The top home insurance companies of the year – analyzed by our experts
Affordable policies, transparent coverage, instant payouts, and plenty of happy customers. Lemonade may be the best thing to happen to home insurance since the Geico gecko. And now you can save on your Lemonade home and auto policies by bundling.
Extensive HO-3 coverage that doesn’t stint on the extras you need to keep your property, possessions, and family safe. State Farm scores high in customer satisfaction with an extensive network of agents and rock-bottom bundles that could save you up to $468 yearly.
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Highly customizable home insurance plans for every household with solid basic protections and low monthly rates. Nationwide lets you build quotes online quickly and easily, and keeps your premiums low with big discounts for smart homes.
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Your home is your castle. But it’s also a massive investment, so it makes sense to protect it, whether your mortgage requires you to or not.
The way we look at it, you can have your cake and eat it, too. Home insurance may be required by your bank, but it’s also the smartest way to keep your property, belongings, and family safe in the event of damage, theft, or loss.
The key is signing up for a dependable homeowners policy that will get you the right amount of coverage at the lowest possible rate.
We scouted out the top homeowners insurance companies on the market, and we spent months testing them at every stage of the customer journey: from choosing coverage and getting quotes, to comparing rates and completing the claims-filing process.
At the end we awarded each home insurance company a SecureScore™. Our SecureScores are based on the six components of the home insurance experience our readers care about most:
|System||Lemonade||State Farm||Nationwide||Progressive||Liberty Mutual||AAA||Allstate||Geico||USAA||Travelers||Farmers|
|Ranking||1st||2nd||3rd||4th||5th View Plans||6th||7th||8th||9th||10th||11th|
|AM Best Rating||Not yet rated||A++||A+||A+||A||A||A+||A++||A++||A++||A|
|Availability in 50 States||No||No||No||No||Yes||No||Yes||Yes||Yes||No||No|
|Green Incentives||For auto insurance only||For auto insurance only||Yes||For auto insurance only||No||Yes||Yes||No||No||Yes||No|
|Read the Review||Lemonade Review||State Farm Review||Nationwide Review||Progressive Review||Liberty Mutual Review||AAA Review||AllState Review||Geico Review||USAA Review||Travelers Review||Farmers Review|
|Homeowners quotes reviewed||33+|
|Time spent testing each provider||40 hours+|
|Average home value||$300,000|
|Average home age||35 years|
|Average premium by month||$143.36|
|Average premium by year||$1,720.32|
Lemonade is going to be love at first sight for a lot of our readers, and not just because of their gorgeous website and five-minute online quotes. Lemonade pays settlements instantly via their mobile app. They’re upfront about their pricing and coverage. And they’ve got tons of very happy customers to back those claims up.
Lemonade has only been in the insurance business for six years, but this lightweight, mobile-first startup has got a lot of homeowners talking.
For starters, Lemonade cuts the jargon out of insurance. They explain their coverage in down-to-earth language anyone can understand and with zero fine print.
Second, getting a Lemonade quote is easy (courtesy of Lemonade’s AI bot, Maya). Even if you’ve got to pay extra for add-ons, you’re paying for coverage for your “bike” and “portable electronics,” not for “furs” and “jewelry.” So families in 2022 will feel like Lemonade is speaking to them and their needs.
Finally, Lemonade is affordable, with basic home insurance plans starting at $25 per month. (We personally didn’t find anything that low, but we found plans in the $90 price range. To see how we did it, check out our Lemonade insurance price guide.)
Our biggest gripe with Lemonade is that they only write home insurance in 22 states. But, given their massive growth over the past six years, we expect that will be changing soon as they expand into more states.
Spotlight on Lemonade: Lemonade is a Public Benefit Corporation. After they take their flat fee, which covers claims payouts, they give whatever’s leftover to charities and social causes. They call it Lemonade Giveback.
State Farm has been insuring homeowners for nearly a century from their headquarters in Bloomington, Illinois. Their HO-3 homeowners policies come with an extensive list of standard protections with head-spinning bundling opportunities.
State Farm gets nearly everything about homeowners insurance right. They’ve got affordable policies stacked with useful extras, near nationwide availability, top-ranked customer service, and some serious money-saving insurance bundles.
First off, State Farm doesn’t play any games with possessions coverage. If you ever end up with lost or damaged stuff, you’re covered for the full amount. The same goes for valuables coverage and weather damage. You’re protected right out the gate. No extra fees or deductibles. Check out the rest of State Farm’s free add-ons in our State Farm plans and rates guide.
State Farm also performed exceptionally well in overall customer satisfaction last year, ranking number four out of 20 top insurers. Having 19,000 flesh-and-blood State Farm agents explains some of that. Despite the push towards online everything these days, a lot of folks still want human help navigating their home insurance policies.
