Your homeowner’s insurance policy has a big job… to protect your biggest investment in a world prone to unpredictable perils like wind storms, wildfires, lightning strikes, and many other threats.
You want a plan that will rise to the challenge if something unexpected threatens your home’s value.
When all is calm, the same plan should stay in the background and not require any thought.
How you build your homeowners policy will help determine how it performs, but you’ll also want to partner with an insurance company you can trust.
What Factors Affect Homeowners Insurance Rates?
Home insurance costs will vary depending on several factors, such as:
- Where you live
- Your personal claims history
- How much coverage you choose
- The cost of rebuilding your home
- What building materials were used to build your home, such as wood, stone, stucco, and brick
- How close you are to a fire department
- How close you are to a water source
- The claims history in your area due to variables such as natural disasters and crime rates
- Your credit, if your state allows this as a pricing factor
Best Homeowner’s Insurance Companies in 2022
Whether you’re changing insurers or shopping for home insurance plans for the first time, knowing how home insurance works can lead you to the plan you need.
We’ll explore those details below. First, let’s look at some of the leading home insurance providers.
This list won’t include every reputable and solid insurance provider in the country, but all six carriers should provide a good place to start when shopping for coverage.
The Travelers Company has over 16 decades of service under its iconic umbrella. The company has a national presence along with great rates and a strong reputation.
A national presence matters with homeowners insurance because a regional company can get overwhelmed when a huge national disaster like a hurricane hits their area. A national company has more diversity and can more easily weather storms.
You may not find as many discounts with Travelers compared with other companies. Still, the carrier has competitive rates and superior ratings from independent rating agencies such as A.M. Best and Moody’s.
The Better Business Bureau also gives The Travelers Co. high marks for customer service.
Your ability to customize a homeowners insurance policy to meet your home’s specific needs can help you save money.
Liberty Mutual specializes in customizing policies which could explain why about 7 percent of the nation’s homeowners have Liberty Mutual insurance.
This size brings stability, which shows in Liberty Mutual’s excellent grades from the independent rating agencies.
The company does occasionally get knocked for its approach to customer service. The Better Business Bureau rates Liberty Mutual A-minus.
You can get policy discounts for staying claims-free, having multiple policies with Liberty Mutual, and keeping a higher deductible. Many homeowners prefer higher deductibles to save on premiums and to reduce the likelihood of filing an unnecessary claim.
Farmers Insurance specializes in property protection. The company ranks well with consumer groups and insurance rating experts.
The company has a large market share nationally, yet it maintains a low percentage of customer complaints. This is an impressive accomplishment, especially considering the company’s stable financial situation.
Ordinarily, we wouldn’t include a company that doesn’t underwrite its own policies, but Farmers seems to have established a seamless partnership with its underwriter, Zurich Insurance.
You can get discounts for at-home safety features, buying a new home, or going with new construction.
Amica Insurance would rank higher on this list if customer satisfaction were the only factor. The company excels at customer care.
Many of the company’s market growth over the past few decades seems to result from positive word-of-mouth reviews.
The company excels at providing coverage across the board. Still, customers can also find coverage for items such as furs, jewelry, and fine art, which can be hard to insure because of their hard-to-define value.
You can get discounts for enrolling in autopay, bundling policies, and improving the safety and security of your home.
Nationwide Insurance Co. is a recognized leader in the broader insurance market.
With Nationwide, you’ll find solid financial stability and a wide variety of customizable options for your coverage which can help save money on premiums.
From a customer service perspective, Nationwide could use some improvement, but it still rates A+ with the Better Business Bureau because it tends to seek resolutions to customer complaints.
Nationwide also offers scheduled personal property coverage, strengthening your policy’s ability to cover high-value items in your home.
You could call Erie Insurance Co. our dark horse candidate on this list. It has an excellent financial footing, which separates it from its competitors.
