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Published: Sep 06, 2022 35 min read
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All Policies Include Dwelling Protection, Personal Property and Liability Coverage
Best Home Insurance Company for Claim-Free HomeownersMultiple Ways to BundleOnline Marketplace that Connects with Multiple InsurersBest Home Insurance Company for Online Service
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Company Highlight

Zero complaints with the National Association Of Insurance Commissioners (NAIC)

One claim every five years won’t risk your discounts or raise your premiums

A wide range of available discounts

By entering basic information, Policygenius can offer various options for a homeowners policy

Flat fee to cover its own costs makes for a quick claims process

J.D. Power Property Claims Satisfaction Score

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#10 of 17 (870 out of a possible 1,000 points)

#6 of 17 (876 out of a possible 1,000 points)

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A.M. Best Rating

A+

A+

A

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Discounts

Paperless, inventory, connected home, new home, multi-policy, and higher deductible discount

Multi-Policy, Responsible Payment, Claims-Free, Welcome and Loyalty, Homebuyer, Protective Device, Early Signing

Homeowners, military service members, students, hybrid or electric car owners, insuring multiple vehicles, among others

Policy bundling, paid in full, claims-free, military, retiree, no-mortgage discounts, among others

Homebuyer, 10% New Customer

All Policies Include Dwelling Protection, Personal Property and Liability Coverage
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Company Highlight

Zero complaints with the National Association Of Insurance Commissioners (NAIC)

J.D. Power Property Claims Satisfaction Score

N/A

A.M. Best Rating

A+

Discounts

Paperless, inventory, connected home, new home, multi-policy, and higher deductible discount

Best Home Insurance Company for Claim-Free Homeowners
Allstate
Our Partner
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Company Highlight

One claim every five years won’t risk your discounts or raise your premiums

J.D. Power Property Claims Satisfaction Score

#10 of 17 (870 out of a possible 1,000 points)

A.M. Best Rating

A+

Discounts

Multi-Policy, Responsible Payment, Claims-Free, Welcome and Loyalty, Homebuyer, Protective Device, Early Signing

Multiple Ways to Bundle
Liberty Mutual
Our Partner
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Company Highlight

A wide range of available discounts

J.D. Power Property Claims Satisfaction Score

#6 of 17 (876 out of a possible 1,000 points)

A.M. Best Rating

A

Discounts

Homeowners, military service members, students, hybrid or electric car owners, insuring multiple vehicles, among others

Online Marketplace that Connects with Multiple Insurers
Policygenius
See an Estimate
Company Highlight

By entering basic information, Policygenius can offer various options for a homeowners policy

J.D. Power Property Claims Satisfaction Score

N/A

A.M. Best Rating

N/A

Discounts

Policy bundling, paid in full, claims-free, military, retiree, no-mortgage discounts, among others

Best Home Insurance Company for Online Service
Lemonade
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Company Highlight

Flat fee to cover its own costs makes for a quick claims process

J.D. Power Property Claims Satisfaction Score

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Discounts

Homebuyer, 10% New Customer

Homeowners insurance pays to repair or rebuild your home and replace its contents if they’re damaged by specific perils like fire, theft or a weather event such as wind or lightning.

If you’re not familiar with home insurance coverage and its policies, you might end up paying more than you should for inadequate coverage. To help you find a homeowners insurance policy that works for you, here are the seven best home insurance companies of 2022.

Our Top Picks for the Best Homeowners Insurance

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Pros
  • Unusually fast quotes and claims payments
  • Unused claims money is paid to a non-profit of your choice
  • Flat fee for administration, in addition to low monthly premiums
  • Demotech Financial Stability Rating: A
Cons
  • Not available in all 50 states
  • Financial strength hasn't been rated by A.M. Best
  • Auto insurance only available in three states, which limits bundling options

Why we chose Lemonade: Lemonade’s streamlined online services and use of AI make the process of getting quotes and filing claims easier and faster.

Lemonade Insurance is an online-only insurance company that uses artificial intelligence to provide notably fast home insurance quotes and claim payments. The company can provide a quote in a few minutes — you simply fill out a form on its website and choose the coverage amount you want.