Of course, it’s not all roses with State Farm. Like many of the best homeowners insurance providers, they’ve struggled a bit with claims settlements since the pandemic hit. And the fact that you do need to finalize certain State Farm policies with an agent may not be for everyone, especially if you’re used to managing your household online.
But the fact is, while you may need a State Farm agent to combine your auto and homeowners insurance (we call that bundling), $468 in yearly savings will be enough of an incentive for most of us to pick up the phone. That’s the discount State Farm quoted us for a home and auto insurance bundle.
Spotlight on State Farm: According to the latest data from the National Association of Insurance Commissioners (NAIC), insuring a house in the $200,000-$299,000 range costs $1,114 per year on average. When you bundle your auto and home insurance with State Farm, you could be paying as little as $855.
Nationwide has staked out a niche in the homeowners market for their highly customizable insurance policies, with ironclad coverage they’ve still managed to make affordable. Nationwide is also at the forefront of the smart home movement, offering significant savings to homeowners with wired or wireless home security systems.
There are insurance providers with awesome quote builders but fairly limited policy customization, and there are providers stacked with options but pretty basic online tools. Nationwide is in a class by itself with a standout quote builder and plenty to customize. Simply put, you can spend a lot of time getting to know your Nationwide quote.
First and foremost on Nationwide’s options menu are a number of branded insurance products that officially fall into the extras camp. (Brand New Belongings® and Better Roof Replacement® are the standouts.) The first gives you replacement cost value (RCV) coverage for your things. The second gives you extra money to rebuild your roof if and when the time comes to replace it. The good news is that neither of these add-ons will drive your premium up much, making them great value for your money.
While plenty of companies have had trouble keeping customers happy in the claims satisfaction department lately, Nationwide is at the top of its game, ranking fifth nationwide. That’s no small feat, and possibly enough to make up for the lapses in overall customer satisfaction data analytics giant J.D. Powers reported last year.
Finally, even with all that additional coverage we packed into our Nationwide quote, $111 monthly for an HO-3 policy was one of the cheapest premiums we’ve seen this year. For more details on Nationwide’s rates, including its smart home program, check our complete guide to Nationwide’s costs and coverage.
Spotlight on Nationwide: Nationwide was a pioneer in car safety. As early as 1963, they were offering customers with auto policies who had been in accidents 50 percent in added medical benefits if they were wearing seatbelts at the time of their accidents.
Progressive has logged a bunch of industry firsts. They were one of the first insurance companies to go online (way back in 1995), and they were a pioneer in comparison shopping. Since then, Progressive has launched a number of affordable insurance products with a virtual coupon book of homeowners discounts to match.
By its own count, Progressive offers over 30 separate insurance products — in addition to homeowners insurance. But most of us still only know Progressive for its cheap, customer-friendly auto insurance plans, and for Flo, Progresssive’s bubbly, blue-eyed mascot. So it may be an eye-opener to learn that, yes, Progressive offers homeowners insurance, and, yes, it’s worth a serious look.
To start with, Progressive can find you some seriously affordable home insurance. And when I say “find,” I mean Progressive’s HomeQuote Explorer scans a database of 13 other top insurance providers to pull up the best quote for your budget and needs. So you will definitely find a competitive rate. We sure did. Read more about our experience with Progressive’s prices in our complete Progressive home insurance cost guide.
The other thing we found about Progressive is that if we wanted it, Progressive had it. So if you’re looking for a complete insurance package — a wireless home security system (which lowers your premium), ID theft protection, pet insurance, a term life plan, cheap auto coverage — you can get it all from Progressive.
Weirdly, that may be Progressive’s only weak spot. At times, it may feel like they offer too much, work with too many other companies, and have too many features to keep straight in your head. However, if you like a “more is better” approach and don’t mind working with a third-party provider, Progressive may be a good match.
Spotlight on Progressive: Progressive has made a name for itself by offering insurance discounts. But they also do auto and homeowners bundles. When you combine your car and home insurance with Progressive, you could save up to 4 percent off your premium.
Liberty Mutual scores big points in two areas that may mean a lot to many of you: You can file a claim by video, and you can get discounts for smart protective devices. But cutting out the rigamarole of onsite insurance reviews and rewarding us for safer homes isn’t all Liberty Mutual gets right. They’ve also got sturdy basic homeowners plans you can build out to cover just about any situation.
Liberty Mutual is one of the biggest, oldest, and most reliable home insurance providers on the market. But that doesn’t mean they’re stuck in their ways. On the contrary, Liberty Mutual has carved out a name for itself for remote video claims reviews and a handy app that lets you submit claims from your tablet or phone. The latter is a serious benefit for households who prefer swiping to phoning.
