The average American homeowner spends more than $1,200 a year on homeowners insurance.
That’s about $100 a month, year after year, for a product most of us will never use. It makes sense to find the lowest rates possible.
But get this: The average homeowners insurance claim pays about $16,000 to fix damage caused by wind, fire, hail, lightning, and other perils.
If you needed to use your policy, you’d want a company that would come through for you. The $50 or $100 you’d saved on premiums this year wouldn’t matter anymore if the policy wouldn’t pay your large claim.
Why Homeowners Insurance Is So Important
“Insurance, generally and as a rule, is a trade-off,” said attorney Etienne Font of Merlin Law Group. Font has three decades of experience handling claim litigation for homeowners insurance.
“You have to determine if the amount of the premium is worth handing the risk over to the other side or if it’s better to keep it.”
Font also points out it’s up to you, the consumer, to find an insurer you can trust to accept your risk.
And risk is out there: With natural disasters on the rise — from wildfires in California to hurricanes and flooding in the Southeast — choosing the right home insurance company to protect your investment has become even more important.
Homeowners Insurance Quick Facts
We’ll explore ways to build the best homeowners coverage below. But if you’re in a hurry to get coverage, these three elements matter a lot:
Replacement Cost vs. Market Value
As you shop, consider choosing “replacement cost coverage” instead of “market value coverage” for your policy.
What’s the difference?
- Replacement cost coverage can restore your home to its original condition, even if the repairs exceed the market value of your home.
- Market value coverage (also called actual cash value) factors in changes in property values and construction costs which could lower your claim’s payout. Your policy would protect the dollar value of your investment but not necessarily the integrity of your home.
Why Deductibles Matter
A higher deductible can lower your premium, but you’d have to pay more out of pocket to unlock your policy’s coverage.
Well Chosen Add-Ons Can Save
Consider buying extra coverage for catastrophes not typically covered by standard home insurance policies.
Standard policies won’t cover damage from earthquakes and floods, for example. If you live in an area prone to these perils, consider paying more for this coverage.
The 7 Best Homeowners Insurance Companies
We recommend these seven homeowners insurance companies for 2020:
- Lemonade Insurance Company: Best for quick claims processing.
- State Farm: Best for local agent support.
- Liberty Mutual: Best for discounts.
- Travelers: Best home insurance company.
- Allstate: Best for customized coverage.
- SelectQuote: Best marketplace for financially-stable companies.
- Young Alfred: Best marketplace for easy-to-compare quotes.
Lemonade Insurance Company
Lemonade has made a splash in its relatively short history. The New York-based company began offering homeowners and renters insurance in late 2016 and has since expanded to serve about half the country.
You’ll get financial stability — Lemonade has a Financial Stability Rating® of A-Exceptional from Demotech, Inc., a Columbus-based financial analysis firm — and the insurer’s modern process could save you time and money.
Lemonade uses artificial intelligence to pair the homeowner with the right policy at a super low price. You can apply either through the insurer’s website or its app.
To get a quote, enter your name and address, answer a few questions about your home’s safety features, and the bots do the rest.
Lemonade mixes your location, proximity to emergency services, the age of your property, and other factors into your initial quote.
You can then customize, adding coverage for specific items like jewelry or sporting equipment and selecting your deductible. You could have a quote in about 90 seconds.
Filing a claim is just as easy, especially on the app where you can simply record a video describing what caused the damage to your home.
Lemonade needs only three minutes to pay on many simple claims; more complex claims will require more review, of course.
This ease of use makes Lemonade stand out, but we chose Lemonade because its claims payment guidelines sweeten the deal even more.
Here’s the big difference between Lemonade and most other insurers: Paying the claim to fix your house won’t cut directly into Lemonade’s annual profits.
An insurer that doesn’t interpret your claim as red ink on its bottom line has more freedom to pay claims quickly.
Money to pay your claim will come from premiums paid by customers, but aside from a flat fee Lemonade keeps to cover its administrative costs, the insurer donates unused premiums to charities chosen by policyholders.
Lemonade is a certified B-Corp®, a type of for-profit company that meets rigorous standards for social and environmental performance, accountability, and transparency.
Get a Free Quote From Lemonade.
With nearly a century of service and a market share of 18.4 percent, State Farm is one of the largest home insurance underwriters in the nation.
State Farm covers losses caused by weather and non-weather events, including lightning, wind, hail, theft, vandalism, and riots. The company also covers accidents that cause direct physical loss such as water damage from a broken pipe in your plumbing system.
You can also buy extra coverage to protect against natural disasters such as earthquakes. Standard policies won’t cover earthquakes or floods.