Erie’s property/casualty companies are rated A+ (Superior) by A.M. Best, a global credit rating agency with a unique focus on the insurance industry.
Unfortunately, it doesn’t offer the best options for discounts. But the company excels at customer service, which can be difficult for an insurance company.
We also like the company’s ability to stretch coverage options to include identity theft recovery, home business protection, and coverage for your underground utility lines.
Erie is more likely than most companies to help with flood damage.
Other Excellent Choices
The following companies also offer a strong financial foundation and excellent coverage options.
- All State
- American Family Insurance
- State Farm
Best Homeowners Insurance Aggregators
As the Internet grows more intertwined with our shopping habits, more and more home insurance shoppers are turning to aggregators to connect them with insurance policies.
Here are a couple of our favorites:
- QuoteWizard: If you have specific needs for your homeowner’s policy, QuoteWizard can help you narrow your search list. And you won’t have to include every detail of your life and property to use the service.
- SelectQuote: This service works much like QuoteWizard, except it focuses on finding cost savings for your coverage. SelectQuote helps you compare policy discounts and other features, making it easier to find lower premiums.
If you use one or another service to find insurance, remember that your policy will come from an insurance company and not the aggregator.
It’s up to you to ensure the insurance company you choose has a solid financial footing, making it more likely to be there when you need to file a claim, even if you go decades without needing a claim.
Building Your Coverage From the Ground Up
Your ability to save on premiums and your policy’s ability to protect your investment depends a lot on how you build your insurance plan.
Like car insurance, homeowners insurance includes several components:
- Dwelling Coverage: Your insurer will call your house a dwelling. This aspect of your coverage protects your home from perils such as storms, fires, and vandalism. The amount of dwelling coverage you buy can also help determine how many of the other coverage types you have.
- Additional Buildings Coverage: Your detached structures — garages, gazebos, and even smaller structures like mailboxes and fences — will be protected by this part of your homeowner’s policy. This coverage tends to max out as a percentage of your dwelling coverage.
- Personal property: Items you can remove from your home, such as electronics, collectibles, and even small appliances that aren’t built-in, get covered by your personal property coverage. If someone broke into your home and stole your personal property, you’d file a claim on this coverage.
- Liability: Like auto insurance, an injury caused by some aspect of your home can mean you’re liable for the injured person’s medical expenses and even lost wages. Your liability protection will cover your responsibility if something like this happens at your home.
- Additional Expenses: Your homeowner’s policy can provide alternative living expenses if a storm or fire makes your home uninhabitable. It can also include health insurance if you’d like to compensate someone after an injury on your property. (This differs from being ordered by a judge to pay, which is when liability coverage kicks in.) These coverages will be optional in many policies.
- Other coverage types: Depending on your circumstances, you can add flood insurance, earthquake insurance, water, sump overflow, and home systems breakdown coverage.
How you build each of these components can determine your policy’s ability to protect your home.
For example, if you have a large workshop full of expensive tools on your property, you may need to increase your coverage for additional buildings and personal property.
If you like to host dinner parties or if you have a swimming pool, you may want more robust liability coverage.
Your homeowner’s policy should match your home to save money on premiums and have enough coverage to protect your investment.
Deductibles and Caps Add to Your Cost
We tend to measure a homeowners policy’s cost by its premiums, which average about $1,200 a year. Your deductible and spending caps will also help determine your cost for coverage.
Many homeowner’s insurance companies on our list above will give you a discount for keeping a higher deductible.
Even if your insurer doesn’t state this discount, you can expect to save on annual costs with a higher deductible. Generally speaking, higher deductibles create lower premiums because higher deductibles mean paying more out of pocket to unlock your policy’s coverage.
If you have a $5,000 deductible, you’d need to spend $5,000 out of pocket to repair your home before your insurance policy would help pay.
Raising deductibles will usually lead to direct savings on premiums, but don’t overuse this tool. If your deductible is too high, you may not be able to use your coverage when you need it.
