Of the 10 companies we reviewed, in most cases, discounts were automatically included. However, when gathering your own quotes, be sure to ask the agents about discounts you may qualify for. You'll also want to review your quotes to verify that all applicable discounts are included.
Below are some of the discounts that may apply to your insurance:
Security discounts include having deadbolt locks and or a monitored security system installed in your house, or living in a gated community and belonging to a homeowners association.
At a minimum, you'll want to have smoke detectors and extinguishers installed in your home. You may get additional credit for extras like 24/7 home monitoring. Some companies even offer discounts to non-smokers since many house fires are caused by cigarettes.
No Claim History
Most insurance companies include discounts to those who have not filed a claim in the past or within a set number of years. With home insurance, in particular, you will likely experience a premium increase if you file a claim.
From our experience, insurance companies offer discounts if you acquire more than one policy, such as auto insurance. You may want to consider adding business insurance, if applicable, or an umbrella policy.
Newly Built Homes
Usually home insurance for new homes is lower than it is for older homes since the plumbing, electrical, roof and HVAC systems are new and up to code. This discount usually extends to homes build within 10 years.
Age & Marital Status
You may benefit from checking to see if your insurance offers discounts to those over 50 or 60 years of age. Many also offer a small discount to married or widowed persons.
Your roof is one of the most important considerations for home insurance. It keeps out damaging rain, hail and heavy snow. You likely can acquire a discount if you have a strong reinforced roof made of fire-resistant material.
How We Compared Homeowners Insurance
Comparing home insurance is difficult. What we could evaluate was the quote process, customer service and introductory coverage options in relation to the price of the premium. We rated highest those companies that can potentially provide good coverage for a competitive price as well as those who provided good answers to specific questions over the phone and by email.
While we can easily rank other types of products, comparing insurance companies is challenging. These are all large companies and offer similar coverage options. Even large consumer polls result in only a small percentage of difference between the highest and lowest rated products. Even within the same company customer experience can vary greatly.
We didn't rate personal liability coverage since most insurances offer the same amount of introductory coverage, usually $300,000. You can easily add more if needed, and it is recommended you increase the amount to cover your assets should something occur. Personal liability insurance helps protect you should bodily injury or property damage happen to another individual for which you might be considered financially responsible.
In the end, you can use our reviews as a starting point, but you'll need to do your due diligence to find the best homeowners insurance company to meet your specific needs.
Documenting Personal Property
As you are researching insurance companies it is a good idea to create a home inventory list with as much detail as possible. Though tedious, you'll need to document your possessions in case you need to make a claim later. A little work now can save you a lot of time and money later if you need to file a claim. Information to collect includes images, receipts, serial numbers, descriptions, purchase date, cost and appraisals. Other information to scan and save copies of include wills, stock certificates, deeds and car titles.
Creating a detailed list will help you decide how much personal property insurance you require. Many insurance companies offer apps or online software to help your organize and securely save your documents to the cloud. It wouldn't hurt to record a video walk-through of your home. You'll also want to store your collected data outside of your home.
Last, you'll also want to preemptively decide if you want to opt for replacement coverage or cash-value coverage.
Obtaining Insurance for an Older or Historic Home
Finding insurance to cover the replacement cost of an older or historic home can be difficult. To protect an older home, at a minimum, you should add code coverage and extended replacement cost endorsements.
Even a home that is just 50 years old could require additional coverage. A home inspection will also likely be required and plan on paying a higher premium (20 to 40 percent) than you would for a new one. Rebuilding costs are often much higher than market price, which warrants the need for extended replacement cost coverage. Though it might be tempting to gloss over details, you should provide the most accurate information about your older home up front, since omissions may result in a claim denial.
Your insurance company may even require that specific updates are completed before it can be insured. Common updates include upgrades to the roof, plumbing, electrical and HVAC system. You may also benefit from installing safety features such as carbon monoxide and smoke detectors, an alarm system and water flow detectors.
Historical homes, especially if the home is in an official historic district or registered as a historic home, may require repairs to meet stringent standards that may not be covered by insurance. For example, many insurances may not pay to replace lath and plaster walls or full-dimension vintage lumber. You may also find it difficult to cover custom molding, stained glass windows and solid wood doors. If you own or plan to buy a historic home, you'll want to shop for an insurance company that will provide full replacement coverage.
A few companies that offer older, or historic, home coverage options include Farmers, USAA, Fireman's Fund and Chubb. Other entities to research include National Trust Insurance Services, or you can research local agencies that may offer some protection.
Homeowners Insurance Coverage…if You Own a Dog
A large portion of liability claims, to the tune of half a billion dollars annually, are due to canine-related injuries. The average dog injury claim is $30,000. The general guideline is that you want to increase your liability insurance to cover all of your assets, which for most is more than the $100,000 offered with basic policies.
The type of dog you own can make a big difference in you premium rates. Some insurance companies don't even cover certain dog breeds. Even if you do not yet have a dog, but are considering getting one, you'll want to make sure the breed is covered by your insurance. Commonly excluded dogs include Akitas, malamutes, chows, Doberman pinschers, German shepherds, Great Danes, pit bulls, Presa Canarios (Canary Mastiffs), Rottweilers, Siberian huskies and Staffordshire terriers. Mixed breed dogs with these types of bloodlines might also be excluded as well as most wolf or wild-dog hybrids. Some also blacklist Labrador Retrievers.
If you are denied homeowners insurance, and you can prove that you were denied insurance, you may be able to obtain insurance via the Fair Access to Insurance Requirement Plan (FAIR). Many states offer some type of insurance coverage for high-risk applicants.
Our Verdict & Recommendations
After you gather your home information it is pretty simple to apply for quotes. We recommend that you try a few companies and carefully go through the policy information before you commit. Ensure that you have the extra endorsements you require added and that the applicable discounts are applied. We recommend that you work with a company that provides a choice of local agents in your area if possible.
If you have some military ties it is well worth it to see if you are eligible for USAA. A good low-priced option includes Travelers or if you are looking for one that offers "unlimited" options consider MetLife. State Farm has over 18,000 agents available nationwide and may be a good choice if you want to work with a local office. Whatever your needs are, apply for quotes with a few.
Other Noteworthy Choices
Amica is one of the highest-rated home insurance companies, according to consumer polls, even polls of those who have filed claims. However, we were not able to complete the quote process without submitting a valid social security number, which we do not supply for testing. We did not include it in the side-by-side comparison, but it is one to consider. Chubb Insurance is worth investigating if you need to insure an expensive, unique property or a historic home.
The information we covered in this review site is general in nature and may not apply to your specific situation. Descriptions of coverage, or what might be paid out, are simplified. Whether a claim will be accepted and paid out depends on the details of your situation and the insurance companies specific exclusions, documentation requirements and provisions. Carefully read your policy to understand the specific terms of your coverage. Not all features apply to everyone and may not be available in all areas.