State Farm will extend discounts based on your home’s:
- Roofing Materials: A newer roof will be more resistant to wind, fire, or hail damage. Less risk for the insurer means you can pay lower premiums.
- Utility Rating Plans: The age and condition of your home’s electrical wires, pipes, and HVAC system will also impact your likelihood of filing a claim. State Farm discounts policies on homes with newer systems.
- Home Security Devices: Home security systems lower the risk of vandalism and theft. Better protecting your belongings means State Farm takes on less of your risk and can lower your premiums.
Like a lot of large full-service insurers, State Farm also offers discounts when you have more than one State Farm policy: You could bundle home and auto, for example.
Get a quote on State Farm’s website or by downloading its app. Just request a quote and answer some basic questions. You can buy the coverage instantly or review the quote for up to 30 days.
None of this makes State Farm stand out. A lot of large, legacy insurers can match State Farm’s discounts and procedures.
So why did State Farm make our list? Because of its street-level, in-your-neighborhood approach to customer service. You’ll see State Farm agencies on main streets, alongside diners and banks, or tucked in beside laundromats and coffee shops in strip malls across the country.
Your local agent has invested in your community and, in most cases, has a vested interest in your stability and success.
You’ll come across some exceptions, so make your own decision based on your assessment of the agent in your neighborhood. Normally, though, a local State Farm agent can deliver the best of both worlds: small-town customer service and access to policies from a big, stable, national insurer.
You already know about Liberty Mutual. More than a century of stable and solid service in all 50 states earns an insurance company “household name” status.
But we chose Liberty Mutual for this list because the company is thorough and flexible — a winning combination in the insurance industry no matter how long you’ve served customers.
For example, Liberty Mutual considers inflation when adjusting the value of your destroyed or damaged property. And the insurer has a long list of available discounts which include:
- Military Discount: For those who protect our liberty — veterans and active duty personnel.
- Preferred Payment Discount: Automatic transfers to pay premiums will help you save.
- Renovated Home Discount: Save premium money by updating your home.
- Claims-Free Discount: Going five years or longer without filing a claim will help you save.
- New Home Discount: New homes have safety features and up-to-code building practices so you can save on insurance.
- Protective Devices Discount: deadbolts, home security, sprinklers, auto-shutoff water valves — these modern devices lower claims and can save you money month to month.
This is not an exhaustive list. Liberty Mutual extends standard discounts, too. Bundled policies and new roof discounts, for example. When you can claim several discounts you’ll be able to notch noticeable savings.
Liberty Mutual also stands out because of its:
- One-claim Forgiveness Feature: The company won’t inflate your premiums because of only one claim.
- Help With Repairs: Along with paying a claim to fix your home, Liberty Mutual can also help you find qualified repair workers in your area.
- Valuables Protection: Liberty Mutual stands out with its protection for jewelry, fine art, or other collectibles that are hard to value.
- Mobile Access: It’s been around 11 decades and counting, but Liberty Mutual has adopted modern practices. Its apps and site offer quick access to policy documents and billing.
Get a free quote from Liberty Mutual.
With 160 years of service and the highest possible A.M. Best rating (A++), it’s tough to beat Travelers Insurance for strength and stability.
And customers with environmentally friendly homes can now get special discounts with Travelers Insurance.
Travelers discounts policies for customers who own a LEED-certified green home, for example. You can also find the usual discounts (multi-policy, new home).
Travelers also gives customers several add-on options like coverage to rebuild a green home, replacement value coverage, identity fraud protection, and higher coverage for jewelry and other expensive items.
You can customize Travelers’ standard homeowners policy to include coverage for additional structures, loss of use, and personal liability, among others.
Getting a quote is easy: Just start on the company’s home page or speak to a Travelers’ sales agent for a more personalized experience.
The company’s site has lots of helpful educational resources to help you assess risks and keep a record of your home upgrades.
New homebuyers can also benefit from Travelers’ OpenHouse app, which lets prospective buyers see a property’s update and maintenance history as they shop for real estate.
Get a free quote from Travelers Insurance.
Founded in 1931, Allstate claimed the country’s second-largest market share for homeowners insurance in 2018, according to the Insurance Information Institute.
Like State Farm, Allstate’s neighborhood agents provide local access to a stable, national product. A.M. Best rated Allstate A+ (superior), and the insurer’s customers complaint ratios rank lower than average.
Allstate’s standard policies include coverage for structural damage, loss of personal property, liability protection, and guest medical protection (in case someone gets injured on your property).