It’s also just as easy to file claims: you just press the claim button in the app and proceed to fill out any necessary information. The use of AI also makes this claims process unusually quick, with many reimbursements paid in a matter of minutes, the company says.

Lemonade also has unique and appealing approaches to paying for its operations and using company profits. Its operations are funded, at least in part, through a flat fee that’s added to the policy’s premium. Then, through its Lemonade Giveback program, it will donate up to 40% of premiums that haven’t been used to pay out claims to a non-profit organization of your choice.

Lemonade also offers a Standard selection of coverage options, including:

  • Dwelling coverage
  • Other structures coverage
  • Personal property coverage
  • Personal liability
  • Medical payments
  • Loss of use

Although Lemonade says it plans to expand its operations to more states and other countries, as of right now, Lemonade is only available in 24 states. In addition to that, not all of its policies are available in those states either — auto insurance, for example, is only available in three states. This lack of availability could potentially limit your bundling options depending on where you live.

Read full review>>

Pros
  • Obtain an online quote in 60 seconds and purchase in as little as 5 minutes
  • Ample coverage for electronics and office supplies
  • Get discounts for using Hippo's free Smart Home System
  • Home-Care Expert program offers referrals to contractors and other providers
Cons
  • Discounts are available for homes with access to digital and smart systems
  • Coverage is not available nationwide

Why we chose Hippo: Hippo’s use of technology both for customer service and improved home security makes them a top choice for tech-savvy homeowners.

Hippo allows customers to complete the quote process entirely online and get a quote in as fast as a minute, and receive a policy in as little as five minutes, the company claims.

Hippo also provides a smart home discount if you agree to install and use a free smart home monitoring system. There are several levels of kit, with escalating arrays of equipment.

The company claims customers save an average of $64/year if they install the plain self-monitoring kit — which includes smoke, CO2 and water-leak detectors — and $91/year when opting for the pro monitoring kit, which adds 24/7 monitoring and emergency dispatch services.

Hippo’s standard policy includes up to $10,000 in coverage for computers and home office equipment, much higher than most policies include for electronics. If you have a home business or a remote working job, this is certainly something to consider.

It also offers a HomeCare Expert program that provides professional service recommendations, via phone, to policyholders who need repairs or maintenance.

In addition to standard home insurance coverage, Hippo can cover:

  • Computers and home office equipment
  • Appliances and electronics
  • Smart home upgrades
  • House cleaners and sitters
  • Water backup
  • Service line protection
  • Enhanced rebuilding
  • Full replacement costs
  • Costs for local ordinance changes

Read full review>>

Pros
  • Guaranteed Replacement Cost coverage standard with all policies
  • Many add-ons include liability coverage, home-sharing coverage, identity recovery and service line protection
  • J.D. Power Ranking: 3rd out of 21
  • A.M. Best Rating: A+
Cons
  • Only available in 12 states
  • Not as many discounts as competitors

Why we chose Erie: Erie’s standard policy includes guaranteed replacement cost and an array of add-on’s that usually cost extra — all valuable additions to an already solid insurance package.

Erie Insurance is one of the country’s top companies when it comes to customer service and claims satisfaction, consistently ranking in the top five in J.D. Power Rankings Customer Satisfaction and Claim Satisfaction studies since 2018.

The company is also among a handful of homeowners insurance companies that include Guaranteed Replacement Cost coverage as part of its standard coverage. This allows homeowners to rebuild their home the way it was before the incident, rather than receiving a depreciated amount due to the home’s age.

Its policy includes roof damage coverage as well, although full replacement does cost extra.

Although it comes up a little short discount-wise when compared to competitors, Erie does offer a 16% to 25% bundling discount and additional discounts if you install automatic sprinklers, smoke detectors, and burglar alarms.

The company is among the few insurers — along with Allstate and USAA — to offer, at additional cost, home-sharing coverage as an alternative to buying such insurance through AirBnB or Vrbo. As a rule, damage from paying guests is not covered under standard homeowners insurance.

Its biggest downside is its lack of availability. Erie only operates in 12 states, making it one of the most limited companies in our list.