Liberty Mutual also has a smart home program for prospective customers who have already invested in smart home security or who are thinking about upping their household security game. When you enroll, you can save extra money on your premium.
Speaking of premiums, we’ve found rates cheaper than Liberty Mutual, to be sure. But, if you know anything about homeowners insurance, you know that pinning down a one-size-fits all rate is impossible, considering all the personal factors that affect premiums.
The good news is that if you’re smitten with this mobile-friendly homeowners legend, there are ways to lower your Liberty Mutual premium substantially by making a few key tweaks to your policy. Read our latest Liberty Mutual homeowners rates guide to find out just how to do that.
Spotlight on Liberty Mutual: Liberty Mutual’s standard possessions insurance protects your electronics from covered damages and theft, but it doesn’t protect them from everyday accidents like coffee spills or tripping over your power cord. If you want the equivalent of AppleCare for your household gadgets, you can get it with Liberty Mutual’s special computer and smartphone coverage.
Like Progressive, AAA is best known for its auto insurance, with 61 million members nationwide. If you happen to be an AAA member, there are two very good reasons for bundling in your home insurance: AAA HO-3 home policies are bargain-basement cheap, and you only pay for the coverage you need.
If you spend a lot of time tinkering under the hood of home insurance policies, it’s easy to get carried away with special features and the sheer number of ways you can tweak a quote. Sometimes you need to take a step back and ask yourself, “What do I really need out of my home insurance policy?”
AAA, the auto insurance giant, has an answer: a stripped-down homeowners plan that will save you big bucks, backed by great customer service and sterling fiscal strength.
It’s true, if you go with AAA you’re going to need to pay a little more for standard protections like coverage for your garage or temporary living expenses. But when your monthly bill is still cheaper than the national average (and most of the competition), who’s complaining?
Like plenty of our top home insurance picks this year, AAA has also put skin in the smart home game. You’ll save up to 15 percent for complying with basic home security protocols. That’s at the generous end of the smart home savings spectrum.
Unusually, AAA also offers special discounts to policyholders over 55, which will bring a smile to mature homeowners looking forward to a safer empty nest that won’t eat up their savings. Explore these discounts and more in our comprehensive guide to AAA homeowners coverage and costs.
Spotlight on AAA: One of the best perks you get when you join AAA is access to TripTik, an all-in-one trip planning app with maps, directions, gas stations (including prices!), hotels, restaurants, and tips on the best local attractions.
Allstate takes a different approach to home insurance. Instead of a single plan you can build out with extra protections, Allstate gives homeowners three budget-friendly plans to choose from: basic, standard, and advanced. Allstate also stands out from the pack for its green incentives and special coverage for a growing segment of the home insurance market — homeowners with side hustles in the rental business.
Allstate takes some of the stress out of choosing a homeowners policy by giving you three ready-made options based on your budget. The advantage of this approach is that you won’t spend hours checking and unchecking boxes like you tend to do when you have one endlessly tweakable home insurance plan to play with. And, if you trust Allstate to get a solid read on your needs, you won’t walk away missing key components of your homeowners package either.
The flip side is a black box policy you have less control over. We saw the same thing when we reviewed Progressive’s three-tier system. We ended up with competitive rates and the coverage we needed, but we were left wondering if the plan we didn’t take might have been the better one. If you want the full story on the Allstate coverage situation, check out our Allstate policies, prices, and protections guide.
Despite the fact that Allstate has been around since 1931, they know today’s insurance market and how our needs have evolved. So, if you ever end up renovating or rebuilding, and choose to follow a green option, you’ll get a special reimbursement.
Allstate has other surprises up its sleeve, too, like its own ID theft protection service and special coverage for families who rent out property. Allstate is also the only insurance company we’ve run across to throw in earthquake coverage with some of its HO-3 home insurance policies.
Spotlight on Allstate: Allstate began selling insurance in 1931 as an offshoot of Sears, Roebuck & Co. Robert E. Wood, Sears’ president at the time, took the name Allstate from a popular tire for sale in the Sears catalog.
You may have your own ideas about Geico Insurance. Top on our list when we decided to explore Geico’s rates and coverage was: “Give me one good reason to trust my house to a lizard.” Well, we actually found three good reasons – cheap, customizable plans, excellent customer service, and nationwide availability.
Like industry stalwarts State Farm and Progressive, Geico has been writing auto insurance policies since the 1930s. They sold their first homeowners package in 1960, long before the green gecko joined the team. Today, Geico has a name for comprehensive homeowners coverage at reasonable rates, but there’s a catch: Geico doesn’t underwrite its own insurance policies; it acts as a middleman.
Going with a third-party home insurance provider isn’t the end of the world. Geico cooperates with some top names. But you won’t be able to pick your provider. Geico chooses for you.