Allstate offers HostAdvantage policies to cover your belongings when you’re home-sharing.
You can get a quote online or by talking to an Allstate agent in your neighborhood.
In addition to the standard policy options, Allstate offers optional coverage for identity theft restoration, electronic data recovery, and business-related items stored in the home.
Customers can claim multi-policy discounts and a theft/fire protection device discount. Homeowners older than 55 and retired also get a discount.
And Allstate has some nice online tools. Its GoodHome product accesses information from public records, current weather conditions, and local home insurance claims to help you identify and prevent common perils.
We also like Allstate’s Premium Gauge which lets you see the ingredients of your premium and how you could save.
Online quote aggregators for insurance get a bad rap. They’re often blamed for sharing your data too freely with insurers or directing you to a sub-par product.
SelectQuote works only with companies with an A.M. Best rating of A- or better.
And, with SelectQuote, you’ll work with an agent throughout the process. You should feel more like you’re working with an insurance broker than with an online algorithm.
SelectQuote offers more helpful tools than other marketplaces. You can learn about different types of coverage and add-ons, and you can see factors affecting your premiums. The site’s coverage calculator is also helpful.
SelectQuote provides direct links to its 22 partnering insurance companies so you can access more detailed information on the individual companies you’re matched with.
As with any policy obtained through a marketplace, make sure to review and compare all the options offered before making a choice.
It’s a quaint idea — Young Alfred, a little cyber-butler with his red bow-tie, directing you to the right homeowners coverage.
But there’s also some serious science behind this company’s approach. Young Alfred uses algorithms, not good manners, to match you with the type of coverage you need so you don’t have to crunch the numbers yourself.
Then, the service works with a network of more than 40 different insurers to find the best one company for your needs.
Most quote tools show the prices for a standard home insurance policy but not your actual cost if you need extras or have special circumstances. The quotes Young Alfred shows are customized to your profile.
And, if you want to retain more control, Young Alfred offers expert resources. You’ll find tips on how to compare homeowners policies and how to save money.
How to Find the Best Home Insurance
We’ve shared our best seven home insurance companies, but you don’t have to take our word for it.
Hundreds of companies offer home insurance. You have more options than ever to choose from, but you can also get overwhelmed shopping for the best home insurance company.
So we’ve compiled a list of factors to consider as you shop: consumer satisfaction, financial strength ratings, claims processing, and coverage options. These are among the factors we considered when creating our seven best list.
Regardless of which company you choose, read through your homeowners insurance policy carefully to understand your coverage and exclusions.
While this might sound like a simple and unnecessary step, many homeowners have had claims denied after a disaster. Save yourself this trouble and understand your policy before you need to use it.
Homeowners insurance exists to protect your home investment from losses caused by natural disasters, accidents, fire, and theft.
Most standard policies include four essential types of coverage:
- Dwelling: This central component of your policy covers your home — the wood, stone, concrete, brick structure itself — and anything that’s attached or integrated such as pipes, electrical wires, and major systems.
- Personal Belongings: This part of your coverage protects items unattached to your home including furniture, small appliances, electronics, and books.
- Additional Living Expenses (ALE): You’d use this part of your policy to pay for a hotel or apartment — and possibly meals — while contractors repaired your damaged dwelling.
- Liability Protection: If a visitor to your home got injured and successfully sued you for damages, this protection could prevent losing your property to a court order.
Some policies allow you to protect tenants if you rent out part of your home. Others let you ramp up your personal belongings coverage to include jewelry or other high value items.
For our list, we considered companies with a wide variety of coverage options and protections for total losses and losses exceeding coverage limits. We also looked at add-on coverage options for events such as flooding and discounts for bundling policies.
An ideal homeowners policy should insulate you from any out-0f-pocket expenses to cover damages or loss.
For this reason, we prioritized insurance companies with a solid overall track record of getting back to their clients quickly as well as companies with hassle-free, 24-hour claims processing.
Solid Financial Standing
With climate catastrophes becoming more common, it’s especially important to seek insurance companies that can weather the storm.
A company with a strong financial outlook should let you avoid headaches like delayed claim payouts down the road.
That’s also why we prioritized insurance marketplaces that work only with financially sound companies — those with high A.M. Best ratings and solid reputations with the National Association of Insurance Commissioners (NAIC).
You should feel at home with your insurance company. That includes being informed, getting updated during the claims process, and being treated fairly during a claim settlement.
We checked different consumer review websites such as the National Association of Insurance Commissioners (NAIC) to find out how well companies serve existing customers.
It’s a good sign when organizations answer customer reviews online; it shows they value their clients’ feedback and overall satisfaction.