For instance, if you couldn’t come up with $5,000 to spend on repairs after a tree fell through your master bedroom, consider setting a more reasonable deductible and accepting the higher premiums.
Higher deductibles have another advantage some homeowners like: They make it less likely you’ll file a claim which can lead to a nice claims-free discount on future years’ policies.
Most policies will limit how much money they’ll spend on repairing or replacing your home. A policy with a lower spending cap can lead to savings on premiums.
But if your insurance policy isn’t big enough to replace the value you’ve lost, should you even have the policy, to begin with?
Yes, some protection is better than no protection, but with something as valuable as your home, being able to replace your investment entirely will be a must.
Fortunately, home insurance is a sound financial investment: Americans can leverage about $200,000 in protection if needed in exchange for paying about $1,200 a year on average.
That’s about $100 a month, less than many people pay for cable TV.
Determining How Much Coverage You Need
To estimate the coverage you need, take a home inventory which is a detailed account of your personal property inside and outside your home.
You’ll also need to calculate the cost of rebuilding your home after a disaster. Ask a real estate agent or other building industry professional for building costs in your area.
Also, determine if you need additional coverage for earthquakes, floods, or a high-risk item, like a swimming pool.
Some insurance companies may require a home inspection to confirm the condition of your home and ensure you have adequate coverage. The insurance company will send an inspector to your home if a home inspection is required.
Some inspections don’t require you to be present because an inspector only will focus on the exterior of your home, including the roof, and any potential hazards in your yard that could cause damage to your home in the case of a severe storm.
Other companies may require interior inspections focusing on the condition of your home’s electrical systems, ventilation, fireplace, plumbing, heating, and air conditioning systems.
Potential Home Insurance Discounts
Here are some common types of discounts you may be eligible to receive:
- New or renovated home discount if you have upgraded wiring and plumbing.
- Safety and security discounts if you have smoke alarms, sprinklers, burglar alarms, and deadbolts on exterior doors.
- Roof age discount if you have a newer roof.
- Disaster preparedness discount if you have storm shutters and shatterproof glass if you live in a hurricane-prone area.
- Multi-policy discount when you buy auto, RV, and motorcycle insurance from the same provider.
- Multi-home discount.
- Claim-free discount when you don’t have a recent history of insurance claims.
- Insurance payment discounts for going paperless and paying your premium in full.
- Employment, organization, and association discounts based on your occupation or if you belong to a union, professional organization, or alumni association.
Other Policy Details
Some specific details within your policy will help determine exactly how an insurance policy pays when you need it:
- Named vs. Unnamed Peril: A named-peril policy covers your home in the event of a peril specifically named in your policy. An unnamed peril policy covers you in the event of any peril unless the policy explicitly excludes it. You can save money with a named peril policy.
- Replacement Value vs. Cash Value: This distinction may seem minor until you have to file a claim. Getting a replacement value policy means your insurance could replace damaged, destroyed, or stolen property with new stuff. A cash value policy means your policy will reimburse you the value of your lost property. The cash value of your stuff is typically less than the cost of a new property. Someone with rare collectibles will want to consider replacement value coverage which costs more.
Getting these details right when you buy your coverage can save you a lot of heartache and frustration if you need to file a claim.
You should also know that most home insurance companies do not cover flood damage.
You’ll need a special flood insurance policy if you live in a flood zone.
Bottom Line: The Right Coverage Can Pay Off
Homeowners insurance can help protect your home’s value in the event of a storm, natural disaster, or act of vandalism or theft.
You can help your policy do its job by ensuring your coverage fits your home.
Having the right coverage amount, the right deductible, and the right policy details will pay off if you have to file a claim.
And, of course, partnering with a leader in the home insurance business, like the ones we’ve listed above, can increase your sense of security even more.
You may have to spend a few extra hours researching coverage and comparing, but when your home is on the line, it’ll be time well spent.