Erie’s base policy also covers these other items, which cost extra with many other companies:

  • Valuables and hard-to-replace items
  • Gift card and gift certificates
  • Animals, birds, and fish
  • Cash and precious metals

You can also add the following coverage to any Erie policy:

  • Water backup and sump overflow
  • Personal liability coverage
  • Identity recovery services
  • Service line protection

Read full review>>

Pros
  • Available in all states and Washington, D.C.
  • JD Power Ranking: 4th out of 21
  • Partnered with Wildfire Defense Systems to provide free fire prevention and risk management
  • Big variety of coverage types, great for bundling discounts
Cons
  • Fewer discounts than other large insurers
  • Only accessible through exclusive State Farm agents

Why we chose State Farm: State Farm offers a wide variety of policies in all 50 states and is the highest ranked nationwide insurer in J.D. Power’s consumer satisfaction survey.

State Farm is the largest home insurance company in the United States. Its homeowners insurance policies are available in all 50 states and Washington, D.C. The company offers all sorts of policies, from life to car to condo.

This gives customers the chance to bundle in a variety of ways and not only get discounts, but get a more streamlined experience overall.

Keep in mind, however, that although State Farm offers a wide variety of policies, only car, condo, life and renters can be bundled. Despite this limitation, the savings it does provide can be substantial. State Farm claims the yearly savings could go up to $1,127 when combining home and auto, for example.

The company ranks highly in customer service, according to J.D. Power Rankings — in fact, it’s the highest-ranking nationwide company, currently at 4th place in the Overall Customer Satisfaction Study.

However, unlike other large insurers in the country, State Farm offers few discounts. These include the traditional multi-policy discount and discounts if you have security systems such as fire and smoke alarms. (Some safety measures might or might not qualify depending on the state, so be sure to check with an agent.) There’s also a discount for using high-quality roofing protection.

Another drawback to State Farm is that it only works through exclusive agents. However, it does have an extensive network of agents — close to 19,000 by some estimates — that cover every state.

Pros
  • Offers database listing vetted and licensed contractors
  • Discounts for claims-free customers
  • J.D. Power Ranking: 1st out of 21
  • A.M. Best Rating: A+
Cons
  • Not available in Hawaii

Why we chose Amica Mutual: Amica Mutual’s customer service is, arguably, the best out there, and its comprehensive contractor database can streamline the process of finding the help you need.

Amica Mutual stands out for customer service on claims, having topped the J.D. Power Property Claims Satisfaction Study for nine consecutive years, as well as the Overall Customer Satisfaction survey.

Another standout aspect to the company is its Contractor Connection database, which lists thousands of vetted, licensed and insured contractors and guarantees their work with a five-year warranty.

Like many insurers, Amica also offers loyalty discounts, in its case to customers who have been with the company for at least two years. It also offers breaks to those who are claim-free for at least three years.

Unfortunately, Amica Mutual is not currently offering homeowners insurance in Alaska or Hawaii, but it is available in every other state.

For customers who require additional coverage, Amica offers:

  • Valuable items coverage
  • Catastrophic coverages
  • Identity fraud expense coverage
  • Home business coverage

Read full review>>

Pros
  • 10% bundling discount when paired with car insurance policy
  • Home Sharing coverage available
  • A.M. Best Rating: A++
Cons
  • Only available to military personnel and their families
  • Home Sharing is not available in all 50 states

Why we chose USAA: USAA has a great combination of low premiums and wide coverage for military members, along with outstanding trustworthiness and financial stability.

USAA is a highly rated insurance provider — for both financial stability and customer service (although its limited availability means it is not included in JD Power customer satisfaction rankings). It offers many different coverage options for military members and their families (including the children of veterans and those who are serving).

USAA is also among a handful of homeowners insurance companies that includes as standard Guaranteed Replacement Cost coverage, which allows homeowners to rebuild their home the way it was before an incident, rather than receiving a depreciated amount due to the home’s age.

The company is also known for its low premiums. If you qualify for membership in USAA, it would be hard to find better home insurance rates and coverage for property damage.