You can’t always take individual complaints at face value, but customer reviews can help you identify complaint patterns before you decide to commit to a policy or company.
How to Choose the Best Insurance Company
As you already know, there’s more to finding the best homeowners insurance than finding the cheapest premiums.
You might save $100 a year on premiums but then lose tens of thousands of dollars if your coverage excluded the very peril that just damaged your home.
“There are certain policies that just have very strange exclusions,” said Font, the insurance attorney we interviewed. “It’s important to ask for an itemized policy statement so you know how that exclusion may affect you and if you should invest in additional coverage.”
It’s also essential to comparison shop. Insurance companies price risk differently and don’t necessarily offer the same discounts across the board — you could get a better rate by switching carriers.
Yes, comparing insurers and policy options can be time-consuming, but it can pay off big in the long run, especially after you’ve suffered extensive property damage.
While there’s more to the decision, you can start comparison shopping by understanding the different types of homeowners insurance options and what they cover.
Types of Home Insurance Policies
You’ll see terms like “HO-2” or “HO-3” thrown around when shopping for home insurance.
These terms refer to the different forms of home insurance policies available today. These brief descriptions can help you know which kind of coverage to buy:
Spoiler-alert: Most homeowners will get HO-3 coverage.
This most basic insurance protects your property against named perils. If the peril isn’t named in your policy, your policy won’t cover it.
Typically, these plans protect you against damage caused by:
- fire or smoke
- vehicles colliding with your home
- aircraft crashing onto your property
HO-2 coverage is still a named-peril policy, but it names more perils, protecting your property from a broader array of problems.
In addition to the HO-1 named perils, HO-2 typically adds damage from:
- the weight of wintry precipitation
- falling objects
- electrical surges
- water damage from an accidental overflow
- some kinds of spontaneous accidental materials destruction
Most homeowners have HO-3 coverage which offers an open-peril plan. This means your coverage would protect you against all perils unless your policy’s language specifically excludes the peril.
Earthquakes and floods will commonly be exclusions. Before signing policy documents, make sure you’ve read and understood your policy’s exclusions.
This is insurance-speak for a renter’s insurance policy. Renter’s policies protect personal belongings and may add in some coverage for additional living expenses and liability. They do not cover the property itself.
An HO-5 form policy offers an open-peril approach like an HO-3 form. But an HO-5 tends to be even more comprehensive and also more expensive.
This coverage, designed specifically for condos, stresses personal belongings and liability but limits dwelling coverage since condo owners normally don’t hold full responsibility for maintaining their structures.
This coverage behaves like an HO-3 form but has specific adjustments for mobile home owners.
Historic homes whose value lies partly in their unique and hard-to-replicate charm can benefit from this form which resembles an HO-3 but with adjustments to better serve owners of older homes.
Get a Replacement Cost Estimate for Your Home
Do you want Actual Cash Value (ACV) or Replacement Cost Value (RCV) coverage?
The answer could make a huge difference if you had to file a claim.
- Actual Cash Value: Your insurance provider will pay your claims after subtracting an amount based on the age and condition of your home or personal property (depreciation). Your payout will not exceed the market value of your home.
- Replacement Cost: Your insurer will pay the repair or replacement cost of your home or property — without subtracting depreciation costs — using the same kind and quality of materials. Even if repairs exceed the worth of your home, you can claim enough cash to complete them.
You can save on premiums with actual cash value coverage but the payouts on claims may not replace all your lost items or repair all damages sustained.
Replacement cost coverage costs more up front but the payouts will be higher as well, allowing you to cover most if not all expenses for lost or damaged items.
With either style of coverage, knowing the replacement cost of your home and its contents can help you decide how much coverage to buy.
To estimate your replacement costs, do the math yourself, use an online calculator, or hire a professional appraiser.
Take Inventory of Your Belongings
Guessing how much insurance you need can be risky. Instead, take an inventory of your belongings and have a ballpark figure of how much insurance you need as you compare policies.
The Allstate app’s Digital Locker feature allows you to take a quick inventory of your household items. From there, you can estimate each item’s value, so you know how much coverage to buy.
Filing a claim will be much easier when you have an inventory.
Decide How Much Insurance You Need
A quote for standard home insurance is just that: the price you’d pay for a standard policy.
There’s a good chance you’ll need to boost your coverage depending on your home’s individual needs. You can purchase optional add-on insurance, also known as endorsements or riders, to help cover needs specific to your situation.
For example, if you keep expensive items like jewelry, artwork, photography equipment, or antiques in your home, you might need coverage beyond a standard policy’s maximum.