And that means if you ever have a claim to settle, you won’t be dealing with a dapper, little lizard. You’ll be dealing with your underwriter, which may make bundling your Geico auto insurance a bit of a hassle, because you’ll have to talk to two separate companies.
If you don’t mind jumping through those hoops, though, Geico can match you with a flexible home insurance policy at lower than average rates.
Spotlight on Geico: The name Geico stands for Government Employees Insurance Company. That’s because when Geico cofounders Leo and Lillian Goodwin opened Geico’s doors in 1936, their original target audience was federal employees. Today, Geico manages over 17 million policies nationwide.
There are over 2 million Americans serving in the armed forces today and over 17 million retired veterans. USAA is the only insurance provider on our list that guarantees active and retired military personnel and their families affordable home insurance. USAA homeowners policies are available everywhere in the country, include protections that are usually sold as add-ons, and are backed by outstanding customer service.
Make no mistake, if you’re not in the military, you can’t purchase a USAA homeowners policy. If you do serve this country (or did and are retired), there are a number of reasons why you might choose USAA.
For starters, USAA’s basic plans come with a few special features they don’t bill you extra for. Replacement cost value (RCV) coverage for your possessions is one of our favorites because it guarantees that if your stuff ever does get lost or damaged, you’ll get a check to buy it back at its current market value, not what it’s worth on Craigslist. USAA offers this premium homeowners protection for free.
USAA also throws in identity theft protection, which is sadly a disproportionate problem for the military, and home-sharing insurance for service members who want to rent out their homes securely while on active duty.
USAA has a reputation for being easy to work with, and while you won’t find a coupon book of special perks like you will with Progressive, USAA does offer incentives for smart homes, which pair nicely with free ID theft protection.
USAA’s rates aren’t bargain basement by any means. You won’t walk away with a quote as low as you would with Lemonade or an auto and homeowners bundle as cheap as State Farm’s. However, considering the extra coverage you do get, the slightly higher monthly cost will likely even out.
Spotlight on USAA: USAA members with a USAA policy get more than just excellent homeowners insurance for less. They can also get guidance from USAA’s financial and investment planning experts.
Travelers sold its first policy in 1884. It cost two cents and insured a four-block walk from the local post office.1 Fast forward to 2020 and Travelers is at the vanguard of the insurtech movement with 3D modeling for its property damage reviews and AI analytics for automated quotes and policy renewals. In between that first two-cent policy and the future of homeowners policies as we know it, Travelers managed to pioneer a brand of home insurance that was reliable, reasonably priced, and always made-to-order.
Travelers was one of the first insurance providers to take identity theft seriously. That was back in 1999, long before cybercrime was front page news.
A focus on ID monitoring isn’t unique in the industry, and Traveler’s $25,000 reimbursement cap certainly isn’t the full ID protection you’d get from top names like Identity Guard® or IdentityForce. It is, however, indicative of Travelers technology-driven approach to homeowners insurance.
Since 2016, Travelers has rolled out real-time customer alerts, digital settlement payouts via PayPal, and a map viewer that lets agents compare before-and-after photos of disaster areas for faster, more accurate damage reviews.
Of course, all that tech comes with a price tag. Travelers policies aren’t the cheapest in town, and they aren’t available everywhere. But they are among the most customizable we’ve found. You may have to spend some time pulling levers and twisting knobs, but designing a quote to match your budget is doable.
Speaking of quotes, getting an online quote for your Travelers policy is easy and quick. So even if you decide to take your business elsewhere, you’ll at least know where you stand with Travelers.
Spotlight on Travelers: Like Allstate, Travelers offers customers green incentives. If your home is LEED-certified, you may get a 5 percent discount on your premium. LEED, incidentally, stands for Leadership in Energy and Environmental Design.
Farmers has a reputation for bulletproof policies that can stand up to any accident thrown at them, with above average scores in claims satisfaction. Because their plans are packed with so much coverage, Farmers rates tend to be higher than the industry median. While there’s some wiggle room to knock down premiums when building your quote, Farmers’ fixed packages may feel a little constraining if you’ve ever built a quote with a single-plan provider like Lemonade or Nationwide.
Farmers homeowners policies come in three packages: standard, enhanced, and premier. Premier is sort of like the J.K. Simmons commercial where the totalled house is magically rebuilt before your eyes – with no stinting on costs or materials, possessions replaced at cost. Farmers’ standard plan, the no-frills option, waters down your protection a bit.
The problem is, Farmers’ no-frills coverage isn’t cheap. When we took a $350,000 house that would have cost us $307 per month to insure on the premier plan, and we simulated insuring it on Farmers’ standard plan, our rate still wasn’t much lower.
What does that mean for prospective Farmers customers? It means that if you go with Farmers, there’s no choice between a light windbreaker and an Arctic fur. You’re getting the fur, which will keep you a lot warmer but costs a lot more.