The company is one of the few — along with Erie and Allstate — to offer, at additional cost, home-sharing coverage as an alternative to buying such insurance through AirBnB or Vrbo. As a rule, damage from paying guests is not covered under a standard homeowners insurance policy.

Read full review>>

Pros
  • Coverage for homes up to $100 million
  • Robust cybersecurity coverage
  • Coverage for properties outside the United States
  • Lower premium average than high-end competitors
Cons
  • Low customer service ratings
  • Customers have to buy more than one policy with the company
  • No homeowners insurance coverage in California

Why we chose AIG: AIG provides comprehensive coverage for high-value properties worth up to $100 million.

AIG is known as a luxury insurer that provides high net-worth individuals with comprehensive coverage, from dwelling to cybersecurity.

It offers guaranteed replacement cost (without any limits, according to the company) for homes valued from $750,000 all the way up to $100 million on an “all-risk” basis — meaning its policy covers all perils except the few specifically excluded. It also offers the option of ultra-high deductibles (up to $100,000) so you can lower your premium and pay more out of pocket.

You must have one of the company’s other policies to get homeowners insurance with AIG, but the company has a wide array of policies aimed at high net-worth customers to choose from — including collection insurance, yacht insurance, auto insurance and even private aircraft insurance.

You can also find services that will help you prevent accidents or take care of them quicker. The insurer provides background check services for domestic staff, private firefighting units, cybersecurity measures and more.

Since January 31st of this year, however, AIG has stopped providing home insurance coverage in California due to the high risk of wildfires and the state’s regular seismic activity. Other insurance policies will still be in effect, though.

In addition to standard coverage, AIG offers services such as:

  • Kidnap, ransom and extortion coverage
  • Landscaping coverage
  • Crisis management and reputation restoration
  • Multinational property coverage
  • Business property coverage

Read full review>>

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Other homeowners insurance companies we considered

As we analyzed home insurance companies, we focused on financial stability and strong customer satisfaction ratings, in addition to the variety of coverage options each company offered.

The insurance providers we selected excelled in all of these categories, but the following carriers fell a bit short when it came to most homeowners’ needs.

However, read on to see if one of these companies might fit your specific needs.

Allstate

Allstate provides discounts to homeowners who take good care of their property, pay on time and are claim-free. There are also discounts for loyalty, setting up AutoPay and renewing before your policy expires. It didn’t make our list because it fell slightly short in customer satisfaction and overall features when compared to competitors.

Pros
  • HostAdvantage add-on available for home-sharing or renting
  • A.M. Best Rating: A+
  • Discounts for paying on time
Cons
  • JD Power Ranking: 10th out of 21
  • HostAdvantage feature is not available in all 50 states

Read full review>>

Nationwide

Covering 46 states and Washington D.C., Nationwide is closer to its name than many of its competitors. This, along with a wide range of coverage options and discounts, make it a good candidate. It fell a hair short of our rankings due to a below average score on the most recent customer satisfaction J.D. Power Rankings.

Pros
  • Notion smart kit helps detect water leaks and qualifies users for additional discounts
  • Valuables Plus and Brand New Belongings add-ons help better protect your possessions
  • Basic policy might cover new city building codes after a disaster
Cons
  • 14th out of 21 in the JD Power Ranking Overall Customer Satisfaction Study

American Family

American Family offers comprehensive coverage and discounts, and its customer satisfaction ratings went up significantly in 2021. However, its limited availability (only 19 states) kept it out of our main list.

Pros
  • Lower than average premiums
  • Uncommon standard coverage such as sewer backup damage
  • Generous discounts for bundling and for new and renovated homes
  • Mobile app lets you make payments, monitor claim status and more
Cons
  • Only available in 19 states

Country Financial

Honoring its name, Country Financial is a great option for customers who live in rural areas and, specifically, farmers. Unfortunately, there isn’t much publicly available information on its property claim satisfaction rates, and it’s only available in 19 states.

Pros
  • Great A+ AM Best rating
  • Farm coverage for hay, grain, livestock, machinery accidents and more
  • Various security and renovation-related discounts
Cons
  • Only available in 19 states

Liberty Mutual

Over a century old, Liberty Mutual offers one of the best apps out there and multiple discounts. However, a high number of complaints with the National Association of Insurance Commissioners (NAIC) kept them out of our main list.