Other common endorsements include coverage against sewer backups, home-based business coverage, and inflation riders that gradually boost the coverage limit over time.
If you’re having trouble estimating your insurance needs an agent could help you find the right level of coverage and the best add-ons.
Consider Additional Coverage for Weather-Related Catastrophes
Your local area can tell you a lot about your insurance needs. Most standard policies cover losses from hail damage and wildfires — but fixing damage from flooding and earthquakes will need extra coverage.
If you live in an earthquake- or flood-prone area, extra coverage for these disasters could be a game-changer for you.
“Anything could go wrong when you least expect it,” said José Gandia, a Puerto Rico-based independent insurance broker with over 20 years of experience.
“It doesn’t matter if you own your house or if you’re still financing it. It’s always a good idea to consider additional insurance to cover a natural disaster or events out of human control [commonly known in the insurance industry as ‘acts of god’].
“In Puerto Rico, many homeowners had paid off their properties and thought that since they sustained a category 5 hurricane, they were in the clear. They didn’t, however, anticipate the devastating damage an earthquake could have.”
Flood insurance is also good to consider, even if you don’t live in a flood plain. According to the Federal Emergency Management Agency (FEMA), over 20 percent of flood claims come from areas not deemed high risk.
Flood insurance works differently from most other home insurance policies: It’s purchased separately through the government’s National Flood Insurance Program. You could still buy it through a broker.
Identify Potential Risks and Take Steps to Reduce Them
Most insurance companies offer discounts to homeowners who take steps to reduce the risk of property damage or loss. Something as simple as installing a home security system or smoke detectors can qualify you for a discount. Evaluate potential risks in your home and neighborhood and take steps to reduce them.
And let your insurance company know about upgrades such as a new roof or new electrical wires. You’ll likely qualify for a discount when you do.
Shop for Quotes
When you know what kind and how much coverage you need, you can shop around for quotes confidently and know you’re making apples-to-apples comparisons.
There are several ways you could go about this.
- The Direct Approach: You can check with each company directly. Though time consuming, this is useful because you might be better able to customize your quote.
- Quicker Comparing: You can also use an insurance marketplace to easily compare multiple policies at once. But the marketplace will show quotes for standard home insurance policies without the additional options you may need for full protection.
- Calling in Help: Another option is to make an appointment with an insurance broker. This might seem more expensive because of the broker’s commission, but the broker may find you better rates. Brokers can also help you figure out exactly how much insurance you need so you can buy just the right amount — which is an often-overlooked avenue for savings.
Choose a Home Insurance Policy Provider
Now it’s time to make the decision. You’ve already compared quotes for your specific needs and filtered out companies with inadequate coverage.
So now you have earned the freedom to choose the cheapest option if you want. However, if other aspects are important to you, make sure to take these into account.
For example, if you’d rather work with a local company or if you value customer service above all else, you may be willing to pay a little more for these features.
Font also says not to rely solely on the information provided by insurance agents as their recommendations could be self-serving.
“They will only tell you what they think will sell you,” said Font. “You should ask for the policy or copy of a standard policy they would issue for your property. They should be able to provide that, and if they don’t – then what are they hiding, right?”
Choose Your Deductible
One of the last decisions you’ll make can have the biggest effect on your premiums and your ability to file a claim: Where should you set your deductible?
Before your insurance company would kick in to repair the damage or replace something, you’d have to pay your part — your deductible.
For example, if a fallen tree does $10,000 worth of damage to your house and your deductible is $500, you’ll need to pay that $500 before your insurance pays the remaining $9,500.
Higher deductibles lower premiums. We advise choosing the highest deductible you could afford. This will save you money on your premium and keep you from being stuck in a difficult financial situation if you needed to file a claim.
And try to keep that deductible tucked away in a savings account you don’t use for everyday expenses. That way, you’ll be less tempted to spend it, it’ll earn interest, and you’ll have the money if you need it.
Review Your Home Insurance Policy Annually
We also recommend looking at your home insurance policy at least once a year to make sure you’re still fully covered. Your insurance needs might change over time as your circumstances change and evolve.
For example, if you’ve made substantial changes such as remodeling the kitchen or a bathroom, check with your insurer to make sure your coverage still fits your home.
Similarly, if you’ve recently taken up an expensive new hobby such as woodworking or photography, make sure your policy covers the new equipment in your home.
Shopping for home insurance doesn’t have to be daunting. A little homework ahead of time — along with learning how to reduce risks and having a clear idea of the amount of coverage you’ll need — will help you choose the insurance company and policy that best fits your needs.