That said, Farmers offers a bunch of terrific discounts that can help offset those extra costs. First and foremost on their specials menu is a declining deductible. Every year you go without a claim, Farmers knocks $50 off your deductible.
Has that declining deductible started to nudge you over into the Farmers camp? Get a complete picture of the Farmers perks situation in our in-depth guide to Farmers’ costs and coverage.
Spotlight on Farmers: Farmers’ Eco-Rebuild coverage gives homeowners up to $25,000 to make green choices when rebuilding or renovating their homes, appliances included.
A lot of things happen in life for no reason, and with no one really to blame. A car hits a puddle and soaks your favorite leather bag. The driver didn’t mean it. Or a gust of wind blows your hat into the river. Not the wind’s fault.
These are small incidents. At the very worst, you’ll buy a new bag and hat. You’re out 200 bucks.
But imagine if that driver was a lightning storm that knocked an oak tree through your sunroom roof. Imagine if your hat was your garage. Instead of $200, you’re out $20,000. While it’s still no one’s fault, this time you’re not going to be able to pay out of pocket. You’re going to need a little help.
That, in essence, is what a homeowners policy does. It sits quietly in your back pocket, protecting your property, possessions, and family against any future accidents.
For that peace of mind, you pay a premium (usually a monthly payment) to your home insurance provider. If disaster ever strikes, your policy jumps into action — sometimes within hours —and secures the money you need to rebuild or buy back what you lost.
FYI: The average homeowners claim in 2019 was $13,582, down over $1,000 from 2018.2
Ths short answer: yes. If you’ve taken out a mortgage, your bank or lender will most likely require a homeowners policy. This is purely self-interest, as they want to protect their investment.
But even after you’ve paid your mortgage off, you’re simply playing Russian roulette if you opt to face nature tête-à-tête. That isn’t just our expert opinion. It boils down to odds. According to the National Association of Insurance Commissioners, one in 20 homeowners files an insurance claim every year.
If you’re one of those five percent, believe me, you’ll be grateful beyond words you took out a homeowners policy. A grease fire in your kitchen can run you between $10,000 and $20,000 in damage. Even a clogged sewer — which you’re responsible for, by the way, not the city — can cost $5,000 to unblock. These aren’t bills you’d ever want to get stuck with.
We’d be lying if we said we never once picked up our homeowners bill and thought about all the nice things we could buy with the money we spend protecting our homes from accidents that never seem to happen. A new pair of speakers for the living room, a better laptop, or a weekend getaway in Miami.
But at the end of the day, clogged sewers and fires (which break out once every 89 seconds in U.S. homes3) are just two of a long list of perils that can literally wipe out everything we’ve worked for in the blink of an eye. So the real question to ask isn’t “Do I need home insurance?”; it’s “Why would I ever want to live without it?”
Did You Know: According to the latest stats from Verisk’s Insurance Services Office, the most common homeowner’s claim isn’t fire or water damage. It’s wind and hail damage, which accounted for about 34 percent of all property claims in 2019. Theft, on the other hand, accounted for merely 1 percent.4
Earlier, we talked about fire and water damage. Those are just two of the “perils” standard HO-3 homeowners policies cover. Most policies will also protect you against lightning, wind and hail (usually lumped together and sometimes under a separate deductible), smoke damage, explosions, freezing, tearing or cracking, short circuits, ice and snow damage, theft, vandalism, volcanic eruption, riots, and even falling aircraft.
If you noticed the absence of floods, hurricanes, and earthquakes from that list, you have a good eye. Flood insurance is always separate. In fact, none of our top insurance companies even sell it. Hurricane and earthquake coverage are usually add-ons, or “endorsements” in the official lingo. Your insurance provider will cover you. You’ve just got to pay extra.
All HO-3 policies cover three main areas of your household against the covered perils listed above: your property, your possessions, and your family. Here’s a breakdown of how they do that.
FYI: You should be able to purchase flood insurance through any of the homeowners insurance companies we reviewed above. If you’re having trouble, FEMA can help you locate a flood insurance provider in your area.
This is the reason you have a home insurance policy. Finding the right amount of property coverage is critical. We offer some ideas on how to approach this below. If this is your first homeowners policy, you can also read our home insurance buyer’s guide to learn all the ins and outs.
Your HO-3 home policy covers anything you build on your property (fences, garages, gazebos, sheds, even swimming pools). Typically, insurance providers earmark 10 percent of your property coverage for additional buildings. With some providers, you can tweak this amount.
There are two types of coverage for your belongings — actual cash value (ACV) and replacement cost value (RCV). The first gives you enough money to buy your stuff back with wear and tear figured in, so basically enough to buy your things back used.