Pros
  • Wide array of discounts for online purchases, new homes and more
  • Comprehensive mobile app
  • Customizable policies and add-on options
Cons
  • High number of complaints with the NAIC

Travelers Group

Travelers Group rewards you with discounts for a wide variety of maintenance and security measures — from having a sprinkler system to installing security cameras. However, its low ranking in the J.D. Power Satisfaction study and higher premiums kept it out of our top picks.

Pros
  • Add-ons include coverage for identity fraud, green home and water backup
  • Discounts for homeowners with security systems
Cons
  • Higher prices than competitors for policy limits above $75,000
  • 19th out of 21 in the JD Power Ranking Overall Customer Satisfaction Study

Chubb

Chubb’s coverage for high-net-worth customers is top notch, and includes a long list of add-ons and policies you can pair up with your home coverage. However, its high price and low ranking in consumer satisfaction studies eliminated it from our list.

Pros
  • Masterpiece homeowners policy covers high-value (worth more than $1M) properties
  • Coverage for traumatic experiences such as child abduction and home invasions
  • Excellent A++ AM Best Rating
Cons
  • More expensive than average, focuses more on high-end customers
  • Only sells through local agents
  • 18th out of 21 in the JD Power Ranking Overall Customer Satisfaction Study

Progressive

Progressive is one of the country’s largest insurance companies and, as such, might be one of the first names that come to mind. However, it doesn’t underwrite its own home insurance policies — instead, it uses an independent network of companies to underwrite the policies.

Pros
  • HomeQuote Explorer® tool allows you to compare quotes by many companies
  • Progressive's network of insurers provides a certain level of flexibility when choosing a policy
  • Wide array of discounts include bundling, going paperless and insuring newly constructed homes
Cons
  • Progressive itself only insures some policies, so those from third parties can vary significantly

Homeowners Insurance Guide

While every homeowners insurance policy is unique, there are several factors that they all have in common. These are important to understand when you’re trying to find the right policy.

Read on to learn more about how homeowners insurance works and how to choose the coverage you really need.

What is homeowners insurance?

Homeowners insurance coverage is a type of property insurance that provides financial compensation if your home is damaged by certain natural disasters, theft and/or accidents. This type of insurance does not cover flooding or earthquakes, which require a different type of coverage.

Additionally, it’s important to keep in mind that home insurance is often required by lenders when you’re financing a new home.

How to choose the best home insurance

There’s a few factors to consider when you’re trying to choose the best home insurance. You’ll have to consider price, your living situation, its specific policy offerings and more. Here are some steps to take before making your decision:

  • Learn about coverage types, policies and the add-ons each company has available so you can find the one that fits your specific situation.
  • Find the top home insurance companies that offer their services in your area.
  • Consider your needs and concerns when assessing each company’s products. Think about your area and its geographical risks, your personal hobbies, pets and more.
  • Talk to an independent home insurance agent who can help you find the right combination of policies for your lifestyle and home. An agent can also help compare quotes objectively, as they have access to all the different companies’ pricing methods and history.

Consider bundling your auto, life and home insurance policies

One of the most common discounts among insurance companies is the multi-policy discount. In some cases, this could save you over $1,000 a year. Most companies let you bundle both home and auto, and many include life insurance as an option for bundling too.

This not only saves you money, but can streamline your renewal process and allow you to keep tabs on all policies more easily.

However, while many companies offer a lot of different policies, such as boat, pet, even livestock, not all policies will qualify for a bundling discount.

Here are the insurers in our list that offer at least home and auto:

  • Lemonade
  • Hippo (although it doesn’t offer auto insurance itself, but offers a discount if you buy insurance through one of their partners companies)
  • Erie
  • State Farm
  • Amica Mutual
  • USAA
  • Allstate
  • Nationwide
  • American Family
  • Country FInancial
  • Liberty Mutual
  • Travelers Group
  • Progressive

What does homeowners insurance cover?

There are several levels of homeowners insurance coverage and policies. Which one is right for you will depend on the level of coverage you need.