With the second type of coverage, which is always a little more expensive, you’ll get the cash you need to buy your things back new. We’ll break ACV and RCV coverage down in more detail below. You should go through this part of your policy with a fine-tooth comb.
Personal liability coverage protects you in two major situations. If a guest or visitor to your property has an accident, your policy would cover the legal and medical bills, and any damage to your home, as long as the accident is covered.
But liability also works in the opposite direction. Say you’re in someone else’s house and you accidentally flood the bathroom. Personal liability coverage would have your back here, too, if you got stuck with the bill. The minimum liability coverage you’ll see is $100,000, but most experts recommend $300,000.
An extension of personal liability, medical payments to others covers doctors’ bills exclusively in the event of an accident on your property, whether you’re responsible or not.
If you need to vacate your house for any reason, your policy will pay for temporary lodging, food, and gas. There are some limits.
For one, you’ll usually have a cap on your expenses. Two, your insurance provider will calculate ahead of time how many days repairs should take, and that’s the time period you’ll be covered for.
Finally, if your normal living expenses are $2,000 per month, and you send a bill for $20,000, you’ll see a volcanic eruption in your living room (see covered perils above) before your insurer foots the bill for the difference.
This list varies from provider to provider, and can include all sorts of fun stuff like portable electronics coverage, insurance for your valuables, and even identity theft protection. Those are pretty self-explanatory.
Here are a few terms that may be new to you. If they appear in your quote, you should take a good look at them before you sign on the dotted line.
Whether you see additional replacement cost coverage or inflation coverage in your homeowners policy, a 10-50 percent boost to cover higher future building costs can be the difference between having the cash to build back your house and taking out another loan to do it.
Your HO-3 policy covers you for accidental water damage (i.e., a pipe bursts out of the blue). But it won’t cover you for negligence (i.e., your roof has been leaking for years and finally drops into your TV room.) It also won’t cover you for damage from what we call a “water back-up.” This could be damage from a malfunctioning sump pump or a clogged sewer or drain. Water back-up insurance is always extra and sometimes advisable.
Before you sweep this extra coverage aside, check out your site plan. If your property is sitting on top of a gas, power, or water line, and there’s an accident, you’re liable for repairs.
Building ordinance coverage gives you extra money to rebuild to code. Even 10 percent of your total property coverage can be a big help. With many of our top providers, adding this extra protection won’t raise your premium much, so keep your eye out for it.
Warranties for appliances cover parts and service, but they don’t cover accidents. If the HDMI slot on your Android TV starts to malfunction, and your warranty is still in effect, you can get your TV fixed for free. But if your 10-year-old spills grape juice back there, you’re in trouble. Equipment breakdown insurance is like accident insurance for your big ticket appliances, TVs included.
Fun Fact: Depending on where you live, your homeowners policy might include some form of “stampede” coverage in case your house is overrun by a herd of berserking cattle.
Ok, do you want the blue pill or the red pill?
“Matrix” references aside, homeowners insurance rates really are a huge can of worms. But if you’re shopping for an insurance policy you’ll keep for years — and want to make the most informed decision possible — you should get your hands at least a little dirty. We’ll try to make this as painless as possible.
First of all, your state, area, and even neighborhood can affect your home insurance premium.
To give a very stereotypical example, a house in the Outer Banks of North Carolina, where hurricanes are seasonal events, would likely be more expensive to insure than a house 400 miles inland in Charlotte.
If we drill down a little further and take that house in Charlotte and place it in a low-crime neighborhood, it will probably be cheaper to insure than a home in a neighborhood where burglary is rampant.
Finally, if our house in the safe Charlotte neighborhood happens to be two blocks away from a fire station, and has monitored fire and smoke alarms, statistics say it would be cheaper to protect than a house even a mile further away.
Location, as they say, is everything.
Every few years, the NAIC publishes a juicy 193-page document with a name so long you can’t fit it in a paragraph.5 It’s our insurance source-of-truth. In this massive doc, you can find useful information, like how much the average home costs to insure in Alaska ($823 if you’re wondering.)
When we say average, by the way, we mean a 1,800 sq. ft. house worth between $200,000 and $290,000 and built between 1985 and 1995. But, obviously, not every home falls within that size, price, or age range. Which is another reason it’s impossible to generalize rates even within a single category like market value. A quick glance at the NAIC’s insurance doc will illustrate this. Since we were in North Carolina a paragraph back, let’s stay there.
The average homeowners policy in this state costs $1,103 per year, according to the NAIC — unless you live in a house worth less than $50,000. In that case, you’d be looking at a $340 bill. If you lived in a home worth $500,000 or more, on the other hand, your bill would be closer to $2,125.
See the pattern? More expensive homes have higher premiums.