Read our list below for the different types of coverage available to you.

H01 The most basic, bare-bones policy. It only covers damage inflicted by these 10 perils: Fire, lighting, hail, windstorms, explosions, civil unrest, aircraft damage, vehicle damage, smoke, vandalism, theft, volcano eruption
H02 A step up in coverage from H01. It covers the ten basic perils plus six more which include: Falling objects, snow, water discharge (not flooding), sudden cracking, bulging or burning of a built-in appliance, accidental damage from electrical currents and freezing
H03 The most popular policy. It covers all perils except for floods and earthquakes. If you’re unsure about whether you need flood coverage in addition to your homeowners policy, take a look at our guide to flood insurance.
H04 This is renter’s insurance, which of course doesn’t apply to homeowners. However, if you’re looking for this type of insurance, make sure to check out our reviews on the best renter’s insurance companies.
H05 The highest level of coverage. It covers most perils, the structure, and your personal belongings at replacement cost regardless of which included peril caused the damage.
H06 This covers condos. While condo structures and common areas are generally covered by homeowners’ associations, with an H06 you can cover your belongings and the inside of your home.
H07 This coverage is for mobile or manufactured homes, meaning homes built elsewhere and moved around or brought into a land plot after manufacture. It’s not to be confused with RV insurance, which is a type of automobile insurance. (If you have an RV, make sure to check out the best RV insurance companies).
H08 The most limited form of coverage, but often the only one available for low-value, older homes. It’s not available in all states and it only offers actual cash value reimbursement (which takes into account depreciation).

What is Excluded from Homeowners Insurance?

Home insurance policies almost never include coverage for the perils listed below. These require additional and different policies.

  • Earthquakes, landslides and sinkholes
  • Flooding and sewer overflows
  • Power failure
  • Neglect
  • War
  • Nuclear hazard
  • Intentional loss caused by you
  • Government actions
  • Loss of property caused by bad zoning, faulty construction and lack of maintenance.

High-risk flood areas

If your area is deemed high-risk by the Federal Emergency Management Agency (FEMA), you’ll be required to purchase flood insurance for your property as an add-on to your policy.

The National Flood Insurance Program (NFIP) provides flood insurance for property owners, renters, and businesses and is available for anyone living in one of the 23,000 participating NFIP communities. For more information about what’s covered and how to purchase flood insurance, visit FloodSmart.gov.

Hail and wind

Depending on where you live, there may be additional weather-related exclusions. For example, homeowners’ insurance policies issued for coastal homes in Texas don’t cover wind or hail damage.

Also, home insurance policies in the Eastern coastal states have what’s called hurricane and windstorm deductibles. Whether you live in Florida or New York, if your house is hit by a storm, the deductible you pay won’t be the fixed amount you agreed upon for the other perils. It will be a percentage based on the coverage you chose. This is mostly regulated by state laws, so to read more about your specific state, you can start at the Insurance Information Institute.

Earthquakes

Earthquake damage is normally not covered by any home insurance policy, and is only added through a rider or by buying a completely different policy. In a place like California — probably the most prone to seismic activity in the United States — it’s important to add a rider or get a policy to cover in the case of a loss. Checking with the largest earthquake insurer in the state, the California Earthquake Authority, is a good start.

Power outages

Depending on your home insurance policy, some items — such as spoiled food or frozen pipes — may not be covered in the event of a short or prolonged power outage. However, it’s not as clearcut as floods or earthquakes, so make sure to check directly with your insurer beforehand to see what’s covered and what’s not.

In the meantime, protect your appliances with surge protectors and check if your refrigerator protection plan is still valid, which can cover the loss of food.

Wildfires

Most home insurance policies tend to cover damages caused by wildfires. However, in places with higher wildfire risk of wildfires, some companies stopped offering this type of coverage altogether or made adjustments involving this specific peril.

Check your locally available insurance companies to see if they still offer those types of policies in your location, or if wildfires can be covered by a rider you can add to your plan. You can also check with your state’s FAIR Plan, such as California’s, to get fire insurance in case companies don’t want to cover your home.

How are homeowners insurance claims paid?