That’s why when we’re giving advice about rates, we always err on the side of research. Before you talk to an agent, explore the average rates in your area. That’s one way to protect yourself against overstuffed premiums. The other way?
Look into your home’s condition.
Did You Know: According to the NAIC’s latest stats, you’ll find the cheapest home insurance in Oregon ($706 per year), followed by Utah ($737) and Nevada ($776).
This is a true story. I was trying to get a quote from Liberty Mutual for a home in Iowa (not a real quote, a test). For some reason, the quote generator wouldn’t spit out a figure. When I asked an agent about it (her name was Shauna and she was great), she told me the reason: The roof on that house was just too old. Liberty Mutual simply wouldn’t insure it.
You’ll see when you go through the process of gathering quotes yourself that insurers will ask for a lot of information about your home. They’re not being nosy’ they’re just trying to get a handle on the potential risk involved in insuring your property.
The major factors are: roof materials and age; wiring, heating and plumbing; fixtures and floors; protective devices like locks, leak sensors, and fire, smoke, and burglar alarms; and how many additional structures you have on the property.
Which is why, if you are in the process of insuring a new home, it makes sense to vamp up home security and upgrade aging HVAC systems before you apply for a premium. You’ll likely get a better rate for having a safer, less accident-prone home.
Most insurers do use your credit score to gauge your risk as a customer, and they charge higher-risk policyholders more (155 percent more by some estimates), but not in the way you might think.
Underwriters don’t throw your credit score into a pot and pull out a premium. Instead, they focus on specific elements of your credit score that they consider to be reliable indicators of your future behavior as a homeowner. They assign a value to those components and that becomes your “credit-based insurance score.”
Insurance companies started using credit-based insurance scores a few decades ago after they realized that underwriters looking at credit scores alone were having trouble making objective judgments. Basically, with the old system, they had to make educated guesses about your likelihood to default on payments, maintain your home, and file claims, which weren’t always accurate.
Credit-based insurance scores aren’t universal, however. California, Maryland, Massachusetts, and Washington have banned insurance companies from using any part of your credit score to set your premium.
Homeowners Tip: When insurance companies pull up your credit report to give you a credit-based insurance score, it’s considered a “soft pull.” It won’t show up to lenders and won’t affect your credit score.
Property coverage, aka dwelling coverage, is many things. It’s the heart of your home insurance policy. It’s the cash you’ll get to rebuild after a disaster. It’s probably also the highest amount of coverage you have.
But it isn’t your home’s market value. You need to understand this from the get-go because insuring your $350,000 home for $350,000 might put you in hot water if you ever need to rebuild. (Building costs go up year to year, and demand fluctuates.) An aging home you bought for $350,000 in 2016, might cost $500,000 to rebuild to code in 2024.
To arrive at a safer figure for your dwelling coverage, you need to get a handle on two basic factors: the size of your home (square footage) and local construction rates. Here’s how to get started.
Many of us already know how big our houses are, or at least have a ballpark figure we can use to estimate building costs. If you don’t, a phone call to your local tax assessor’s office is usually all it takes to get that info.
If you prefer a more hands-on approach, you can always whip out the measuring tape and go room to room. (Actually, you don’t even need measuring tape these days. There are a bunch of free smartphone apps that will get the job done.) This way you’ll also have up-to-date measurements.
Of course, if none of that is working for you, you can always hire an appraiser. When you consider how many thousands of dollars you’ll be pouring into a rebuild, $100-$200 for an accurate floor plan is a pretty modest investment.
Once you have your square footage in hand, you’re ready for the next step.
First, a disclaimer. Just like average homeowners rates — which fluctuate depending on where you live and what kind of house you own— building costs will vary.
According to the National Association of Home Builders, construction costs for a $296,650 home were $114 per square foot in 2019.6 (In 2011, they were $80, by the way, so you can see how much those rates change.)
But that doesn’t mean your home will cost $114 per square foot to rebuild. It’s just a ballpark figure to get your bearings by. That’s why talking to a local agent is always an excellent idea because they know the going rates in your area better than anyone else.
We’re not saying that AI quote generators aren’t smart. Lemonade has a great one. So does Travelers. We’re just saying they aren’t Shauna from Davenport, Iowa, the Liberty Mutual agent who’s been on 400 construction sites and knows the names of every contractor in town.
Once you have those rebuilding rates, and you know your home’s square footage, just multiply the two numbers. So, for example, a 2,700 square-foot home that costs $114 per square foot to rebuild would give us $307,800.
That wasn’t so bad, was it? If you’re wondering where inflation protection figures into the equation, that’s an excellent question. Read on.
Did You Know: According to the United States Census Bureau, the size of the average single-family home built in 2020 was 2,261 sq. ft.7
We recommend some form of coverage to protect against higher future building costs, whether it’s additional replacement cost coverage (we discussed this a few paragraphs ago), or inflation protection. The reason is simple: over time building costs go up, rarely down.