In most cases, an adjuster will inspect the damage to your home and offer you a certain amount of money for repairs, based on the terms of your policy. The insurance company will then typically send an advance, before sending the final payment. In fact, you may get multiple checks as you make temporary payments, permanent repairs, and replace damaged belongings.

How to file a home insurance claim

File a police report

If your claim is the result of a criminal act, the first thing you’ll want to do is file a police report. This will provide you with evidence for the insurer (many insurers will want to see the police report before paying a claim) and can help you in the process of recovering stolen property.

Contact your insurer

Contact your insurer as quickly as possible and ask all the necessary questions. Whatever doubt you have, ask it, and provide your insurance provider with all the required information. Your insurance company will send a form for you to fill out; do that promptly.

Document everything

As a precaution, you should already have pictures of your home and a list of your most valuable possessions in case anything were to happen. When it does, take pictures of all the damage and missing items, and write them down for when an inspection takes place in order to avoid forgetting anything.

Keep the receipts

In case you need to take care of urgent repairs or find accommodations elsewhere, other than documenting the damage, keep the receipts so that your insurance provider can reimburse you later on, given the damage and additional living expenses are covered.

What is the 80% rule in homeowners insurance?

Most insurers abide by the 80% rule, which states that they will only reimburse you the full amount of damages if you buy coverage worth at least 80% of the property’s value. If you buy coverage for less than 80% of your home’s value, the insurer will pay you only a percentage of the damages incurred.

Let’s say your home is valued at $500,000 and you buy coverage for $400,000 (80% of your home’s value). If you suffer $100,000 in covered damages, your insurer will likely pay for the full amount, minus your deductible.

If you bought coverage for $300,000, however, the insurer will not pay the full amount of damages. Instead, it will pay you the greater amount of the two following options:

  • The actual cash value of the building or part of the home that was destroyed, which includes depreciation, or
  • Based on the proportion of coverage you did buy compared to the coverage you should have bought.

So, in this example, it’ll divide the $300,000 coverage you did buy by the $400,000 you should have bought and pay a corresponding percentage of the damages. As a result, if you suffer a $100,000 loss, the insurer will end up reimbursing you 75% of that amount, minus the deductible you chose when you bought the policy.

It’s worth noting, however, that even a policy that covers 100% of your home’s value isn’t a guarantee that an insurer will pay the full amount needed to repair your home. If, for example, there’s a fire and the cost to demolish the structure is higher than what the policy covers, you’ll have to cover the difference.

Make sure to read your policy carefully and consult with an agent if you have questions about how much coverage to get.

Cash value vs. replacement cost

Coverage limits usually boil down to a decision between “actual cash value” or “replacement cost” coverages:

  • Actual cash value: calculates the value of your home minus depreciation, taking into account existing damage or wear. You’ll only receive a settlement for your home’s value at the time it was lost.
  • Replacement cost: reflects the amount needed to rebuild your home as close as possible to how it was before. Home replacement costs are almost always higher than actual cash value, making it the most expensive coverage option.

There isn’t a one-size-fits-all coverage choice or a straight answer for how much is homeowners insurance. It all depends on the homeowner, the dwelling, and the location, among other factors.

How much is homeowners insurance?

While the national average premium is around $100 a month (or $1,200 a year), it’s important to know that there isn’t a single established price for home insurance. Although these vary from company to company and policy to policy, here are some of the most common factors that can determine how much you pay for insurance.

Factors that impact your insurance premium

Coverage amount needed. How much coverage you choose to buy will obviously have the greatest impact on your monthly or yearly premium. This means the overall cap the insurer agrees to cover in the case of an included peril. You don’t need to cover the entire cost of your house, but you should aim to cover at least 80% of the value .

Location of your home. The location of your house determines the type of perils it could be exposed to and so this will greatly impact the rate an insurance company offers you. For example, a house in a storm-prone zone will be more expensive to insure than one that isn’t.

Style and age of the home. The overall build and condition of the house is taken into account in order to adjust the premium. If a house is fairly deteriorated or built with outdated materials, for example, its structure is at a higher risk, thus raising the price on coverage.

Square footage. No surprise here: the size of your home is used to calculate your premium. Larger homes will inevitably need more resources to fix or rebuild, and are also more prone to neglect in certain areas.

Credit score. Like many other payments, loans and services, credit score plays a role in calculating your premium when getting a homeowners insurance quote. Insurers use this as a way to measure your credibility in maintaining your house.

Home insurance discounts

When shopping for the best homeowners insurance, you should make it a point to ask about discounts on your insurance premium and save money on your policy.

Each company has options to help you reduce your insurance costs. The following are the most common home insurance discounts:

  • Automatic payment discount. Set up automatic payments from your bank account or credit card.
  • Paperless discount. Receive your statements electronically.
  • Advance payment discount. Pay the entire amount of your annual policy at once instead of on a monthly basis.
  • Claims-free discount. Your claims history can save you money if you don’t file a claim within a certain amount of time — usually three to five years.
  • Protective devices discount. Install a burglar alarm, surveillance system, sprinkler system, water shut-off system or smoke alarms to help prevent losses.

Additional Expenses to Keep in Mind

Depending on your living situation, standard insurance products might not be enough.

When you’re ready to choose a homeowners insurance policy, see what types of endorsements — also known as insurance riders or add-ons — each company offers. These will increase your premium, but it might be worth it if it means protecting valuable assets such as jewelry or collectibles.

With certain companies, you can also get protection for more specific issues such as water damage, cybersecurity threats and even kidnapping.

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Homeowners Insurance FAQ

How much is homeowners insurance?

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The average cost of homeowners insurance in the US is $1,200 per year, or $100 per month, for a single policy. However, homeowners' insurance rates vary substantially depending on your home's specific situation, condition, how much coverage you want, and where you live.

What does homeowners insurance cover?

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Most standard policies include four types of coverage: 1) dwelling coverage, which covers your home's structure; 2) personal property coverage; 3) liability protection; and 4) loss of use coverage, which covers excess living expenses in case you need to live outside of your home temporarily.

What is homeowners insurance?

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Homeowners insurance is a policy that will reimburse you for damages to your house, your personal belongings and, in some cases, your digital property, injuries to your guests and more.

Policyholders pay an agreed-upon amount either monthly or yearly and, if their dwelling were to suffer damage, the insurer will pay a certain amount to cover repairs or reimburse losses.

However, insurers will only pay for damages caused by a list of causes or perils outlined in your policy. If there is damage to your home caused by a covered peril, the insurer will generally either pay you the current cash value of what was lost (which takes into account depreciation) or pay for the entire cost of replacing your property, depending on the type of policy you chose.

How much homeowners insurance do I need?

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The amount of coverage will depend on the value of your home and the items you wish to cover, and whether you choose actual cash value coverage or full replacement cost. You should cover at least 80% of the value of the home, and to cover high-value items with additional endorsements or riders. Do remember that these types of policies do not cover flood or earthquake damage. If you live in an area that's prone to natural disasters — Florida and California, for example — you might want to look for additional coverage.

What is the best home insurance?

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The best home insurance will vary based on individual coverage needs and budget. A good rule of thumb is to look for a home insurance policy that is affordable, covers most perils, and is offered by a financially sound company with a good track record of customer satisfaction. Based on these and other factors, we determined that Lemonade, Erie Insurance, Allstate, Amica, USAA, Hippo and AIG are some of the best companies in the market.

How We Chose the Best Homeowners Insurance Companies:

To compile our list of the best homeowners insurance companies, we used a methodology based on the following factors:

  • Coverage.Looked through dozens of insurers and coverage options and narrowed our choices based on policy options, average premium, customer service, additional benefits and claims processing speed.
  • Satisfaction rating. We used J.D. Power’s 2021 U.S. Property Claims Satisfaction Study to gauge customer satisfaction with claim settlement, claim process, First Notice of Loss (FNOL), estimation and repair.
  • Customer complaints. We evaluated each underwriter’s homeowners insurance complaint ratio based on data from the National Association of Insurance Commissioners (NAIC).
  • Financial strength. We eliminated companies with A.M. Best financial strength ratings below an A.

Best Homeowners Insurance Companies of September 2022