When we were calculating contractors’ costs above, for example, we saw how between 2011 and 2019 — eight short years — construction rates shot up by $34 per square foot. A home you built in 2011, in other words, would cost 30 percent more to rebuild in 2019.
So definitely consider tucking away between 20-50 percent extra to rebuild down the line. Saving a few bucks a month on your premium might make you happier today, but that kind of savings just isn’t worth risking your entire home over.
Before we get into the nitty gritty of belongings coverage, a word to the wise.
If you’re shopping for homeowners insurance for the first time, or you’re preparing to switch insurers, and you haven’t made an inventory of what you own, cancel your trip to the park this Sunday and pencil in a few hours of “time with my stuff.”
Go room to room and write down what you’d want to get back in the worst- case scenario. Pro-Ject turntable? Check. Salvation Army reclining chair? Maybe you can leave that one off the list.
Keep in mind that really expensive things, like cameras, artwork, laptops, and jewelry, might require extra insurance. Coverage limits vary from provider to provider.
But back to choosing your belongings’ coverage: Do you want ACV or RCV?
FYI: 57 percent of Americans polled by the Insurance Information Institute in 2020 admitted they hadn’t inventoried their possessions for their homeowners policy and had no written, photographic, or video record.8
Let’s use our Pro-Ject turntable from above as an example.
If I bought my turntable in 2018 for $450, its value today would be less. In fact, used hi-fi usually depreciates by 50-60 percent once you carry it home.
So the actual cash value of my $450 turntable would be between $225 and $270. With ACV coverage, that’s the amount I’d get to buy it back if mine was stolen. Not great, right? Actually, it’s even worse.
My Pro-Ject turntable might not even cost $450 to buy new. That was 2018. The price in 2024 (when I lose it) might be $550. Then what?
Then I wish I’d invested in RVC coverage.
RCV coverage will nudge your monthly premium up a bit, but it can be worth it.
Again, take the Pro-Ject turntable I bought in 2018. If I lose it in a burglary in 2024, instead of getting a check for $225 (enough to buy one off Craigslist), I’d get $450, or whatever it costs to buy it back new at the time I lose it.
Of course, reimbursements don’t happen by magic. There’s a process behind them, and documentation is key, especially in a burglary when things disappear. (You can’t tell the insurance inspector that you had a green Lamborghini sitting in your living room and ask for $250,000 to replace it if you have no proof that it existed.)
But if you take inventory, make sure you have enough coverage for your more expensive belongings, and go with RCV coverage, you will eventually get your things back pretty much as they were before.
All right, you’ve reached the end of this guide! But the story doesn’t end here. Check back from time to time because we’re constantly updating and expanding our content to keep up with the latest developments in the homeowners insurance market.
Do I have to buy homeowners insurance?
If you have a mortgage, your bank will almost definitely require you to have homeowners insurance. But, as we discussed above in our Homeowner’s Guide, it’s really a smart idea to cover your property and possessions anyway.
How much does homeowners insurance cost?
Huge question. Homeowners rates vary state by state, property by property, and individual by individual. For instance, average home insurance in Louisiana is $1,987 yearly. In Oregon, it’s $707. That said, the average policy countrywide cost $1,249 in 2018, the last year we have information for.
Which is the cheapest home insurance company?
The most affordable providers we found were Allstate, Lemonade, Nationwide, and State Farm. But this might not be your experience.
Will I get all my things back if my property is destroyed?
If you’ve got the right amount of coverage, you should get a check to build and buy back all your property. To play it 100 percent safe, you’ll need some form of inflation insurance (for your home), enough liability insurance (for yourself and your family), and replacement cost value coverage for your things.
How long will it take to get my settlement payout?
If your case is open and shut, some providers, like Lemonade, make instant payouts. If your situation needs human arbitration, expect to wait between 15 and 30 days to deposit your check.
Travelers. (2022). Travelers History.
Insurance Information Institute. (2022). Facts + Statistics: Homeowners and renters insurance.
National Fire Protection Association. (2021, Sep). Fire loss in the United States.
Insurance Information Institute. (2022). Homeowners Insurance Losses By Cause, 2015-2019.
National Association of Insurance Commissioners. (2020). Dwelling Fire, Homeowners Owner Occupied, and Homeowners Tenant and Condominium/Cooperative Unit Owner’s Insurance Report: Data for 2018.
NAHB Economics and Housing Policy Group. (2020, Jan 2). Cost of Constructing a Home.
United States Census. (2021, Jun 1). Characteristics of New Housing.
Insurance Information Institute. (2020, Sep). 2020 TRIPLE-I CONSUMER POLL.